HAMP Servicing Guidelines Presentation

THE HAMP SERVICING GUIDLINES

Created by Katy Box, former Staff Attorney at Northwest Consumer Law Center

Voice Recording by Zach Parsons, intern at Northwest Consumer Law Center

HAMP PARTICIPATIONServicers not investors participate in the Home Affordable Modification Program, otherwise known as HAMPMost major servicers participate in HAMP, with a few exceptionsHAMP participation list: http://www.makinghomeaffordable.gov/get-answers/Pages/get-answers-how-contact-mortgage-company.aspx

ACESSING THE HAMP SERVICING GUIDLINESNon-GSE Servicers: https://www.hmpadmin.com/portal/programs/docs/hamp_servicer/mhahandbook_45.pdf Fannie Mae: https://www.fanniemae.com/content/guide/svc081215.pdf Freddie Mac: http://www.freddiemac.com/singlefamily/guide/FHA: http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/letters/mortgagee

This Presentation Based off The Making Home Affordable Handbook for Non-GSE Servicershttps://www.hmpadmin.com/portal/programs/docs/hamp_servicer/mhahandbook_45.pdf Very similar to the Freddie Mac and Fannie Mae HAMP servicing guidelines

HAMP ELIGIBILITY REQUIREMENTSLoan originated before January 1, 2009No previous HAMP modification (for Tier I modification)Owner occupied, single family property Unpaid principle balance of $729,750 or less, for a one unit property

HAMP TIER I WATERFALLServicers must apply the modification steps enumerated in the Standard Modification Waterfall in the order of succession until the borrowers monthly mortgage payment is reduced to 31% of the borrowers gross monthly income Waterfall steps:CapitalizationInterest rate reductionTerm extensionPrincipal forbearance

HAMP TIER II - WATERFALLEffective June 1, 2012, the Obama administration expanded the HAMP program to borrowers who did not meet the eligibility requirements under the existing program (HAMP Tier 1).HAMP Tier 2 is available to homeowners who:want to modify a loan on a rental propertypreviously did not qualify for HAMP because their debt-to-income ratio was 31% or lowerpreviously received a HAMP trial period plan, but defaulted in their trial payments

HAMP TIER II WATERFALL-continuedNo target payment is created StepsCapitalizationSet fixed interest rate based on Market rateMarket rate is determined by Freddie Mac Weekly Market Survey: http://www.freddiemac.com/pmms/ Extend term to 480 monthsForbears principle to the lessor of 30% of post modification principle balance or amount to create a post modification loan to market value ratio of 115%LTV is principal balance divided by value of property After completing all steps, servicer determines whetherThe payment was reduced by at least 10%Determines whether the payment falls within 10% to 55% of borrowers gross monthly income

B owes $100,000 on her loan, and has missed $20,000.00 in payments (no expenses or escrow advances). B has an adjustable rate mortgage with a 7% interest rate. She has 300 months remaining in her term. Her grossMonthly income is $1000.00 ($310 is 31%).

HAMP TIER I TEST SCENARIO

HAMP TIER IWaterfall Step 1: Capitalization$120,000 is the new UPBIf you amortize $120,000 over the remaining 300 month term her new monthly payment is $848

HAMP TIER I Waterfall Step 2: Interest rate reductionReduce interest rate by increments of 0.125% (stop at 2%)If you reduce the interest rate to 2% and amortize the loan over the remaining 300 months, her new payment is $508.63

HAMP TIER IWaterfall Step 3: Term ExtensionExtend term to 480 monthsMonthly payment with full term extension is $363

HAMP TIER IWaterfall Step 4: ForbearanceForbear up to 30%Maximum principle forbearance is $36,000 (30% of UPB)A principle balance of $102,500 will reach the target payment, only requiring about a 14% forbearance

A forbeared principle amount is placed as a non-interestbearing lien on the property that is payable in full at the end of the loan term.

HAMP TIER IIB owes $100,000 on her loan, and has missed $20,000.00 in payments (no expenses or escrow advances). B has an adjustable rate mortgage with a 7% interest rate. She has 300 months remaining in her term. Her gross monthly income is $1000.00 ($310 is 31%). The original payment was $997.95.

HAMP TIER IIWaterfall Step 1: Capitalization The new principle balance is $120,000If you amortize $120,000 over the remaining

300 month term her new monthly payment is $848

This payment does it fall within 10% to 55% of the borrowers gross monthly income, so we have to move on to the next step of the waterfall

HAMP TIER IIWaterfall Step 2: Interest rate reduction The interest rate is set at the Freddie Mac Weekly Market Ratehttp://www.freddiemac.com/pmms/

HAMP TIER II INTEREST RATE REDUCTIONWith the reduced interest rate over theremaining life of the loan, the new payment is still not within 10% to 55% of the borrowers gross monthly income

Servicer must continue down the waterfall

HAMP TIER II WATERFALL STEP 3: TERM EXTENSION Term is extended to up to 480 months with the reduced interest rate

Theres no need to move on to principle forbearance, because the term extensionwas sufficient to create a payment between 10%to 55% of the borrowers gross monthly income

18NET PRESENT VALUE TESTPassing the waterfall is not enoughEven if an affordable mortgage payment is created using the waterfall, the borrower still must pass the net present value test to be eligible for a loan modification