HAMP Standard and Alternative Modification Waterfalls Home Affordable | June 2012 2 Agenda 4 HAMP...

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Transcript of HAMP Standard and Alternative Modification Waterfalls Home Affordable | June 2012 2 Agenda 4 HAMP...

  • Making Home Affordable | June 2012

    Training Presentation for Servicers

    HAMP Standard and Alternative Modification

    Waterfalls

  • 2 Making Home Affordable | June 2012

    Agenda

    HAMP Tier 2 Standard & Alternative Modification Waterfalls 4

    Overview of HAMP Eligibility 1

    HAMP Tier 1 Standard Modification Waterfall 2

    HAMP Tier 1 Alternative Modification Waterfall 3

    Resources 7

    Net Present Value (NPV) Model 6

    Discussion/Questions 8

    Prohibitions on Modification Waterfall Steps 5

  • 3 Making Home Affordable | June 2012

    Overview of HAMP Eligibility

    Criteria Guideline HAMP Tier 1

    HAMP Tier 2

    Servicer, Investor, Insurer

    Guidance applies to MHA-participating servicers of mortgages not owned, guaranteed, or insured by Fannie Mae, Freddie Mac, FHA, VA, or USDA.

    Origination The mortgage loan is a first lien originated on or before January 1, 2009.

    Unpaid Principal Balance Limits

    The unpaid principal balance, prior to capitalization, must be less than or equal to: $729,750 for a one-unit property $934,200 for a two-unit property $1,129,250 for a three-unit property $1,403,400 for a four-unit property

    Property Condition

    The property securing the mortgage loan has not been condemned.

    Financial Hardship

    The borrower must be able to document a financial hardship.

  • 4 Making Home Affordable | June 2012

    Overview of HAMP Eligibility Criteria Guideline

    HAMP Tier 1

    HAMP Tier 2

    Natural Persons

    The borrower is a natural person. Mortgage loans made to business entities are not eligible for assistance under HAMP.

    Occupancy The mortgage loan is secured by a single family property that is occupied by the borrower as his or her principal residence.

    Occupancy

    The mortgage loan is secured by a single-family property that is used by the borrower for rental purposes only and not occupied by the borrower, whether as a principal residence, second home, or vacation home. Borrower may not own more than five single-family properties in addition to the principal residence.

    ---

  • 5 Making Home Affordable | June 2012

    Overview of HAMP Eligibility Criteria Guideline

    HAMP Tier 1

    HAMP Tier 2

    Delinquency The mortgage loan securing the principal residence is not delinquent, but default is reasonably foreseeable.

    Delinquency The mortgage loan securing the principal residence is delinquent.

    Delinquency The mortgage loan securing the rental property is delinquent. ---

  • 6 Making Home Affordable | June 2012

    Overview of HAMP Eligibility Criteria Guideline

    HAMP Tier 1*

    HAMP Tier 2

    Minimum Payment Ratio

    The borrowers monthly mortgage payment, PITIA, (including principal, interest, taxes, insurance, and when applicable, association fees, existing escrow shortages) is greater than 31 percent of the borrowers verified monthly gross income.

    Minimum Payment Ratio

    The borrowers monthly mortgage payment, PITIA is less than or equal to 31 percent of the borrowers verified monthly gross income. ---

    *Only single family properties occupied by borrowers as principal residences qualify for HAMP Tier 1.

  • 7 Making Home Affordable | June 2012

    *Only single family properties occupied by borrowers as principal residences qualify for HAMP Tier 1.

    Criteria Guideline HAMP Tier 1*

    HAMP Tier 2

    Previous HAMP Trial or Modification

    The mortgage loan has never received a TPP or been modified under HAMP.

    Previous HAMP Tier 1 Trial

    The mortgage loan received a HAMP Tier 1 TPP on which the borrower defaulted. (Tier 2 TPP must be at least 10% less than failed Tier 1 TPP.) ---

    Previous HAMP Tier 1 Modification

    The mortgage loan received a HAMP Tier 1 permanent modification on which the borrower defaulted. (Additional eligibility criteria include: demonstrable change in circumstances or 12 or more months since effective date of HAMP Tier 1 modification.)

    ---

    Previous HAMP Tier 2 Trial or Modification

    The mortgage loan received a HAMP Tier 2 TPP or permanent modification on which the borrower defaulted. --- ---

    Overview of HAMP Eligibility

  • 8 Making Home Affordable | June 2012

    The Standard Modification Waterfall is

    a stated order of successive steps that

    must be applied until the borrowers

    target monthly mortgage payment

    ratio is reduced to 31%.

    STEP 1

    Capitalization STEP 2

    Interest Rate Reduction

    STEP 3

    Term Extension STEP 4

    Principal Forbearance

    What Is it?

    HAMP Tier 1 - Standard Modification Waterfall

    NOTE: Steps must be performed in sequence

  • 9 Making Home Affordable | June 2012

    MTMLTV ratio property valuation

    Delinquent Interest

    Current Remaining Term

    Taxes, insurance, homeowner association dues, and escrow shortage

    Funds remaining in the existing suspense account

    Current UPB

    HAMP Tier 1 - Standard Modification Waterfall

    Data Inputs

    Loan Information

  • 10 Making Home Affordable | June 2012

    HAMP Tier 1 Standard Modification Waterfall

    The following items must be capitalized:

    Accrued interest;

    Out-of-pocket escrow advances to third parties;

    Required escrow advances that will be paid to third parties during the trial period;

    Mortgage insurance payments that are due. Advances for expenses incurred in performing servicing obligations, such as foreclosure fees and costs, must also be capitalized. These costs must:

    Be consistent with the security instrument.

    Be allowable under GSE guidelines.

    Not be prohibited by applicable law.

    Capitalization

    Note: Late fees should not be capitalized!

  • 11 Making Home Affordable | June 2012

    Gross Monthly Income $ 3,667.10 Desired PITIA @ 31% ($3667.10 x .31) $ 1,136.80 Taxes & Insurance ($ 337.11) HOA Payment ($ 100.00) Future Escrow Shortage Payment ($ 10.00) Target Monthly Mortgage Payment $ 689.69

    Original payment (Pre-modification) $ 1,774.61

    Current payment $ 1,872.96

    Remaining Term 284 months

    Current Interest Rate 5.875%

    HAMP Tier 1 Standard Modification Waterfall

    Current UPB $ 274,965.19 Out-of-Pocket Escrow Advances $ 3,500.00 Projected Escrow Advance during trial period $ 1,000.00 Delinquent Interest $ 7,526.07 Late Fees $ 250.00 Adjusted Gross UPB $ 286,991.26

    Capitalization Worksheet Example

  • 12 Making Home Affordable | June 2012

    Current payment $ 1,872.96 Taxes & Insurance $ 337.11 HOA Payment $ 100.00 Future Escrow Shortage Payment $ 10.00 Total PITIA: $ 2,320.07

    Total PITIA payment: $ 2,320.07

    Gross Monthly Income: $ 3,667.10

    X 100 =

    Current Monthly Mortgage Payment Ratio: 63.3%

    HAMP Tier 1 Standard Modification Waterfall

    Capitalization - Monthly Mortgage Payment Ratio Calculation

  • 13 Making Home Affordable | June 2012

    Reduce the borrowers interest rate:

    In increments of 0.125% or 1/8 percent.

    Until the target monthly mortgage payment ratio is reached.

    Interest rate floor is 2%.

    Incentives will not be paid for reducing the rate lower than the 2% floor.

    If the resulting rate is below the Interest Rate Cap (Freddie Mac Primary Mortgage Market Survey, PMMS, Rate), then the reduced rate will not increase for the first five years.

    The ending rate does not have to be a multiple of one-eighth.

    Interest Rate Reduction

    HAMP Tier 1 Standard Modification Waterfall

  • 14 Making Home Affordable | June 2012

    NEW INTEREST RATE

    PROJECTED PAYMENT

    2.0%

    $ 1,269.32

    Current Term

    Adjusted Gross UPB

    Tax and Insurance

    Current Interest Rate

    Gross Monthly Income

    HOA Payment

    Desired PITI @ 31%

    Target Payment

    284 months

    $ 286,991.26

    $ 337.11

    5.875%

    $ 3,667.10

    $ 100.00

    $ 1,136.80

    $ 10.00

    $ 689.69

    Future Escrow Shortage

    If the 31% target monthly mortgage payment ratio cannot be reached by lowering the interest rate to the 2% floor,

    then reduce the interest rate to the 2% floor and proceed to Step 3, Term Extension. Note:

    46.8%

    Use Current Interest Rate as the starting point

    Interest Rate Reduction Scenario

    HAMP Tier 1 Standard Modification Waterfall

  • 15 Making Home Affordable | June 2012

    Extend the term:

    In one-month increments.

    Up to