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MHA Housing Power Point

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Information on the housing and mortgage crisis that we all can benefit from.

Information on the housing and mortgage crisis that we all can benefit from.

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  • 1. "An Update on the Making Home Affordable Plan" “Saving one home at a time”
  • 2. Meet Your Presenter CORA R. FULMORE  President of the Mortgage & Credit Center, LLC since 1997 and Co-Chair of NCHEC Advisory Board  MCC provides direct assistance in the area of: ◦ Budgeting, money management, credit rebuilding, homeownership and foreclosure prevention  More than 25 years of experience in the area of credit and mortgage counseling.  Certified trainer with NeighborWorks America, Freddie Mac, HUD, local & state government.  Host of the “Cora Fulmore Show” WOKB 1680 AM Station  Scheduled to appear on WHLV-TV 52 –Trinity Broadcasting Network  MCC also provide assistance to non-profits in the area of capacity building and program development. Developed & Presented by the Mortgage & Credit Center, LLC
  • 3.  Take a look at the program’s success, challenges and projections  To discuss recent changes to the Home Affordable Refi and Mod Plan  Give a better understanding of the plan from a housing counselor’s perspective  Review documentation requirements Developed & Presented by the Mortgage & Credit Center, LLC
  • 4. Through August 2009, 47 loan service providers have offered more than 570,000 homeowners loan modifications through the (HAMP) program. Of these, 47 service providers have successfully converted over 360,000 modifications. However, the House Financial Services Committee, said they want to see more conversion of trial offers from loan service providers — namely 500,000 by November 1. Developed & Presented by the Mortgage & Credit Center, LLC
  • 5. The Government is following up Developed & Presented by the Mortgage & Credit Center, LLC
  • 6. August 09 Report Source: http://www.treas.gov/press/releases/docs/
  • 7. AUGUST REPORT
  • 8. Source: http://www.treas.gov/press/releases/docs/
  • 9. September 09 Report Source: http://www.treas.gov/press/releases/docs/
  • 10. September 09 Report
  • 11. September 09 Report Source: http://www.treas.gov/press/releases/docs/
  • 12. Question How has the MHA program impacted your clients? Overall, would you say that lenders are working with you utilizing the program as intended? Developed & Presented by the Mortgage & Credit Center, LLC
  • 13. Developed & Presented by the Mortgage & Credit Center, LLC
  • 14. Developed & Presented by the Mortgage & Credit Center, LLC
  • 15. FLORIDA 8/09 – 62,401 Developed & Presented by the Mortgage & Credit Center, LLC
  • 16. Intent of the Plan  To get the economy and the housing market back on track  Comprised of the Home Affordable Modification and the Home Affordable Refinance Plan  Designed to insure long term sustainability. Developed & Presented by the Mortgage & Credit Center, LLC
  • 17. What type of loans are eligible? Home Affordable Home Affordable Refinance Modification Is only available for Most conventional conforming loans loans including prime, owned or securitized subprime, adjustable, by Fannie Mae and loans owned by lenders Freddie Mac. and loans in securities are eligible. Developed & Presented by the Mortgage & Credit Center, LLC
  • 18. How do we get started? 1-800-7FANNIE or go to www.fanniemae.com/homeaffordable or 1-800-FREDDIE (8am to 8pm EST) www.freddiemac.com/avoidforeclosure Developed & Presented by the Mortgage & Credit Center, LLC
  • 19. Developed by www.onlinehousingtraining.com
  • 20. Developed by www.onlinehousingtraining.com
  • 21. Developed by www.onlinehousingtraining.com
  • 22. Your client can help you help them…
  • 23. Know who is participating  Fannie Mae and Freddie Mac are required to participate  Private Investors and Servicers participation is voluntary  As contracts are signed, a list of participating servicers will be available on the internet at www.financialstability.gov Developed & Presented by the Mortgage & Credit Center, LLC
  • 24. 64
  • 25. Program Updates Developed & Presented by the Mortgage & Credit Center, LLC
  • 26. FHA HAMP Developed & Presented by the Mortgage & Credit Center, LLC
  • 27. Making Home Affordable/FHA  Available for FHA loans that are at least one month delinquent, but no more than 12 months delinquent.  Homeowner cannot have intentionally defaulted.  Modification will be re-amortized over 30 years.  Mortgagee must give the mortgagor the opportunity to qualify for the program before proceeding with the foreclosure process Developed & Presented by the Mortgage & Credit Center, LLC
  • 28. FHA-HAMP Partial Claim  Mortgagees can use a Partial Claim in order to reduce principal with the goal of achieving a 31% DTI for the mortgagor.  The maximum one-time only principal reduction on the modification is determined by multiplying the outstanding principal balance of the existing mortgage as of the date of default by 30 percent, reduced by arrearage amounts advanced to cure the default for up to 12 months PITI and allowable foreclosure costs. Developed & Presented by the Mortgage & Credit Center, LLC
  • 29. FHA-HAMP Partial Claim Example John and Anna – Reduction of income To fulfill the 31% Housing Ratio  Delinquent: 3 months  New Payment: $1,085  UPB: $150,000  Escrow & MIP $300  Income: $3,500  New PI: $785  Recurring  Rate: 6% Assumption Debt: $800  New Mortgage: $130,931  Principle • Payment: $1,220 Reduction: $19,069 • Escrow: $300  Backend Ratio: 53.9% • P & I: $920 • Maximum principal deferment is $41,340 (30% of $150,000, less the $3,660 delinquency, or $45,000 - $3,660) • Based on their gross income, mortgagor is eligible only for a principal deferment of $19,069 plus $3,660 arrearages (which would include any foreclosure costs incurred to that point, in accord with Mortgagee Letter 2008-21) • Total Partial Claim of $22,729 Developed & Presented by the Mortgage & Credit Center, LLC
  • 30. Home Affordable Refinance Freddie Mac Fannie Mae • Must be current • Must be current • 1st mortgage must be • 1st mortgage must be 125% or less of current 125% or less of current market value market value ENDS JUNE 10,nd2010 • 2nd lien holder MUST • 2 lien holder MUST AGREE to subordinate AGREE to subordinate • Must obtain the • May obtain the refinance refinance from the from any mortgage current servicer originator or current servicer Developed & Presented by the Mortgage & Credit Center, LLC
  • 31. Other Requirements  Owner occupied properties  Fully documented income to support the new mortgage debt  No “cash out” allowed, (exception closing costs)  If the CLTV exceeds 125%, all junior lien holders must subordinate and the new LTV must not exceed 125% Developed & Presented by the Mortgage & Credit Center, LLC
  • 32. Retirement funds disability Documentation Needed   Death benefits  Unemployment benefits •Hardship Affidavit / Imminent Default  Insurance policies •Most recent signed income tax return  Income borrower can provide •Proof of residency (e.g., current utility bill) reasonable documentation •IRS Form 4506-T  Base wages •Borrower’s monthly income documentation  Salaries overtime •Credit report on each borrower •Form 1126, Borrower Financial Statement  Commissions •Borrower’s other indebtedness (e.g., alimony)  Fees •Property Value (AVM / BPO)  Tips  Bonuses  Housing allowances  Annuities  Compensation for personal services  Social Security payments  Pensions and any documented income Developed & Presented by the Mortgage & Credit Center, LLC
  • 33. Refi Fact Sheet
  • 34. Developed & Presented by the Mortgage & Credit Center, LLC
  • 35. Home Affordable Modification  The mortgage originated on or before January 1, 2009.  Loans modified under this program will have to reduce the front end DTI to 38% by the lender to comply with program guidelines  The US Treasury Department will then match, dollar for dollar, further reductions to 31% front end DTI for the borrower Developed & Presented by the Mortgage & Credit Center, LLC
  • 36. Additional Criteria  The property must be owner occupied, single family 1-4 unit property, no vacant properties are eligible  The home must be a primary residence and verified by prior years tax return or current utility bill  First lien balances must be equal to or less than $729,750 Developed & Presented by the Mortgage & Credit Center, LLC
  • 37. Net Present Value The NPV model used in the HMP takes into account the principal factors that can influence the cash flow, including: 1. The value of the home relative to the size of the mortgage. 2. The likelihood that the loan will be foreclosed on. 3. Trends in home prices. 4. The cost of foreclosure including: legal expenses, lost interest during the time required to complete the foreclosure action, property maintenance costs, and expenses involved in reselling the property. 5. The cost of the modification including: • a lower monthly payment from the borrower, • the likelihood the borrower will default even after the loan is modified, • financial incentives provided by the government, and • the likelihood that a loan will be paid off before its term expires (prepayment probability). Developed & Presented by the Mortgage & Credit Center, LLC
  • 38. Net Present Value Test Servicers must perform the NPV Test at least twice: 1. When qualifying the Borrower for the Trial Period 2. When finalizing the Modification If the NPV Test is Negative and principal forbearance is needed to achieve the target payment, the mark-to-market LTV ratio cannot be less than 100%. If the mark-to-market LTV ratio is less the 100%, the borrower can only qualify for HMP if the result is NPV positive, ( there are some exceptions - Section C65.7(c) If the NPV Test is Positive, the servicer will proceed with the modification process Developed & Presented by the Mortgage & Credit Center, LLC
  • 39. Underwrite the Borrower:  Verifying Income/Target Payment  Pay stubs - wage earners/profit & loss (self-employed) RAYMOND & PEARL  Signed complete copy of most recent tax return Income: $4,000.00  All documented sources, including Max PITIA 31%: $1,240.00 rental income and unemployment compensation Taxes 1/12: $ 200.00  Other documented income, if Insurance 1/12: $ 120.00 requested IRS Form 4506-T Association Fee 1/12: $ 75.00 Example: Net Principal & Interest: $ 845.00 Gross monthly income MONTHLY INCOME: $4,000 x .31 = $1,240 Target PITIA(S)= shortage) payment Developed & Presented by the Mortgage & Credit Center, LLC
  • 40. MODIFICATION WATER FALL SYSTEM 1. Capitalization of Arrearages: Accrued interest, real estate taxes and other arrearages (excluding late fees) may be capitalized and added to the principal balance of the mortgage loan. 2. Interest Rate Reduction: First, the interest rate will be reduced (subject to a floor of 2%) in increments of 0.125% in order to bring the monthly payment as close to the target Front-End DTI level as possible without going below 31%. 3. Reamortization of Principal: Next, if the interest rate reduction has not achieved the target Front-End DTI, the servicer shall extend the term of the mortgage loan or the length of amortization, as applicable, to up to 40 years in order to reach the target Front-End DTI ratio. 4. Principal Forbearance: Next, if the interest rate reduction and reamortization have not achieved the target Front-End DTI, the servicer shall set aside principal to reach the target Front-End DTI ratio. 5. Principal Forgiveness: While not a requirement under the standard waterfall, servicers have the option to forgive principal at any point in the waterfall. Developed & Presented by the Mortgage & Credit Center, LLC
  • 41. Developed & Presented by the Mortgage & Credit Center, LLC
  • 42. Developed & Presented by the Mortgage & Credit Center, LLC
  • 43. Chase, WaMu & EMC Developed & Presented by the Mortgage & Credit Center, LLC
  • 44. Developed & Presented by the Mortgage & Credit Center, LLC
  • 45. Citi Mortgage http://www.citigroup.com/citi/citizen/community/homeownershippreservation/ Developed & Presented by the Mortgage & Credit Center, LLC
  • 46. Developed & Presented by the Mortgage & Credit Center, LLC
  • 47. Program Updates  Further updates will be posted as available at www.financialstability.gov Developed & Presented by the Mortgage & Credit Center, LLC

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