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# Making Home Affordable Parrilla

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• ExampleMortgagor had a reduction of income and is delinquent three (3) full mortgage payments.  The unpaid principal balance on the mortgage on the date of default is \$150,000 and the monthly payment is \$1,220 (consisting of P&I of \$920 and escrows, including MIP, of \$300). The financial analysis reveals that the mortgagor’s gross monthly income is \$3,500 and the total monthly other recurring debt payments are \$800.
• Example - ContinuedIn order to fulfill the 31% Front End Ratio requirement, the mortgagor(s) total monthly mortgage payment would have to be reduced to \$1,085 (\$3,500 x 31%). Therefore, P&I would have to be reduced to \$785 (\$1,085 total monthly mortgage payment less \$300 escrow and MIP). Assuming that the loan modification will have an interest rate of 6% and a P&I of \$785, the new mortgage amount would have to be \$130,931, resulting in a principal reduction of \$19,069 (\$150,000 unpaid principal balance less \$130,931). In this example, the mortgagor’s Back End ratio is 53.9% (\$1,885/\$3,500), which satisfies the 55% Back End Ratio limitation.
• Example - ContinuedIn this example, the maximum principal deferment is \$41,340 (30% of \$150,000, less the \$3,660 delinquency, or \$45,000 - \$3,660). However, 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) for the total Partial Claim of \$22,729.
• Example - ContinuedA principal reduction of \$19,069 (\$150,000 unpaid principal balance less \$130,931) is needed to support the new modified loan amount. In this example, the total partial claim would be \$22,729 (\$19,069 principal deferment + \$3,660 arrearage). The Mortgagor’s Back End Ratio is 53.9% (\$1,885/\$3,500), which satisfies the 55% Back End Ratio limitation.

### Transcript

• 1. Making Home Affordable
Program: FHA’s Home
Affordable Modification Loss Mitigation Option
Mortgagee Letter 2009-23, page 1
• 2. Basic Program Guidelines FHA-Home Affordable Modification Program (FHA-HAMP)
FHA-HAMP combines a Partial Claim with a Loan Modification
Total Partial Claim, including arrearages of up to 12 months Principal, Interest, Taxes, and Insurance (PITI) plus legal fees and costs related to a canceled foreclosure action (maximum over life of loan), and deferred principal, may not exceed 30 percent of the unpaid principal balance as of the default date.
Mortgagor must first complete a three month trial plan with a payment equal to the monthly PITI to be required on the modified loan (must be a fixed rate mortgage).
If trial plan payments are not made in a timely manner, the Mortgagor is no longer eligible for FHA-HAMP.
Mortgagee Letter 2009-23, pages 1 and 2
• 3. Debt to Income Ratios
Front-End Ratio – The total first mortgage payment (PITI) divided by the Mortgagor’s gross monthly income, shall be 31%.
Back-End Ratio – The total first mortgage payment plus all recurring monthly debt divided by the Mortgagor’s gross monthly income, shall not exceed 55%.
Mortgagee Letter 2009-23, page 2
• 4. Calculation of Maximum Partial Claim Amount under FHA-HAMP
Maximum Partial Claim amount is &lt;=30% of the outstanding principal balance.
Maximum principal deferment on the FHA-HAMP is determined by:
Outstanding Principal Balance x 30% - Amount of Arrearages - Foreclosure fees and costs.
Subject to the requirements of ML 2008-21.
Principal deferment shall not exceed amount needed to bring the total monthly mortgage payment to 31 percent of the Mortgagor(s) gross monthly income.
Mortgagee Letter 2009-23, page 2
• 5. Calculation of MaximumPartial Claim - Example
Unpaid Principal Balance = \$150,000
Current Monthly Payment (PITI) = \$1,220 (P&I = \$920 + TI = \$300)
Current Other Recurring Debt = \$800
Gross Monthly Income = \$3,500
Number of Payments Past Due = 3
Total Arrearage = \$3,660
Mortgagee Letter 2009-23, page 2
• 6. Calculation of MaximumPartial Claim – Example - Continued
Maximum Partial Claim = \$150,000 x 30% = \$45,000
Maximum Monthly PITI = \$3,500 x 31% = \$1,085 (Front Ratio)
Maximum Total Monthly Debt = \$3,500 x 55% = \$1,925 (Back Ratio)
Mortgagee Letter 2009-23, page 2
• 7. Calculate Terms of Modified Loan – Example - Continued
New P&I = \$1,085 (Max PITI) - \$300 (T&I) = \$785
New Mortgage Term = 360 months
New Interest Rate = 6% (Assumed fixed rate)
Calculated New Principal Balance = \$130,931
Mortgagee Letter 2009-23, page 2
• 8. Principal Reduction and Total Partial Claim
Principal Reduction = \$150,000 - \$130,931= \$19,069
Total Partial Claim = \$19,069 principal deferment + \$3,660 arrearage = \$22,729
Total Partial Claim &lt; \$45,000 Calculated Maximum Partial Claim
Mortgagor’s New Back End Ratio is 53.9% [Sum of PITI + Other Recurring Monthly Debt (\$1,085 + \$800) divided by \$3,500 Gross Monthly Income] which satisfies the 55% Back End Ratio limitation.
Mortgagee Letter 2009-23, page 2
• 9. Requirements to Use FHA-HAMP
Mortgagees must evaluate the defaulted mortgage for Loss Mitigation actions in the following priority order:
1. Existing FHA Home Retention
Loss Mitigation Options
2. FHA-HAMP
Mortgagee Letter 2009-23, page 3
• 10. FHA-HAMP continuation
The property securing the FHA-insured property must be the mortgagor’s primary and only residence; and only single family (1-4 units) properties are eligible.
The servicing lender also must obtain an executed Hardship Affidavit from every mortgagor and co-mortgagor seeking an FHA-HAMP. Mortgagee Letter 2009-23
• 11. Partial Claim Filing and Document Delivery
Partial Claim(s) must be subordinated to the modified first-lien mortgage.
Original Credit and Security Instruments are to be forwarded to HUD’s Secretary-Held Servicing Contractor.
Mortgagee Letter 2009-23, pages 3
• 12. Remittance
Repayment Terms, Option Failure and
Disclosures described in Mortgagee Letters
2000-05 and 2003-19 apply.
Subordination requests and any payments for Partial Claims are to be sent to HUD’s Secretary-Held Assets Servicing Contractor.
Secretary-Held Assets Servicing Contractor website: