Making Home Affordable

This overview will provide: Background Program Explanation & Features Frequently Asked Questions Modification Success Story How to Get Started Beware of Rescue Scams Additional Resources July 2009 | Making Home Affordable

Background

Program Explanation & Features

Frequently Asked Questions

Modification Success Story

How to Get Started

Beware of Rescue Scams

Additional Resources

Background Homeowner Affordability & Stability Plan Making Home Affordable Program Home Affordable Refinance Home Affordable Modification The Administration’s Plan Program for Homeowners Programs Available

Home Affordable Refinance Program (HARP) Purpose Gives borrowers the opportunity to refinance into more affordable loans at today’s lower rates Only for borrowers with Fannie Mae or Freddie Mac loans Scope Estimated millions of borrowers are eligible

Purpose

Gives borrowers the opportunity to refinance into more affordable loans at today’s lower rates

Only for borrowers with Fannie Mae or Freddie Mac loans

Scope

Estimated millions of borrowers are eligible

HARP Eligibility Criteria Borrower – Owner-occupant of a 1-4 unit property Is current on the mortgage Has reasonable ability to pay new mortgage payment Loan – Mortgage is owned or guaranteed by Fannie Mae or Freddie Mac Amount of first mortgage does not exceed 125% of property’s current market value Refinance will improve the long-term affordability or sustainability of the loan

Borrower –

Owner-occupant of a 1-4 unit property

Is current on the mortgage

Has reasonable ability to pay new mortgage payment

Loan –

Mortgage is owned or guaranteed by Fannie Mae or Freddie Mac

Amount of first mortgage does not exceed 125% of property’s current market value

Refinance will improve the long-term affordability or sustainability of the loan

How does HARP differ from other refinances? No equity requirement No combined loan-to-value requirement MI flexibilities for loans with higher LTVs Faster to qualify and may be less expensive to process Limited cash-out to cover closing costs only; no debt consolidation

No equity requirement

No combined loan-to-value requirement

MI flexibilities for loans with higher LTVs

Faster to qualify and may be less expensive to process

Limited cash-out to cover closing costs only; no debt consolidation

First, determine basic eligibility using tools on www.MakingHomeAffordable.gov Borrowers may contact their current mortgage lender or any mortgage lender approved by the investor - subject to LTV limitations: If the amount owed on your first mortgage is equal to or less than 105% of the current market value, you may work with your existing mortgage lender or any GSE-approved mortgage lender If the amount owed is greater than 105% and does not exceed 125% of the current market value, please contact your existing mortgage lender How does a borrower apply for HARP?

First, determine basic eligibility using tools on

www.MakingHomeAffordable.gov

Borrowers may contact their current mortgage lender or any mortgage lender approved by the investor - subject to LTV limitations:

If the amount owed on your first mortgage is equal to or less than 105% of the current market value, you may work with your existing mortgage lender or any GSE-approved mortgage lender

If the amount owed is greater than 105% and does not exceed 125% of the current market value, please contact your existing mortgage lender

Home Affordable Modification Program (HAMP) Purpose Modifies loans of qualifying at-risk borrowers to achieve affordable payments Allows borrowers to keep their homes Reduces impact of foreclosure on communities Scope Estimated millions of borrowers are eligible

Purpose

Modifies loans of qualifying at-risk borrowers to achieve affordable payments

Allows borrowers to keep their homes

Reduces impact of foreclosure on communities

Scope

Estimated millions of borrowers are eligible

HAMP Eligibility Criteria Borrower – Owner-occupant of 1-4 unit property Has reasonable ability to pay modified mortgage payment Has a financial hardship and is delinquent or at risk of imminent default Loan – Amount owed on first mortgage is equal to or less than $729,750 Mortgage was originated on or before January 1, 2009 First mortgage payment (PITI + homeowner association/ condo fees) must be greater than 31% of borrower’s gross income

Borrower –

Owner-occupant of 1-4 unit property

Has reasonable ability to pay modified mortgage payment

Has a financial hardship and is delinquent or at risk of imminent default

Loan –

Amount owed on first mortgage is equal to or less than $729,750

Mortgage was originated on or before January 1, 2009

First mortgage payment (PITI + homeowner association/ condo fees) must be greater than 31% of borrower’s gross income

Determining Imminent Default Borrowers who are current on their loans but are struggling to make payments may also be eligible for HAMP if they: Have a documented hardship – decrease in income, increase in expenses, facing interest rate increase within the next four months, etc. Do not have sufficient savings or other liquid assets to make future payments

Borrowers who are current on their loans but are struggling to make payments may also be eligible for HAMP if they:

Have a documented hardship – decrease in income, increase in expenses, facing interest rate increase within the next four months, etc.

Do not have sufficient savings or other liquid assets to make future payments

Modification Process Your Mortgage Lender or Counselor… Determines if borrower meets minimum eligibility criteria Obtains borrower income and debt information Calculates borrower’s target modified payment to reach debt-to-income ratio of 31%

Your Mortgage Lender or Counselor…

Determines if borrower meets minimum eligibility criteria

Obtains borrower income and debt information

Calculates borrower’s target modified payment to reach debt-to-income ratio of 31%

Know Your Debt-to-Income (DTI) Ratio Front-End DTI Ratio Used to determine whether your monthly mortgage payment is “affordable” Calculated by dividing your current monthly mortgage payment by your gross monthly income 31% DTI

Front-End DTI Ratio

Used to determine whether your monthly mortgage payment is “affordable”

Calculated by dividing your current monthly mortgage payment by your gross monthly income

Modification Process - Continued Your Mortgage Lender… Performs these steps in order to reach target modified payment Step 1 : Capitalizes outstanding debt, escrow advances and out-of-pocket servicing expenses (no late fees allowed) Step 2 : Reduces the interest rate to as low as 2% Reduced rate remains fixed for 5 years and increases 1% per year thereafter to market interest rate at the time of modification Step 3 : Extends loan term up to 40 years Step 4 : Defers a portion of the principal, interest-free, until loan is paid off

Your Mortgage Lender…

Performs these steps in order to reach target modified payment

Step 1 : Capitalizes outstanding debt, escrow advances and out-of-pocket servicing expenses (no late fees allowed)

Step 2 : Reduces the interest rate to as low as 2%

Reduced rate remains fixed for 5 years and increases 1% per year thereafter to market interest rate at the time of modification

Step 3 : Extends loan term up to 40 years

Step 4 : Defers a portion of the principal, interest-free, until loan is paid off

Modification Terms Taxes and insurance must be escrowed Accrued interest and expenses will be added to the amount due - all late fees will be waived No modification fee can be charged Pending foreclosure sales must be postponed during evaluation & trial periods Borrowers must be truthful Borrowers with high overall debt must agree to seek free counseling

Taxes and insurance must be escrowed

Accrued interest and expenses will be added to the amount due - all late fees will be waived

No modification fee can be charged

Pending foreclosure sales must be postponed during evaluation & trial periods

Borrowers must be truthful

Borrowers with high overall debt must agree to seek free counseling

Know Your Debt-to-Income Ratio Back-End DTI Ratio Used to determine how much of your income is needed to pay off all of your debts Calculated by dividing your total monthly debt payments by your gross monthly income Need Assistance? HUD-approved housing counselors are available to assist you. The service is free and available 24/7. 1-888-995-HOPE

Back-End DTI Ratio

Used to determine how much of your income is needed to pay off all of your debts

Calculated by dividing your total monthly debt payments by your gross monthly income

Second Mortgage Lien Modification Program Purpose Modifies 2 nd mortgages of qualifying at-risk borrowers to achieve affordable payments on both mortgages Incentives encourage participation from all parties Scope Estimated that up to 50% of at-risk borrowers with 1 st mortgages have 2 nd mortgages

Purpose

Modifies 2 nd mortgages of qualifying at-risk borrowers to achieve affordable payments on both mortgages

Incentives encourage participation from all parties

Scope

Estimated that up to 50% of at-risk borrowers with 1 st mortgages have 2 nd mortgages

Second Mortgage Lien Modification Program - Continued A 2 nd mortgage lien may be eligible when… The mortgage lender is a participant in the Second Mortgage Lien Modification Program under HAMP Borrower’s corresponding 1 st mortgage is modified through HAMP Mortgage originated on or before January 1, 2009 3 rd and/or 4 th mortgage liens are not eligible

A 2 nd mortgage lien may be eligible when…

The mortgage lender is a participant in the Second Mortgage Lien Modification Program under HAMP

Borrower’s corresponding 1 st mortgage is modified through HAMP

Mortgage originated on or before January 1, 2009

3 rd and/or 4 th mortgage liens are not eligible

Second Mortgage Lien Modification Program - Continued May only be modified once No fee charged to modify Borrower must provide consent to share their 1 st mortgage lien modification data with the 2 nd mortgage lender if the lenders are two different parties

May only be modified once

No fee charged to modify

Borrower must provide consent to share their 1 st mortgage lien modification data with the 2 nd mortgage lender if the lenders are two different parties

Borrower Incentives No cost for modification Borrowers can receive principal reductions for making HAMP payments on time Incentives can equal up to: $1,000 per year for five years for 1 st mortgage $250 per year for five years for 2 nd mortgage (if applicable) Incentives add up monthly and are allocated once a year to reduce borrower’s unpaid mortgage principal balance With no extra effort, borrowers increase the equity in their homes However, if borrower defaults on their 1 st or 2 nd modified mortgages, then no additional incentives will be allocated

No cost for modification

Borrowers can receive principal reductions for making HAMP payments on time

Incentives can equal up to:

$1,000 per year for five years for 1 st mortgage

$250 per year for five years for 2 nd mortgage (if applicable)

Incentives add up monthly and are allocated once a year to reduce borrower’s unpaid mortgage principal balance

With no extra effort, borrowers increase the equity in their homes

However, if borrower defaults on their 1 st or 2 nd modified mortgages, then no additional incentives will be allocated

Frequently Asked Questions Question: Is housing counseling required under Making Home Affordable? Answer: For a Home Affordable Modification, you must agree to obtain counseling from a HUD-approved housing counselor if your back-end DTI is at or above 55%. Counseling is optional if your back-end DTI is under 55% HUD-approved housing counseling is free

Question:

Is housing counseling required under Making Home Affordable?

Answer:

For a Home Affordable Modification, you must agree to obtain counseling from a HUD-approved housing counselor if your back-end DTI is at or above 55%.

Counseling is optional if your back-end DTI is under 55%

HUD-approved housing counseling is free

Frequently Asked Questions Question: How can I find a HUD-approved housing counselor? Answer: Online: Select “Find a Counselor” on the Making Home Affordable website, www.MakingHomeAffordable.gov By Telephone: Call 1-888-995-HOPE (4673)

Question:

How can I find a HUD-approved housing counselor?

Answer:

Online:

Select “Find a Counselor” on the Making Home Affordable website, www.MakingHomeAffordable.gov

By Telephone:

Call 1-888-995-HOPE (4673)

Frequently Asked Questions Question: Can you explain how my payment can be modified to 31% DTI? Answer: Following Treasury’s guidance, the mortgage lender must: Reduce the interest rate to as low as 2% If necessary, extend the loan term to 40 years If necessary, defer a portion of the principal, interest-free, until the loan is paid off Principal forgiveness is allowed but not required

Question:

Can you explain how my payment can be modified to 31% DTI?

Answer:

Following Treasury’s guidance, the mortgage lender must:

Reduce the interest rate to as low as 2%

If necessary, extend the loan term to 40 years

If necessary, defer a portion of the principal, interest-free, until the loan is paid off

Principal forgiveness is allowed but not required

Frequently Asked Questions Question: Is the modified payment permanent? Answer: It depends on the interest rate. If the new rate is higher than the market rate at the time of origination, the rate is fixed for the life of the loan. If it’s lower, the rate is fixed for 5 years. After that, it can increase by 1% per year, but only up to the market rate at the time of origination. It will never go higher.

Question:

Is the modified payment permanent?

Answer:

It depends on the interest rate.

If the new rate is higher than the market rate at the time of origination, the rate is fixed for the life of the loan.

If it’s lower, the rate is fixed for 5 years. After that, it can increase by 1% per year, but only up to the market rate at the time of origination. It will never go higher.

Frequently Asked Questions Question: Are mortgage lenders required to participate? Answer: If you have a Fannie Mae or Freddie Mac loan, yes. For other loans, participation is optional. However, significant financial incentives are being provided to encourage participation by Borrowers Mortgage Lenders Investors

Question:

Are mortgage lenders required to participate?

Answer:

If you have a Fannie Mae or Freddie Mac loan, yes.

For other loans, participation is optional. However, significant financial incentives are being provided to encourage participation by

Borrowers

Mortgage Lenders

Investors

Modification Success Story “ Nick” in Northern, VA Reason for default: Serious illness in family Family member died Employer reduced salary Increased medical expenses

“ Nick” in Northern, VA

Reason for default:

Serious illness in family

Family member died

Employer reduced salary

Increased medical expenses

Modification Success Story Payment: $1,877 Interest Rate: 6.50% Term, in Months: 324 Months Delinquent: 10 Payment: $1,214 Interest Rate: First 60 Months 2.00% Final Rate 4.85% Term, in Months: 326 Amt Capitalized: $18,772 Before Monthly Savings for 60 Months $663 Savings During First Year $7,956 After

Payment: $1,877

Interest Rate: 6.50%

Term, in Months: 324

Months Delinquent: 10

Payment: $1,214

Interest Rate:

First 60 Months 2.00%

Final Rate 4.85%

Term, in Months: 326

Amt Capitalized: $18,772

Getting Started Easy-to-Use Main Navigation for Homeowners to Quickly Find Information On the Home Page, consumers can access: Spanish Content 1-888-995-HOPE (4673) Beware of Scams Information Video Helpful Links in Footer Sample Home Page Access Checklist to Prepare Borrowers to Speak with their Mortgage Lender or Counselor

On the Home Page, consumers can access:

Spanish Content

1-888-995-HOPE (4673)

Beware of Scams

Information Video

Helpful Links in Footer

Determine Basic Eligibility Homeowners can find out if they may be eligible for Home Affordable Refinance or Home Affordable Modification by clicking on each button and answering several questions. Homeowners can learn about: Home Affordable Refinancing Home Affordable Modification Consumer FAQs Beware of Foreclosure Scams Sample Eligibility Page

Homeowners can learn about:

Home Affordable Refinancing

Home Affordable Modification

Consumer FAQs

Beware of Foreclosure Scams

Contact Your Mortgage Lender On the Contact Your Mortgage Servicer page: List of participating mortgage lenders and their contact information Link to Hope Now website Link to Modification and Refinance pages Link to Understanding Your Mortgage Link to Hope Now website for additional list of mortgage lenders and their contact information. Participating mortgage lenders contact information shown here. Sample Contact Your Mortgage Servicer Page

On the Contact Your Mortgage Servicer page:

List of participating mortgage lenders and their contact information

Link to Hope Now website

Link to Modification and Refinance pages

Link to Understanding Your Mortgage

Beware of Rescue Scams Beware of any company that promises: That it’s safe to skip your mortgage payments That walking away from your house won’t affect your credit They will buy your house and sell it back to you later A specific result, for a fee There is never a fee for getting information about the Making Home Affordable program from your mortgage lender or a HUD-approved housing counselor.

Beware of any company that promises:

That it’s safe to skip your mortgage payments

That walking away from your house won’t affect your credit

They will buy your house and sell it back to you later

A specific result, for a fee

Additional Resources For Immediate Borrower Assistance: Call 1-888-995-HOPE (4673) Find a HUD-Approved Housing Counselor: Visit www.MakingHomeAffordable.gov Find Your Mortgage Lender’s Phone Number: Refer to your monthly mortgage statement, or Look up on www.MakingHomeAffordable.gov

For Immediate Borrower Assistance:

Call 1-888-995-HOPE (4673)

Find a HUD-Approved Housing Counselor:

Visit www.MakingHomeAffordable.gov

Find Your Mortgage Lender’s Phone Number:

Refer to your monthly mortgage statement, or

Look up on www.MakingHomeAffordable.gov