AAR Homeowner Affordability And Stability Program


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AAR Homeowner Affordability And Stability Program

  1. 1. Homeowner Affordability and Stability Program Understanding the Logistics Amy Swaney, CMB Peoples Mortgage Company
  2. 2. Making Home Affordable <ul><li>3 Distinct Areas of Focus </li></ul><ul><li>Home Affordable Refinance Programs </li></ul><ul><li>Home Affordable Modification Programs </li></ul><ul><li>Restoring Confidence in FNMA/FHLMC </li></ul>
  3. 3. Understanding the Secondary Market Borrower Brokers Servicing Investor Bankers Wall Street Secondary Market
  4. 4. Understanding Securitization The Bank Buys or Originates The Bank Packages into MBS The Secondary Market Buys the MBS and Sells to investors $100 Million Pool of Mortgages $100 Million MBS
  5. 5. Understanding Securitization -Then FNMA FHMLC Wall Street Firms Private $100 Million MBS
  6. 6. Understanding Securitization - Now FNMA FHMLC Wall Street Firms Private $100 Million MBS
  7. 7. Making Home Affordable <ul><li>3 Distinct Areas of Focus </li></ul><ul><li>Home Affordable Refinance Programs </li></ul><ul><li>Home Affordable Modification Programs </li></ul><ul><li>Restoring Confidence in FNMA/FHLMC </li></ul>
  8. 8. 1 -Home Affordable Refinance Understanding the Secondary Market Federal National Mortgage Association (FNMA/Fannie Mae) Federal Home Loan Mortgage Corporation (FHLMC/Freddie Mac) 2 separate entities both currently held in conservatorship by the government
  9. 9. Freddie Mac Home Affordable Refinance <ul><li>FHLMC must own your 1 st mortgage </li></ul><ul><li>You must be current </li></ul><ul><li>Your 1 st mortgage must be 105% or less of current market value </li></ul><ul><li>If you have a 2 nd mortgage, the lender MUST AGREE to subordinate </li></ul><ul><li>You must obtain the refinance from your current servicer </li></ul>
  10. 10. Fannie Mae Home Affordable Refinance <ul><li>Fannie Mae must own your 1 st mortgage </li></ul><ul><li>You must be current </li></ul><ul><li>Your 1 st mortgage must be 105% or less of current market value </li></ul><ul><li>If you have a 2 nd mortgage, the lender must agree to subordinate </li></ul><ul><li>You may obtain the refinance from any mortgage originator or current servicer </li></ul>
  11. 11. How Do You Know? Is your loan owned by Fannie Mae? 1-800-7FANNIE (8 a.m. - 8 p.m. EST) http://www.fanniemae.com/homeaffordable Is your loan owned by Freddie Mac? 1-800-FREDDIE (8am to 8pm EST) www.freddiemac.com/avoidforeclosure
  12. 12. 1-Home Affordable Refinance <ul><li>General Guidelines for both Programs </li></ul><ul><li>Mortgage Insurance: </li></ul><ul><li>If original loan did not require mortgage insurance - new loan will not require mortgage insurance </li></ul><ul><li>If original loan did require mortgage insurance - new loan will require the same amount of coverage </li></ul><ul><li>Loan Level Price Adjustments: </li></ul><ul><li>LLPA’s reduced </li></ul>
  13. 13. 1-Home Affordable Refinance <ul><li>General Guidelines for both Programs </li></ul><ul><li>Streamline Documentation Guidelines: </li></ul><ul><li>AVM or Reduced Appraisal </li></ul><ul><li>Income documentation waivers </li></ul>
  14. 14. Home Affordable Refinance <ul><li>Issues </li></ul><ul><li>Loans over 105% LTV - Arizona </li></ul><ul><li>2 nd Mortgage Lenders not required to subordinate </li></ul><ul><li>No determination of how the secondary market will price these loans </li></ul><ul><li>Banks still have liquidity issues for funding the loans </li></ul>
  15. 15. 2- Home Affordable Modification <ul><li>Who is Eligible? </li></ul><ul><li>1 st Mortgages currently owned by FNMA or FHLMC </li></ul><ul><li>Must be owner-occupied, 1- to 4- unit, including condos, cooperatives, eligible manufactured homes, and conforming jumbo mortgages. </li></ul><ul><li>Mortgages for properties that are abandoned, vacant, or condemned are not eligible. </li></ul><ul><li>Mortgages may be previously modified, but can only be modified once under the Home Affordable Modification Program. </li></ul>
  16. 16. Home Affordable Modification <ul><li>Who is Eligible? </li></ul><ul><li>Eligible borrowers must provide affirmation of financial hardship and proof of current income. </li></ul><ul><li>Borrowers may be in foreclosure. </li></ul><ul><li>Any foreclosure action will be temporarily suspended while borrowers are considered for foreclosure prevention options unless… </li></ul><ul><ul><li>the Servicer has completed efforts to contact a borrower and has determined </li></ul></ul><ul><ul><li>(1) the borrower has not responded or </li></ul></ul><ul><ul><li>(2) the borrower does not have the capacity or willingness to participate in the program. </li></ul></ul><ul><ul><li>Borrowers are still eligible if they are in active bankruptcy. </li></ul></ul>
  17. 17. Home Affordable Modification Underwriting Underwriting looks to create a 1 st mortgage housing payment of 31% of household income (principal, interest, insurances, taxes, homeowner/condo association fees, and escrow shortages- PITIAS) A new PITIAS amount is established.
  18. 18. Home Affordable Modification Underwriting Borrowers must successfully complete a three-month trial payment period, during which they will be required to pay the estimated new monthly payment. Servicers enter into a workout/forbearance plan with the borrower during the trial period, followed by a modification agreement upon successful completion.
  19. 19. Home Affordable Modification <ul><li>Incentives </li></ul><ul><li>Borrowers who remain current on their payment receive a principal reduction of up to $1,000 per year for five years. </li></ul><ul><li>Servicers receive money for each eligible modification they establish, and incentives of up to $1,000 each year for three years as long as a borrower stays current on their loan </li></ul><ul><li>Incentives accrue monthly based on timely payment and are awarded yearly. The payment of incentives will be forfeited should the borrower become 90-days or more delinquent at any time. </li></ul>
  20. 20. Home Affordable Modification How Will Lenders Modify? • Use borrower’s monthly household gross income x 31% • Solve for new monthly “affordable” payment using the following sequential steps until the 31 percent PITIAS-to-income ratio is achieved: .
  21. 21. Home Affordable Modification <ul><li>Modification Process </li></ul><ul><li>STEPS </li></ul><ul><li>Calculate New Unpaid Principal Balance : </li></ul><ul><li>Principal Balance + Escrow Shortages + Arrearages = Unpaid Principal Balance (UPB) </li></ul><ul><li>Calculate a new monthly payment: </li></ul><ul><li>Use the new UPB </li></ul><ul><li>The current note rate on the mortgage </li></ul><ul><li>The remaining term </li></ul><ul><li>* If an affordable payment is achieved, the interest rate will fix permanently at the current note rate – if not continue </li></ul><ul><li>3. Reduce the interest rate in decrements of 0.125 percent to no lower than 2.0 percent </li></ul><ul><li>**If the modified interest rate is below the market rate, the rate will remain fixed for five years. In the sixth year, the interest rate will be subject to annual increases of no more than 1 percent per year, not to exceed the lesser of the fully indexed rate at the time the loan was originated or the market rate (PMMS) at the time the modification documents are prepared. </li></ul>
  22. 22. Home Affordable Modification <ul><li>Modification Process </li></ul><ul><li>STEPS </li></ul><ul><li>Extend the amortization term </li></ul><ul><li>Month-by-month up to 480 months </li></ul><ul><li>Forebear principal </li></ul><ul><li>The interest-bearing principal is not less than 100 percent of current market value. </li></ul><ul><li>***Deferred principal will not be subject to interest and requires a balloon payment due upon sale, payoff or maturity. Deferred principal will be non-interest bearing and non-amortizing. </li></ul><ul><li>6. If a PITIAS-to-income ratio of no less than 31 percent cannot be achieved, the borrower does not qualify for this program. </li></ul>
  23. 23. Home Affordable Modification <ul><li>Benefits </li></ul><ul><li>Modifications under program available to any first lien up to $729,750. </li></ul><ul><li>Incentives for servicers to extinguish 2 nd lien debt </li></ul><ul><li>Additional Incentives to servicers to facilitate short-sales AND deed-in-lieu's for loans not qualified for program </li></ul>
  24. 24. Home Affordable Modification <ul><li>Issues </li></ul><ul><li>Loans must be owned or guaranteed by FNMA/FHLMC </li></ul><ul><li>Credit Implications not determined </li></ul><ul><li>Is this delaying inevitable </li></ul><ul><li>No safe-harbor for servicers on private label portfolios </li></ul>
  25. 25. 3-Confidence in FNMA/FHLMC Continuing the purchase of up to $600 billion in GSE debt and GSE Mortgage Backed Securities Increase the GSE’s retained portfolio caps from $50 billion to $900 billion
  26. 26. Marilyn Ferguson It's not so much that we're afraid of change or so in love with the old ways, but it's that place in between that we fear . . . . It's like being between trapezes. It's Linus when his blanket is in the dryer. There's nothing to hold on to.
  27. 27. More Information… To receive updates and get on my email broadcast list text or email me your name, company name, email and phone number Amy Swaney,CMB 480-529-3008 [email_address]