President Obama's Proposals for Distressed Home Owner Relief

1. Slide Show by Lou Tulga CCIM CRB
Based on Fact Sheet from the Office of Press Secretary
Copyright (c) 2012 Lou Tulga CCIM CRB 1

2. Overview of the President’s Plan
 Broad-Based Refinancing to Help Responsible
Borrowers Save an Average of $3,000 per Year
 Homeowner Bill of Rights
 Initiate a Pilot Program to Transition Foreclosed
Property into Rental Housing to Help Stabilize
Neighborhoods and Home Prices
 Move the Market to Provide a Full-Year of
Forbearance for Borrowers Looking for Work
 Pursuing Joint Investigation into Mortgage Origi-
nation and Servicing Abuses
Copyright (c) 2012 Lou Tulga CCIM CRB 2

3. I. Broad Based Refinancing Plan
 Help homeowners who are current on mortgage
payments and who face substantial barriers in getting
refinancing though no fault of their own because
 Their mortgages are underwater
 Banks may be worried about losses not responsible for
 The President worked with housing regulators to make
millions of Americans eligible for lower interest rates
 But, now the President will be calling on Congress to
open up the possibility for assistance to even more
homeowners
Copyright (c) 2012 Lou Tulga CCIM CRB 3

4. I. Broad Based Refinancing Plan
 Under the proposal borrowers with loans insured by
Fannie or Freddie will have access to streamlined
refinancing through those entities
 Borrowers, with standard non-GSE loans who are
current with loan payments, will have access to
refinancing through a new a new program run through
the FHA…with no more unnecessary barriers
Copyright (c) 2012 Lou Tulga CCIM CRB 4

5. I. Broad Based Refinancing Plan
 Simple and straight forward eligibility criteria
 Current on their mortgage for the pasts 6 months and
have missed no more than one payment in the previous
6 months
 A current FICO score of no less than 580 (ca. 90% of
current mortgagors meet this requirement)
 The outstanding loan must not be larger than current
FHA conforming loans for the area
 Refinancing for single-family, owner-occupied principal
residence
Copyright (c) 2012 Lou Tulga CCIM CRB 5

6. I. Broad Based Refinancing Plan
 Borrowers will apply through a streamlined process
 New loan-to-value limits that may require lenders
interested in refinancing deeply underwater loans
(greater than 140 LTV) to write down the excess
balance of these loans to meet the new LTV standards
--reducing the risk to the new re-fi lender and erase
the negative equity position of the borrower
Refinancing Plan will cost ca. $5 - $10 billion which will
be fully offset by using a portion of the proposed
“Financial Crisis Responsibility Fee—imposed on the
largest financial institutions
Copyright (c) 2012 Lou Tulga CCIM CRB 6

7. II. Home Owner Bill of Rights
 The Administration sees the mortgage servicing system as
badly broker and would benefit from a single set of strong
federal standards
 Simple, easy to understand Mortgage Forms
 No hidden fees and penalties
 No conflicts of interest between servicers, multiple investors
and junior lien holders, etc.
 Early assistance and intervention for at-risk owners
 Continuity of contact within the process
 Time and contact requirements before beginning the
foreclosure process
Copyright (c) 2012 Lou Tulga CCIM CRB 7

8. II. Home Owner Bill of Rights
 Safeguards Against Inappropriate Foreclosure
 Right of Appeal: Servicers must explain to all home
owners any decision to take action based on failure to
meet payments and provide reasonable opportunity to
appeal that decision in a formal review process
 Certification of Proper Process: Prior to a foreclosure
sale, servicers must certify in writing to the foreclosure
attorney or trustee that appropriate loss mitigation
alternatives have been considered and that the
proceedings are in keeping with applicable law
 Borrower to get a copy of certification
Copyright (c) 2012 Lou Tulga CCIM CRB 8

9. III. Pilot Program…REORental
 The Department of Treasury and HUD along with
FHFA are developing a strategy to transition REO
properties into rental housing
 The strategy is intended to reduce the inventory of
unsold homes, help stabilize housing prices, support
neighborhoods, and provide sustainable rental
housing for families
 FHFA and the Administration to develop a program to
help manage REO properties and ease pressure on
communities from presence of distressed housing
Copyright (c) 2012 Lou Tulga CCIM CRB 9

10. IV. Toward Forbearance for
Borrowers Looking for Work
 Extension for FHA and HAMP programs to give such
borrowers time to find work
 12-Month Forbearance for Mortgages Owned by GSEs
who have announced that for loans they own lenders
may grant forbearance up to one year for borrowers out
of work
 Move to major services: BOA and Wells Fargo have
begun to offer this longer period to borrowers who are
unemployed
 A newly emerging norm to provide 12-month
forbearance
Copyright (c) 2012 Lou Tulga CCIM CRB 10

11. V. Joint Investigation in Mortgage
Origination and Servicing Abuses
 DOJ, HUD, SEC and various state attorneys general
have formed a “Residential Mortgage-Backed
Securities Working Group under the President’s
“Financial Fraud Enforcement Task Force” to
investigate and alleged misconduct
Copyright (c) 2012 Lou Tulga CCIM CRB 11

12. VI. Employment from
Rehabilitation Contracts
 The President will propose in the next budget to invest
$15 billion in a national effort to put construction
workers on the job rehabilitating hundreds of
thousands of vacant and foreclosed housing and
businesses by bringing expertise and capital from the
private sector and expand innovative property
solutions like land banks
Copyright (c) 2012 Lou Tulga CCIM CRB 12

13. VII. Expand HAMP Eligibility
 Open HAMP more broadly: Currently if a borrower’s
first-lien mortgage debt-to-income ratio is below 31%
they are ineligible
 But, many borrowers who do not meet this
requirement, are still struggling because of junior lien
and other debt obligations
 Expand eligibility to landlords of currently occupied or
intended to be occupied properties because single
family rentals are an important source of affordable
housing
Copyright (c) 2012 Lou Tulga CCIM CRB 13

14. VIII. Increase Loan Modification
Incentives to Help Borrowers
Rebuild Equity
 Potential “write-down” of mortgage balances when
borrower owes significantly more than the property
value
 To continue to encourage investors to consider
expanding the use of principal balance “write-downs”
 Currently, an owner of a loan receives between 6 and
21 cents on a dollar to write-down the principal
Copyright (c) 2012 Lou Tulga CCIM CRB 14