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![Principal Reduction and Total Partial ClaimPrincipal Reduction = $150,000 - $130,931= $19,069Total Partial Claim = $19,069 principal deferment + $3,660 arrearage = $22,729Total Partial Claim < $45,000 Calculated Maximum Partial ClaimMortgagor’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](https://image.slidesharecdn.com/makinghomeaffordable-parrilla-091006113245-phpapp01/85/Making-Home-Affordable-Parrilla-8-320.jpg)
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Making Home Affordable Parrilla
The FHA-HAMP program combines a partial claim with a loan modification to help struggling homeowners in default. It allows for up to 30% of the unpaid principal balance to go towards arrearages and fees, with the remainder deferred until payoff. Homeowners must complete a 3 month trial plan first. The modified loan amount is calculated to keep the front-end ratio below 31% and back-end ratio below 55% of gross monthly income. If successful, the partial claim is subordinated to the modified loan and documents are sent to HUD for processing.
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Making Home Affordable Parrilla
- 1. Making Home AffordableProgram: FHA’s Home Affordable Modification Loss Mitigation OptionMortgagee Letter 2009-23, page 1
- 2. Basic Program GuidelinesFHA-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 IncomeRatiosFront-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 MaximumPartial Claim Amount under FHA-HAMPMaximum Partial Claim amount is <=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 MaximumPartialClaim - ExampleUnpaid Principal Balance = $150,000Current Monthly Payment (PITI) = $1,220 (P&I = $920 + TI = $300) Current Other Recurring Debt = $800Gross Monthly Income = $3,500Number of Payments Past Due = 3Total Arrearage = $3,660Mortgagee Letter 2009-23, page 2
- 6. Calculation of MaximumPartialClaim – Example - ContinuedMaximum Partial Claim = $150,000 x 30% = $45,000Maximum 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 ofModified Loan – Example - ContinuedNew P&I = $1,085 (Max PITI) - $300 (T&I) = $785New Mortgage Term = 360 monthsNew Interest Rate = 6% (Assumed fixed rate)Calculated New Principal Balance = $130,931Mortgagee Letter 2009-23, page 2
- 8. Principal Reduction andTotal Partial ClaimPrincipal Reduction = $150,000 - $130,931= $19,069Total Partial Claim = $19,069 principal deferment + $3,660 arrearage = $22,729Total Partial Claim < $45,000 Calculated Maximum Partial ClaimMortgagor’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 UseFHA-HAMPMortgagees must evaluate the defaulted mortgage for Loss Mitigation actions in the following priority order:1. Existing FHA Home Retention Loss Mitigation Options2. FHA-HAMPMortgagee Letter 2009-23, page 3
- 10. FHA-HAMP continuation The propertysecuring 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 Filingand Document DeliveryPartial 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. RemittanceRepayment Terms, OptionFailure 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:http://www.hud.gov/offices/hsg/sfh/nsc/fmaddr.cfmMortgagee Letter 2009-23, page 3 and 4
Editor's Notes
- #6 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.
- #7 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.
- #8 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.
- #9 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.