eligibility limitation to Fannie or Freddie loans is only on the refinancing program HARP, not the modification program. HAMP shall apply to all mortgages originated prior to January 1, 2009. No loans originated subsequent to that date should be eligible. New borrowers should be accepted until December 31, 2012. Program payments should be created for up to 5 years subsequent to the date of entry into the HAMP.
Monitoring, however, shall continue for the life regarding the loan. General Qualification Terms: 1. The building should be owner-occupied, lone family two to 5 unit property within condominium, cooperative, and manufactured building affixed to a foundation and treated as real property below current state law. The building should be the primary residence verified by tax return, credit report, and other documentation for example utility bills. The building shall not be investor-owned.
The building shall not be vacant or condemned. Borrowers in a current bankruptcy case are not automatically eliminated from consideration for HAMP. Borrowers in active litigation regarding the mortgage loan can qualify for a modification without waiving any legal rights. First lien loans should have an unpaid principal balance prior to capitalization regarding the arrears equal to fewer than: a. 5 Units$1,403,400 Pending Foreclosures: Any foreclosure action should be temporarily suspended during the trial HAMP period, or while borrowers are regarded for alternative foreclosure prevention options.
Within the function that HAMP or the alternative foreclosure prevention choices fail, the foreclosure action should be resumed. Loan to Price Ratios LTV? For HAMP borrowers, there is no minimum or maximum Loan to Price LTV ratio for eligibility purposes. Borrowers, however, can only exercise one modification of their mortgage below HAMP. If the HAMP modification fails, then there exists no more HAMP options. Debt to Income Ratios: Front-End DTI is the ratio regarding the Principal, Interest, Taxes and Insurance Payments PITIA to the Monthly Gross Income.
PITIA is defined below the program as principal, interest, taxes, insurance within homeowners insurance and hazard and flood insurance and homeowners association and condominium fees. Mortgage insurance premiums PMI Insurance are excluded from the PITIA calculation. The Front-End DTI Target is 31%. The Standard Waterfall step that conclusions in a Front-End DTI closest to 41%, without going below 31%, shall satisfy the Front-End DTI Target. There is no restriction on reducing Front-End DTI below 31%, but any portion regarding the reduction below 31% shall not be covered by the Payment Reduction Cost Share offered by the Treasury.
Building Valuations: The Servicer shall use, at its discretion, neither one regarding the government sponsored enterprises' GSEs automated valuation models AVM -provided that the AVM Renders a reliable confidence score-or a Broker Cost Opinion to determine the Property Price for the DTI Test. As an alternative, the servicer shall rely on the AVM it uses internally provided that I the servicer is subject to supervision by a Federal regulatory agency, ii the servicer's primary Federal regulatory agency has reviewed the model and or or its validation and iii the AVM renders a reliable confidence score. If the GSE or servicer AVM is unable to render a price with a reliable confidence score, the servicer should obtain an assessment regarding the property price utilizing a property valuation method acceptable to the servicer's Federal regulatory agency, e. , in accordance together with the Interagency Appraisal and Evaluation Guidelines as though such guidelines apply to loan modifications, or a Broker Cost Opinion BPO. In all cases the property valuation shall not be higher than 60 days old.
Verification of Income: The borrower's income should be verified by requiring a signed Shape 4506-T Request for Transcript of Tax Return and obtaining the highest many recent tax return on file for each borrower on the note. For wage earners, the 3 most recent pay stubs for each wage earner on the note shall also be required. For self-employed borrowers or for non-wage income borrowers, the borrower's income should be verified by obtaining other third-party documents that give reasonably reliable evidence of income. Borrowers should also represent and warrant that they do not have sufficient liquid assets to make their monthly mortgage payments. Monthly Gross Income: The borrower's Monthly Gross Income MGI is the quantity prior to any payroll deductions and includes wages and salaries, overtime pay, commissions, fees, tips, bonuses, housing allowances, other compensation for personal services, Corporate Security payments, within Corporate Security received by adults on behalf of minors or by minors intended for their own support, annuities, insurance policies, retirement funds, pensions, disability or death benefits, unemployment benefits, rental income and any other income.
Monthly Net Income MNI shall be used for preliminary screening and qualifications. If used, the servicer shall need to multiply net income by 1. 25 to obtain an estimate of Monthly Gross Income MGI. Back-End DTI: The Back-End DTI is the ratio regarding the borrowers' total monthly debt payments for example Front-End PITIA, any mortgage insurance premiums, payments on all installment debts, monthly payments on all junior liens or mortgages, alimony, car lease payments, aggregate negative net rental income from all investment properties owned, and monthly mortgage payments for 2nd homes to the borrower's MGI. The servicer should validate each monthly installment payment, revolving debt and secondary mortgage debt by pulling a credit report for each borrower or a joint report for a married couple.
The servicer should also think about details obtained from the borrower orally or in writing concerning incremental monthly obligations. Borrowers who otherwise qualify for the modification below this program, but who should hold a post-modification Back-End DTI greater than or equal to 55%, should be provided with a letter stating that they can be compulsory to work with a HUD-approved counselor and the modification shall not take effect until they give a signed statement indicating that they shall obtain such counseling. Reasonably Foreseeable or Imminent Default: Every potentially eligible borrower who calls or writes in to their servicer in reference to a modification should be screened for a hardship. This screen should ascertain whether the borrower has had a change in circumstances that causes financial hardship, or is facing a recent or imminent increase within the mortgage payment that is likely to make a about insurance hardship e. If the borrower reports a fabric change in circumstances, the servicer should ask about current income and assets, and current expenses as well as the critical circumstances relating to the claimed financial hardship.
Each of these elements shall be verified through documentation. If the servicer determines that that a non-defaulted borrower is facing a financial hardship is in Imminent Default and should be unable to make his or her mortgage payment within the immediate future, the servicer should apply the NPV Test. The NPV Test: A Standard NPV Test should be compulsory for each loan that is in Imminent Default or is at fewest 60 days delinquent below the MBA delinquency calculation. This NPV Test shall compare the net present price NPV regarding the cash flows expected from a modification to the net present price of cash flows expected within the absence of a modification. If the NPV regarding the modification scenario is greater, the NPV result is deemed positive.
The NPV Test applies to the Standard Waterfall only and does not need consideration of principal forgiveness. However, the servicer shall decide to forgive principal if the servicer determines that principal forgiveness improves the likelihood of loan performance and the price regarding the modification. Compulsory parameters for the NPV Test should be published in a little weeks. If the NPV Test generates a positive result when applying the Standard Waterfall, the servicer is compulsory to release a HAMP to the borrower. If the NPV Test generates a negative result, modification is optional, unless prohibited by the service contracts.
The monthly payment reduction incentive is available for any HAMP, whether or not NPV is positive, that meets the eligibility requirements and is performed regarding to the Waterfall described below. If the NPV Test result is negative and a HAMP is not pursued, the lender or investor should seek other foreclosure prevention alternatives, within alternative modification programs, deed-in-lieu and brief sale programs. Loan Modification and Standard Waterfall: Servicers shall follow the Standard Waterfall described below to reduce the monthly payments to 31% Front-End DTI Target defined below. The initiative shall reimburse lenders or investors for one 1/2 regarding the costs of reducing monthly mortgage payments from a position consistent with a 38% Front-End DTI Ratio or less, if the unmodified DTI is fewer than 38% below to a position consistent with a 31% Front-End DTI Ratio. This Payment Reduction Cost Share can final for up to 5 years from the HAMP modification effective date.
Principal Reduction Option: There is no requirement to use principal reduction below HAMP: however, servicers shall forgive principal to achieve the Front-End DTI Target. Principal forgiveness shall be used on a standalone basis or prior to any step within the Standards Waterfall process. If principal forgiveness is used, subsequent steps within the Standard Waterfall shall not be skipped. If principal is forgiven and the rate is not reduced, the rate should be frozen at its existing position and treated like a modified rate for the purposes regarding the Interest Rate Cap. Within the function of principal forgiveness, the Repayment Reduction Cost Share continues to be based on the change within the borrower's monthly payment from 38% to 31% Front-End DTI Ratio and is limited to 5 years.
Modification Terms: Interest Rate Floor: THE IRF for modified loans is 2%. Interest Rate Cap: The modified interest rate should remain in location for 5 years, subsequent to which time the interest rate should be gradually increased by 1% 100 basis points per year or such lesser quantity as should be wanted until it reaches the IRC. The IRC for a modified loan is the lesser regarding the fully indexed and fully amortizing original contract rate or the Freddie Mac Primary Mortgage Market Survey rate for 30-year fixed rate conforming mortgage loans, rounded to the nearest 0. 125%, as regarding the date that the modification document is prepared. If the modified rate exceeds the Freddie Mac Primary Mortgage Market Survey rate in effect on the date the modification document is prepared, the modified rate should be the new note rate for the remaining loan term.
Principal Forbearance: No interest shall accrue on the forbearance amount. If the choice to forbear principal is selected, the servicer shall forbear on collection the deferred portion regarding the Capitalized Balance until the earlier regarding the maturity regarding the modified loan, the sale regarding the property, or the pay-off or refinancing regarding the loan. Redefaulting Loans: A loan should be regarded to have redefaulted when the borrower reaches a 90-day delinquency status below the MBAS delinquency calculation. Redefaulting Loans should be terminated from the program, and no distant payments of any kind should be created to the lender or investor, servicer, or borrower. Redefaulting Loans should be regarded for other loss mitigation programs prior to being referred to foreclosure.
Trial Period Required. Successful completion regarding the Trial Modification Period and entry into program agreements between the Servicer and the Treasury's financial agent are prerequisites for any payments to the lender or investor, servicer or borrower. Modification is effective on first calendar month following the successful completion regarding the Trial Period. Successful completion means that the borrower is current below the MBA delinquency calculation at the end regarding the Trial Period. Borrowers in foreclosure restart states should be regarded to have failed the Trial Period if they can be not current at the time the foreclosure sale is scheduled.
No payments below the program to the lender or investor, servicer or borrower should be created during the Trial Period. No payments below the program to these parties should be created if the Trial Period is not completed successfully. NO payments below the program to these parties should be created unless and until the servicer has entered into the program agreements together with the Treasury's financial agent. Length of Trial Period: The Trial Period shall final for 90 days 3 payments at modified terms or detailed if compulsory to comply with investor contractual obligations within the Pooling and Servicing Agreements. The borrower should be current at the end regarding the Trial Period to obtain the HAMP modification.
Escrows: Servicers are compulsory to escrow for modified borrowers' real estate taxes and mortgage-related insurance payments immediately if they have the capability of processing these payments or are already creating use of a third-party vendor for this purpose. Servicers who do not have this capacity should implement an escrow process within six months regarding the program agreement. Counseling Requirements: For borrowers with a Back-End DTI of 55% or higher, the servicer should inform the borrower regarding the availability and advantages of counseling and give a list of regional HUD-approved counselors. The servicer should give the borrower with a letter stating that counseling is a requirement regarding the modification terms. The letter should be compulsory by counselors sequential to begin counseling.
The modification shall not take effect until the borrower represents in writing that he or she shall obtain counseling. Assumable: If the solidified loan was assumable prior to modification, a HAMP modification cancels this feature. Unpaid Late Fees: Unpaid late fees should be waived for the borrower. These with late fees prior to the beginning regarding the Trial Period and accrued during the Trial Period. Credit Report: The servicer shall close the cost regarding the credit report.
Servicer Compensation: Upon modification following a successful Trial Period, and contingent on signing the program servicer agreement, the servicer shall receive an incentive fee of $1,000 for each eligible modification meeting HAMP guidelines. Servicers shall also receive Pay for success fees payable each 12 months for 3 years at $1,000 per year. Servicers shall not receive Pay for Success fees for Redefaulting Loans. For loans modified while still current below the MBA delinquency calculation, the Servicer shall receive a Current Borrower One-Time Incentive of $500 following successful completion regarding the Trial Period. Lenders that service their own portfolio loans are eligible for these incentives.
The term servicer means the party that is responsible for performing the modification activities. Similar incentives should be paid below the HARP Program. Borrower Cash Contributions: The investor shall not need the borrower to contribute cash for eligibility or execution of a Trial or Permanent modification. Lender or Investor Compensation: Lenders or investors should be compensated only within the function that the Front-End DTI Target or a decreased Front-End DTI is achieved. Lenders or investors shall follow the Standard Waterfall specified above to reach a monthly payment that satisfies the Front-End DTI Target.
As described above, Treasury shall give compensation based on one 1/2 regarding the dollar difference between the monthly payment for a 31% Front-End DTI Ratio and the lesser of i the monthly payment for a 38% Front-End DTI Ratio or ii the borrower's current monthly payment. This compensation should be provided for up to 5 years or until the loan is paid off. Upon a modification becoming effective following successful completion regarding the Trial Period by a borrower who was current prior to the beginning regarding the Trial Period, lenders or investors should be paid a $1,500 Current Borrower One-Time Incentive, subject to sure de minimis constraints discussed below. No monthly lender or investor payments should be created during the Trial Period. Monthly lender or investor payments shall begin subsequent to the Trial Period is successfully completed, the servicer signs a service agreement with Treasury, and formal modification begins.
No monthly lender or investor payments should be created if the Trial Period is not completed successfully. Borrower Compensation: Borrowers should be eligible to accrue up to $1,000 each year in Pay-for-Performance Success Payments for up to 5 years, a total of up to $5,000 over 5 years, subject to sure de minimis constraints discussed below. Accruals are based on on-time payment performance. First annual principal balance reduction should be effective 12 months subsequent to entering the Trial Period as long as the borrower is not terminated from the program. In any provided month, the borrower's mortgage payment should be created on time, accounting for standard servicer grace periods, sequential to accrue the monthly Pay for Performance Success Payment.
The borrower shall receive details on a monthly basis regarding the accrual of these payments. The payment should be directed to the servicer, who shall reduce the principal balance by the payment quantity but not by higher than $1,000 per year for 5 years if the borrower continues within the program. Payments are to be applied directly and entirely to reduce the principal balance, and any applicable prepayment penalties on partial principal prepayment created by the government should be waived. The equivalent of 3 months of Pay-for-Performance Success Payments should be created upon successful completion regarding the Trial Period, contingent upon the servicer signing a service agreement together with the Treasury. Borrowers who are terminated from the program lose their right to outstanding accruals.
De Minimis Constraint: To qualify for servicer Pay for Success payments and borrower Pay for Performance Success Payments, the modification should reduce the monthly payment by a minimum of seven %. The monthly payment is the PITIA payment, as used in defining DTI, together with the loan fully indexed and fully amortized. When paid, servicer annual Pay for Success payments and borrower Pay for Performance Success Payments should be the lesser of i $1,000 or ii 1/2 the reduction within the borrower's annualized monthly payment. The de minimis constraint does not apply to the up-front Servicer Incentive Payment, the Payment Reduction Cost Share, or the Building Cost Depreciation Reserve Payment. Disclosure: When promoting or describing loan modifications, servicers should give borrowers with details drafted to help them understand the modification terms that are being offered and the modification process.
Servicers also should give borrowers with clean and understandable written details related to the fabric terms, costs, and risks regarding the modified mortgage loan in a timely manner to enable borrowers to make informed decisions. Fair Lending: Servicers' modifications below this program should comply together with the Equal Credit Opportunity Act and the Fair Housing Act, which prohibit discrimination on a prohibited basis in connection with mortgage transactions. Loan modification programs are subject to the fair lending laws, and servicers and lenders should make sure that that they do not treat a borrower fewer favorably than other borrowers on grounds for example race, religion, local origin, sex, marital or familial status, age, handicap, or receipt of public assistance income in connection with any loan modification. These laws also prohibit redlining. Consumer Inquiries and Complaints: Servicers should have procedures and processes in location to be can respond to inquiries and complaints relating to loan modifications.
Servicers should make sure that that such inquiries and complaints are provided fair consideration, and timely and appropriate responses and resolution. Building Cost Depreciation Payments. To encourage lenders or investors to modify more mortgages, compensation should be provided to partially offset probable losses from building cost declines. This should be structured like a simple cash payment on each modified loan while the loan remains active within the program. Payments for Brief Sales and Deeds-in-Lieu: Compensation should be provided to servicers and borrowers sequential to facilitate brief sales or deeds-in-lieu in those cases in which borrowers neither fail the net present price NPV test described above or fail to qualify for, or default under, the modification program.
2nd Line Elimination Payments: To reduce the borrower's overall indebtedness and improve loan performance, more incentives should be provided to extinguish junior liens on homes with first-lien loans that are modified below the program.
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