aar homeowner affordability and stability program
TRANSCRIPT
Homeowner Affordability and Stability Program
Understanding the Logistics
Amy Swaney, CMBPeoples Mortgage Company
Making Home Affordable
3 Distinct Areas of Focus
• Home Affordable Refinance Programs
• Home Affordable Modification Programs
• Restoring Confidence in FNMA/FHLMC
Borrower
Brokers
Servicing
InvestorBankers
WallStreet
Secondary
Market
Understanding the Secondary Market
Understanding Securitization
$100 MillionPool of
Mortgages
$100 Million
MBS
The Bank
Buys or Originates
The Bank
Packages into MBS
The Secondary Market Buys the MBS and Sells to investors
Understanding Securitization -Then
FNMA
FHMLC
$100 Million
MBS
Wall Street Firms
Private
Understanding Securitization - Now
FNMA
FHMLC
$100 Million
MBS
Wall Street Firms
Private
Making Home Affordable
3 Distinct Areas of Focus
• Home Affordable Refinance Programs
• Home Affordable Modification Programs
• Restoring Confidence in FNMA/FHLMC
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
Freddie MacHome Affordable
RefinanceFHLMC must own your 1st mortgage
1. You must be current
2. Your 1st mortgage must be 105% or less of current market value
3. If you have a 2nd mortgage, the lender MUST AGREE to subordinate
4. You must obtain the refinance from your current servicer
Fannie MaeHome Affordable
RefinanceFannie Mae must own your 1st mortgage
1. You must be current
2. Your 1st mortgage must be 105% or less of current market value
3. If you have a 2nd mortgage, the lender must agree to subordinate
4. You may obtain the refinance from any mortgage originator or current servicer
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
1-Home Affordable Refinance
General Guidelines for both Programs
Mortgage Insurance:• If original loan did not require mortgage insurance
- new loan will not require mortgage insurance• If original loan did require mortgage insurance -
new loan will require the same amount of coverage
Loan Level Price Adjustments:LLPA’s reduced
1-Home Affordable Refinance
General Guidelines for both Programs
Streamline Documentation Guidelines:
• AVM or Reduced Appraisal
• Income documentation waivers
Home Affordable Refinance
Issues• Loans over 105% LTV - Arizona• 2nd Mortgage Lenders not required to
subordinate• No determination of how the secondary
market will price these loans• Banks still have liquidity issues for funding
the loans
2- Home Affordable Modification
Who is Eligible?
• 1st Mortgages currently owned by FNMA or FHLMC • Must be owner-occupied, 1- to 4- unit, including
condos, cooperatives, eligible manufactured homes, and conforming jumbo mortgages.
• Mortgages for properties that are abandoned, vacant, or condemned are not eligible.
• Mortgages may be previously modified, but can only be modified once under the Home Affordable Modification Program.
Home Affordable Modification
Who is Eligible?• Eligible borrowers must provide affirmation of
financial hardship and proof of current income. • Borrowers may be in foreclosure.• Any foreclosure action will be temporarily
suspended while borrowers are considered for foreclosure prevention options unless…
– the Servicer has completed efforts to contact a borrower and has determined
– (1) the borrower has not responded or – (2) the borrower does not have the capacity or
willingness to participate in the program.
Borrowers are still eligible if they are in active bankruptcy.
Home Affordable Modification
UnderwritingUnderwriting looks to create a 1st 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.
Home Affordable Modification
UnderwritingBorrowers 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.
Home Affordable Modification
Incentives• Borrowers who remain current on their payment
receive a principal reduction of up to $1,000 per year for five years.
• 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
• 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.
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:
.
Home Affordable ModificationModification Process
STEPS
1. Calculate New Unpaid Principal Balance: Principal Balance + Escrow Shortages + Arrearages = Unpaid Principal Balance (UPB)
2. Calculate a new monthly payment:Use the new UPB The current note rate on the mortgageThe remaining term * If an affordable payment is achieved, the interest rate will fix permanently at the current note rate – if not continue
3. Reduce the interest rate in decrements of 0.125 percent to no lower than 2.0 percent **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.
Home Affordable Modification
Modification ProcessSTEPS
4. Extend the amortization term Month-by-month up to 480 months
5. Forebear principalThe interest-bearing principal is not less than 100 percent of current market value. ***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.
6. If a PITIAS-to-income ratio of no less than 31 percent cannot be achieved, the borrower does not qualify for this program.
Home Affordable Modification
Benefits• Modifications under program available to
any first lien up to $729,750.• Incentives for servicers to extinguish 2nd
lien debt• Additional Incentives to servicers to
facilitate short-sales AND deed-in-lieu's for loans not qualified for program
Home Affordable Modification
Issues• Loans must be owned or guaranteed by
FNMA/FHLMC• Credit Implications not determined• Is this delaying inevitable• No safe-harbor for servicers on private
label portfolios
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
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.
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Amy Swaney,CMB480-529-3008