the role of mortgage servicers in foreclosure mediation the modification underwriting process

8/13/2019 The Role of Mortgage Servicers in Foreclosure Mediation the Modification Underwriting Process

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Title: The Role of Mortgage Servicers in Foreclosure Mediations and

the Modification Underwriting Process

Presenter: Joseph Ward McIntosh

Associate AttorneyMcCarthy & Holthus, LLP

19735 10th Ave NE, Ste N 200

Poulsbo, WA 98370

206-399-5034

[email protected]

Bio: Joe is an associate attorney with the law firm of McCarthy &

Holthus, LLP in Washington. Joes practice area is creditors

rights, which he has done exclusively since becoming a lawyer

in 2007. Joe and his firm are active in representing

beneficiaries in Washington State Foreclosure Mediations. Joe

represents both big and small mortgage servicers in

foreclosure mediations, and is knowledgeable about the

industry and the mortgage modification process.

Joe is a native of Mercer Island, WA. He is a graduate of

Washington State University, and Willamette Law School. He

lives in Seattle, and works out of the firms downtown Seattle

office. Prior to joining McCarthy & Holthus, Joe worked for a

Seattle creditors rights firm focusing on collection and creditor

litigation.


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Who is the Beneficiary? What Interests are Involved?

BorrowerServicerInvestorInsurer

-Investors

-Fannie Mae1

-Freddie Mac2

-FHLB3

-Private Investors

-Servicers

-Banks

-Servicing Companies

-Insurers

-FHA / HUD4

-VA5

-USDA6

-private mortgage insurance

1http://www.fanniemae.com

2http://www.freddiemac.com

3http://www.fhlbanks.com/

4http://portal.hud.gov/hudportal/HUD

5http://www.benefits.va.gov/homeloans

6http://www.rurdev.usda.gov/Home.html


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What Shapes the Options on a Loan?

-Investors

-Fannie Regs7

-Freddie Regs8

-Private investor guidelines

-Private mortgage backed securities (MBS)

-HAMP9

-National Mortgage Settlement (NMS)10

-Insurance

-FHA / HUD guidelines

-VA guidelines

-USDA guidelines

-private mortgage insurance

-Servicers

-internal programs

-internal underwriting requirements

7https://www.efanniemae.com/sf/guides/ssq/.

Policy making loan guidelines can be both financial and political; for a discussion of principal reductions See

http://articles.washingtonpost.com/2012-07-31/business/35486217_1_principal-reduction-program-principal-

reduction-fannie-and-freddie.

8http://www.freddiemac.com/sell/guide/#

9https://www.hmpadmin.com/portal/programs/index.jsp

10 http://www.nationalmortgagesettlement.com/help
https://www.efanniemae.com/sf/guides/ssq/http://www.freddiemac.com/sell/guide/https://www.hmpadmin.com/portal/programs/index.jsphttps://www.hmpadmin.com/portal/programs/index.jsphttp://www.freddiemac.com/sell/guide/https://www.efanniemae.com/sf/guides/ssq/


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-internal policy

How Do Mortgage Modifications Work?

-Affordable Mortgage Payment

-Re-Amortizing Loan (waterfall)

-extension of term

-reduction of rate

-principal forbearance

-principal forgiveness

How Does a Mortgage Modification Get Approved?

IntakeUnderwritingDue DiligenceTrial ModPermanent Mod

-Intake

-modification application

-proof of income / hardship

-Underwriting

-verification of income and expenses

-Due Diligence

-credit report

-title report

-escrow analysis (taxes and insurance)

-property appraisal

-Modification


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-inputs -> new monthly payment -> re-amortization -> NPV11

-trial plan

-permanent modification

How Does a Short Sale Get Approved

-Intake

-application

-proof of income / hardship

-offer + proof of funds

-Due Diligence

-property appraisal

-Approval & Closing

11For HAMP loan reviews, an NPV test is the very last step of the approval process . NPV values the discounted re-

amortized loan against a foreclosure. If a HAMP loan doesnt re-amortize, it fails for affordability, and no NPV testis run. For many non-HAMP programs, an NPV test is not utilized at any stage of the review. For example, if a loan

has mortgage insurance, its the insurer thatassumes risk of loss.

WAs foreclosure mediation law includes an NPV requirement. Its not yet clear to practitioners or those within

the industry what this law requires, or what was intended. There seems to be a disconnect between what WA

lawmakers understand about NPV, and how it actually works within the industry. There are other examples of this

disconnect between WAs law and the industry, but NPV is the most common encountered by practitioners.

the role of mortgage servicers in foreclosure mediation the modification underwriting process

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