Making Home Affordable Working Together to Help Homeowners

September 2010 l Making Home Affordable The Crisis Continues

Foreclosures continue to devastate families and communities across the country.

September 2010 l Making Home Affordable 2 Response to the Crisis

MHA is part of • Homeowner Affordability and Stability Plan Administration boosts affordability and reduces foreclosures. MHA is key. goal to promote • stability and The $8,000 Homebuyer Tax Credit helped more affordability. than 2.5 million buy houses. • Historically low 30‐year fixed‐rate mortgages provide affordability and stability for families. • HUD’s NSP provides resources to purchase, rehabilitate, sell, and rent foreclosed and vacant properties. • Hardest Hit Fund provides targeted aid to families in states hit hardest by housing downturn.

September 2010 l Making Home Affordable 3 Making Home Affordable Offers Help

MHA and other • Home Affordable Refinance Program (HARP) programs work • FHA Refinance for Homeowners with Negative Equity together to • Home Affordable Modification Program (HAMP) help –Home Affordable Unemployment Program (UP) homeowners –Principal Reduction Alternative (PRA) • Second Lien Modification Program (2MP) avoid • Home Affordable Foreclosure Alternatives (HAFA) foreclosure and • Options for mortgages insured, guaranteed, or held by to revitalize federal government agencies: the housing –FHA (FHA‐HAMP) market. –USDA (RD‐HAMP) –VA (VA‐HAMP) • Housing Finance Agency Innovation Fund for the Hardest Hit Housing Markets (Hardest Hit Fund)

September 2010 l Making Home Affordable 4 HARP Overview

Home • Helps homeowners unable to refinance due to Affordable declining property values. Refinance • Makes payments more affordable and/or stable. Program –Replace ARM, Option ARM etc. with fixed‐ (HARP) rate mortgage. –Reduce amortization term in order to build equity. • Extended through June 30, 2011. • Through all refinances, including HARP, 7 million homeowners saving $150/month.

September 2010 l Making Home Affordable 5 FHA Refinance –Negative Equity

Provides • Provides homeowner who owes more than home additional value chance to refinance into FHA loan at no more refinancing than 97.75% of home value. option for • Homeowner must be current, occupy home as underwater primary residence, and have qualifying credit score. homeowners. • Lender writes down unpaid principal balance of 1st lien by at least 10%. • Total mortgage debt after refinancing may not exceed 115% of home value. • Treasury provides incentives to participating servicers, investors who extinguish all or part of 2nd lien.

September 2010 l Making Home Affordable 6 HAMP Overview

Home • Modifies 1st liens for eligible homeowners to Affordable achieve more affordable or more stable Modification payments. Program –Helps homeowners keep their homes. (HAMP) –Reduces impact of foreclosure on communities. • Ends December 31, 2012.

September 2010 l Making Home Affordable 7 HAMP Eligibility Criteria Homeowner: Loan: • Has financial hardship and is • Amount owed on first delinquent or at risk of mortgage equal to or less imminent default than $729,750 • Is owner‐occupant of 1‐4 • Mortgage originated on or unit property before January 1, 2009 • Has sufficient, documented • First mortgage payment (PITI income to support the + homeowner association/ modified payment condo fees) is greater than 31% of homeowner’s monthly gross income

September 2010 l Making Home Affordable 8 Home Affordable Unemployment Program (UP)

• UP provides Any unemployed homeowner who requests some breathing assistance under HAMP must first be room while considered for UP. homeowner • UP provides temporary assistance to seeks re‐ homeowner with hardship related to employment. unemployment. • Assistance grants homeowners a forbearance where payments are reduced or suspended. • Effective August 1, 2010. What if the homeowner is unemployed?

September 2010 l Making Home Affordable 9 UP Eligibility Criteria

Borrower: Loan: • Is owner‐occupant of 1‐4 unit • Amount owed on first property. mortgage equal to or less than • Makes request before seriously $729,750. delinquent (three months due, • Mortgage originated on or unpaid). before January 1, 2009. • Is unemployed at time of • Is delinquent or default is request and eligible for foreseeable. unemployment benefits. • Loan has not been previously • Has not previously received UP modified under HAMP. forbearance.

September 2010 l Making Home Affordable 10 From UP to HAMP Modification

• Eligible Minimum forbearance is 3 months, but may be homeowner extended at servicer discretion. enters • Homeowner’s payment must be reduced to no forbearance more than 31% of gross income. period. • Servicer may suspend homeowner’s mortgage payment in full. • The UP Forbearance Plan Notice provides the effective date and other details about the Forbearance Plan. What if the homeowner is unemployed?

September 2010 l Making Home Affordable 11 From UP to HAMP Modification

• Servicer At least 30 days before forbearance expiration, evaluates servicer required to evaluate whether extension eligible will be provided. homeowner for • Servicer provides Initial Package to homeowner HAMP. at re‐employment or 30 days before UP forbearance expiration. • Homeowner submits Initial Package for servicer evaluation for HAMP.

What if the homeowner is unemployed?

September 2010 l Making Home Affordable 12 Steps to HAMP Modification

Step #1 • Homeowner proactively seeks help from servicer for everyone! or responds to servicer solicitation letter. • Initial Package includes: Homeowner –Request for Modification and Affidavit Form submits Initial (RMA) Package for –Signed and dated 4506T‐EZ evaluation. –Two most recent pay stubs and/or evidence of income • Servicer evaluates income, debt, and hardship against eligibility criteria.

September 2010 l Making Home Affordable 13 HAMP Principal Reduction Alternative (PRA)

PRA offers • Program enhancement addresses principal some relief to reduction. underwater • PRA gives participating servicers flexibility to homeowners. offer principal reduction relief to homeowners whose homes are worth significantly less than they still owe (LTV 115%+). • Servicers will be required to evaluate homeowners for PRA this Fall. What if the • homeowner is Homeowners should not wait for PRA to underwater? become effective. PRA will be retroactive. PRA Effective Guidance forthcoming. Fall 2010

September 2010 l Making Home Affordable 14 Steps to HAMP Modification (PRA)

Servicer Servicer applies sequential steps “The Alternative calculates Waterfall”to reduce monthly mortgage payment target modified to 31% of gross (pre‐tax) income. payment. 1.Capitalize outstanding interest, escrow advances, out‐of‐pocket servicing expenses (no late fees). Servicer reduces UPB to reach LTV of 115% or target monthly mortgage payment at 31%. What if the 2.Cut interest rate to as low as 2%. homeowner is underwater? 3.Extend loan term up to 40 years. PRA Effective Fall 2010 4.Defer portion of principal, interest‐free, until loan is paid off.

September 2010 l Making Home Affordable 15 Steps to HAMP Modification (PRA) • NPV test is complex, nonlinear mathematical Servicer model to analyze cost/benefit of investment Applies Net decisions. Present Value • (NPV) Test If NPV test is positive on “The Standard Waterfall,” servicer must modify the loan. • If NPV test is negative, servicer may modify the loan in accordance with investor guidelines. If NPV test is positive on “The Alternative What if the Waterfall,” servicer may reduce principal in homeowner is conjunction with HAMP modification. underwater? PRA Effective • Homeowner can request review of NPV values if Fall 2010 denied because of negative NPV test.

September 2010 l Making Home Affordable 16 HAMP Modification Reduces Principal

• Successful trial Homeowner who makes timely payments becomes receives principal reduction of up to $5,000: permanent $1,000 per year for 5 years. modification. Homeowner in good standing receives principal reduction in thirds: one‐third per year for 3 years. Homeowner in good standing who pays off loan (30+ days after effective) receives entire What if the homeowner is principal reduction. underwater? PRA Effective Fall 2010

September 2010 l Making Home Affordable 17 HAMP Protections Against Foreclosure

Designed to • Servicers may not refer homeowner to protect foreclosure until homeowner is determined responsible ineligible for HAMP, or contact efforts have homeowners failed. from • Servicer may not proceed with foreclosure sale unnecessary until homeowner determined ineligible, and costly declines HAMP, or contact efforts have failed. foreclosure • Servicer’s attorney or trustee cannot conduct a actions. foreclosure sale without written certification that a homeowner is not HAMP‐eligible. • In most cases, if homeowner not approved, homeowner benefits from 30‐day waiting period before a foreclosure sale.

September 2010 l Making Home Affordable 18 2MP Overview

Creates • Works in tandem with HAMP. When 1st lien comprehensive modified, participating 2MP servicers must solution to offer to modify 2nd lien. achieving • 2nd lien must have been originated on or before greater January 1, 2009. affordability. • Homeowners who are delinquent must successfully complete 3‐month trial period. • No new 2MP modifications after December 31, 2012.

September 2010 l Making Home Affordable 19 2MP Modification Reduces Principal

• 2MP works in Homeowner who makes timely payments tandem with receives principal reduction of up to $1,250: HAMP. $250 per year for 5 years. • Servicers may extinguish 2nd lien; or extinguish part of 2nd lien and modify remaining unpaid principal balance. Under PRA, when there is principal forbearance or reduction on 1st lien, participating 2MP What if the servicer must forbear or forgive on 2nd lien in homeowner is underwater? same proportion. PRA Effective Fall 2010

September 2010 l Making Home Affordable 20 HAFA Overview

HAFA provides • Provides other foreclosure alternatives: Short more Sale (SS), Deed‐in‐Lieu of foreclosure (DIL). alternatives to • Standardizes and simplifies process to improve foreclosure. execution. • Offers benefits to proactive homeowners: – Provides homeowner with $3,000 relocation assistance. – Releases homeowner from future liability. – Encourages cooperation from subordinate lien holders. • Ends December 31, 2012.

September 2010 l Making Home Affordable 21 HAFA Eligibility Criteria Homeowner: Loan: • Is owner‐occupant • Amount owed on first • Property may be vacant <90 mortgage equal to or less days if homeowner required than $729,750 to relocate 100+ miles for • Mortgage originated on or work before January 1, 2009 • First mortgage payment (PITI + homeowner association/ condo fees) is greater than 31% of homeowner’s monthly gross income

September 2010 l Making Home Affordable 22 FHA‐HAMP Overview

Provides • Defers principal through partial claim; modifies additional remaining balance into 30‐year fixed‐rate loan. assistance to • Provides affordable payment at 31% of gross homeowners monthly income. with FHA‐ • Homeowner who makes timely payments insured loans. receives principal reduction of up to $5,000: $1,000 per year up to 5 years. • For more information, call the National Servicing Center at 877‐622‐8525 or visit HUD.gov/offices/hsg/sfh/nsc/nschome.cfm. • Ends December 31, 2012.

September 2010 l Making Home Affordable 23 Hardest Hit Fund (HHF) ‐ Overview

HHF supports • HHF supports innovative HFA programs that innovative stabilize housing and help families avoid programs foreclosure. R1: $1.5B, R2: $600M, R3: $2B. developed by • Programs may include assistance to unemployed state HFAs to homeowners, principal reduction, funding to prevent extinguish 2nd liens, and facilitation of SS, DIL. foreclosures • Designed to complement MHA or reach and stabilize homeowners ineligible for MHA. housing markets. • Ten states received funding: AZ, CA, FL, MI, NV, NC, OH, OR, RI, and SC. • Additionally eligible: AL, GA, IL, IN, KY, MS, NJ, TN, and DC.

September 2010 l Making Home Affordable 24 HHF ‐ Michigan

Michigan.gov/ mshda

September 2010 l Making Home Affordable 25 Let’s Work Together

Together we • Help promote upcoming MHA events. can help more • Encourage homeowners to apply. homeowners • Ensure that homeowners submit all required avoid documentation upfront. foreclosure. • Direct homeowners to free resources: –MakingHomeAffordable.gov –1‐888‐995‐HOPE –HUD.gov –LoanScamAlert.org

September 2010 l Making Home Affordable 26 Access Program Information HMPAdmin.com

Trusted advisors have easy access to Resources for Counselors and Trusted Advisors MHA • FAQs information • Presentations • Escalation process details and tools. Homeowner Outreach • Homeowner presentations • Consumer brochures. • Fact Sheets in English, Spanish, Portuguese, Chinese, Korean, Hmong, Tagalog and Vietnamese • Web‐ready banner ads

September 2010 l Making Home Affordable 27 Escalate Tough Cases HMPAdmin.com

Get help with cases that are difficult to resolve.

September 2010 l Making Home Affordable 28 Fight Scams LoanScamAlert.org

Spread the word. Identify and report scams.

Information is available in multiple languages.

Homeowners learn to identify scams. Enforcement is key part of campaign.

Partner Toolkit provides resources for local participation and promotion.

September 2010 l Making Home Affordable 29 Access Resources for Trusted Advisors

Resources are • HAMP Solution Center: 1‐866‐939‐4469, in place to help [email protected] you help • Escalate cases to [email protected]. homeowners • FannieMae.com, 1‐800‐7Fannie • FreddieMac.com, 1‐800‐Freddie, [email protected] • Follow MHA progress at FinancialStability.gov. • For FHA loans: 877‐622‐8525 or HUD.gov/offices/hsg/sfh/nsc/nschome.cfm.

September 2010 l Making Home Affordable 30 Find Program Info MakingHomeAffordable.gov

Homeowners have easy access to MHA information and tools.

Find the list of participating servicers at www.MakingHomeAffordable.gov/ contact_servicer.html.

September 2010 l Making Home Affordable 31 Discussion/Questions

Thank You

September 2010 l Making Home Affordable 32