"Making Home Affordable" Plan Presentation

Making Home Affordable Plan
National Korean American Service & Education Consortium
Making Home Affordable Plan
Announced by the Obama administration on February 18, 2009
Offer assistance to as many as 7 to 9 million homeowners
Clear and consistent guidelines for modifications
Incentives to servicers, holders and homeowners
Two Programs
Home Affordable Refinance Program
Home Affordable Modification Program
Participating Servicers
Aurora Loan Services LLC
Bank of America
Carrington Mortgage Services LLC
Chase Home Finance
Citi Mortgage
Countrywide
GMAC Mortgage, Inc.
Green Tree Servicing LLC

Home Loan Services, Inc.
Ocwen
Saxon Mortgage Services, Inc.
Select Portfolio Servicing
Wells Fargo Bank
Wilshire Credit Corporation

Home Affordable Refinance Program
Homeowner owns a 1-4 unit home
First-lien mortgage owned or securitized by Fannie Mae or Freddie Mac
The Homeowner must be current on his or her mortgage. Current means the homeowner has not been more than 30 days late in the past 12 months
Amount owed on the first mortgage may not exceed 105% of the home’s current value
Fannie Mae & Freddie Mac
How do you know if the loan is owned or securitized by Fannie Mae or Freddie Mac?
Fannie Mae
1-800-7FANNIE (8 am to 8 pm EST)
www.fanniemae.com/homeaffordable
Freddie Mac
1-800-FREDDIE (8 am to 8 pm EST)
www.freddiemac.com/avoidforeclosure/

Home Affordable Refinance Program
Fixed rate mortgage
15 or 30 year term
Interest rate on the loan will be based on the market rate in effect at the time of the refinance
No “cash out” allowed (exception closing costs)
Temporary program – Ends June 10, 2010
Documentation Needed
Hardship Affidavit / Imminent Default
Most recent signed income tax return
Proof of residency (e.g., current utility bill)
IRS Form 4506-T
Borrower’s monthly income documentation
Credit report on each borrower
Form 1126, Borrower Financial Statement
Borrower’s other indebtedness (e.g., alimony)
Property Value (AVM / BPO)

Home Affordable Modification Program
Loans originated before January 1, 2009
Temporary program – Ends December 31, 2012
Homeowners who are current or delinquent can qualify
Financial hardship
Owner-occupied, one to four unit property
A mortgage payment that is more than 31% of the homeowner’s gross monthly income

Home Affordable Modification Program
First lien mortgages with an unpaid principal balance equal to or less than:
One unit : $729,750
Two units: $934,200
Three units: $1,129,250
Four units: $1,403,400
Calculate a new payment that is 31% of the homeowner’s gross monthly income by reducing the interest rate to as low as 2% and extending the term of the mortgage to 40 years
Apply a “net present value” test to determine if the cost of the payment reduction is better financial outcome for the investor than going to foreclosure
When Modification Doesn’t Work
Servicers and borrowers are also encouraged to take alternatives to foreclosures, like short sales or taking of deed in lieu of foreclosure
Servicers will be eligible for a payment of $500 and can make reimbursable payments up to $1,000 to extinguish other liens
Borrowers are eligible for a payment of $1,500 in relocation expenses in order to effectuate short sale and deeds-in-lieu
Home Affordable Modification Program
Put the homeowner on a 3-month trial at the new payment amount
If the homeowner makes the payments on time during the trial period, the loan will be modified
The foreclosure process will be temporarily suspended during the three month trial period
What if the homeowner cannot make the payments on time during the trial period?
Home Affordable Modification Program
Interest rate fixed for five years
After five years, the interest rate can be gradually stepped-up by 1% per year until it reaches the interest rate cap
Interest rate cap is the lesser of
Note rate or
Freddie Mac Survey rate for 30-year fixed rate mortgage loans (on the date the modification is prepared)
Home Affordable Modification Program
If payment on a portion of the principal is deferred, no interest will accrue on the forbearance amount
The forbearance amount will be a balloon payment that is due at the end of the loan term or when the loan is paid off or refinanced
Lenders and servicers are not required to forgive a portion of the principal
Unpaid taxes, insurance, foreclosure fees and costs will be added to the unpaid principal balance of the modified loan
Late fees will be waived
Taxes and insurance must be escrowed
Important Considerations
Mortgages can be previously modified, but can only be modified once under the program
Homeowners who are in bankruptcy may be considered for a modification
Servicers cannot require that homeowners make a cash contribution
Counseling is required only for homeowners whose debt to income is equal to or greater than 55%

Incentives
Servicers receives $1,000 for each loan modification
If the homeowner remains in the program, the servicer will receive up to $1,000 each year for up to 3 years
If the homeowner is current when the loan is modified, the lender or investor will receive a one time $1,500 bonus and the servicer will receive $500
If the homeowner is current on the modified mortgage, he or she will receive $1,000 each year for up to five years which will be applied towards reducing the principal balance of the mortgage
Documentation Needed
Information about your mortgage, such as your monthly mortgage statement and
Information about the monthly gross (before tax) income of your household, including recent pay stubs if you receive them or documentation of income you receive from other sources.
Your most recent income tax return.
Information about any second mortgage or home equity line of credit on the house.
Account balances and minimum monthly payments due on all of your credit cards.
Account balances and monthly payments on all your other debts such as student loans and car loans.
Second Lien Program
Reaches up to 1 to 1.5 million homeowners, and reduce payments further for up to 50% of participants in the Home Affordable Modification Program
For amortizing loans & interest-only loans
Borrowers receive success payments of up to $250 per year for as many as five years. These payments are applied to pay down principal on the first mortgage.
Automatic modification of a second lien when a first lien is modified
Hope for Homeowners
Requires the mortgage holder to accept a payoff below the current market value of the home, allowing the borrower to refinance into a new FHA-guaranteed loan
Servicers are required to determine eligibility for a Hope for Homeowners refinancing when evaluating borrowers for Home Affordable Modification
Websites
www.makinghomeaffordable.gov/index.html
www.financialstability.gov
www.hud.gov
www.fanniemae.com
www.freddiemac.com
www.fha.gov