Independent Foreclosure Review FAQs

November 16, 2011

 

Q1. What is the Independent Foreclosure Review?

As part of a consent order with federal bank regulators, the Office of the Comptroller of the Currency (OCC), the Office of Thrift Supervision (OTS) (independent bureaus of the U.S. Department of the Treasury), or the Board of Governors of the Federal Reserve System, 14 mortgage servicers and their affiliates are identifying customers who were part of a foreclosure action on their primary residence during the period of January 1, 2009 to December 31, 2010.

The Independent Foreclosure Review is providing homeowners the opportunity to request an independent review of their foreclosure process. If the review finds that financial injury occurred as a result of errors, misrepresentations or other deficiencies in the servicer’s foreclosure process, the customer may receive compensation or other remedy.

Q2. What is a foreclosure action? What foreclosure actions are part of the Independent Foreclosure Review?

Foreclosure actions include any of the following occurrences on a primary residence between the dates of January 1, 2009 and December 31, 2010:

  • The property was sold due to a foreclosure judgment.
  • The mortgage loan was referred into the foreclosure process but was removed from the process because payments were brought up-to-date or the borrower entered a payment plan or modification program.
  • The mortgage loan was referred into the foreclosure process, but the home was sold or the borrower participated in a short sale or chose a deed-in-lieu or other program to avoid foreclosure.
  • The mortgage loan was referred into the foreclosure process and remains delinquent but the foreclosure sale has not yet taken place.

Q3. How do I know if I am eligible for the Independent Foreclosure Review?

Your loan must first meet the following initial eligibility criteria:

  • Your mortgage loan was serviced by one of the participating mortgage servicers in Question 4.
  • Your mortgage loan was active in the foreclosure process between January 1, 2009 and December 31, 2010.
  • The property was your primary residence.

If your mortgage loan does not meet the initial eligibility criteria outlined above, you can still have your mortgage concerns considered by calling or writing your servicer directly.

Q4. Who are the participating servicers? What mortgage servicers and their affiliates are part of the Independent Foreclosure Review process?

The list of participating servicers includes:

  • America’s Servicing Co.
  • Aurora Loan Services
  • Bank of America
  • Beneficial
  • Chase
  • Citibank
  • CitiFinancial
  • CitiMortgage
  • Countrywide
  • EMC
  • EverBank/EverHome Mortgage Company
  • GMAC Mortgage
  • HFC
  • HSBC
  • IndyMac Mortgage Services
  • MetLife Bank
  • National City Mortgage
  • PNC Mortgage
  • Sovereign Bank
  • SunTrust Mortgage
  • U.S. Bank
  • Wachovia Mortgage
  • Washington Mutual (WaMu)
  • Wells Fargo Bank, N.A.

Q5. What are some examples of financial injury due to errors, misrepresentations or other deficiencies in the foreclosure process?

Listed below are examples of situations that may have led to financial injury. This list does not include all situations.

  • The mortgage balance amount at the time of the foreclosure action was more than you actually owed.
  • You were doing everything the modification agreement required, but the foreclosure sale still happened.
  • The foreclosure action occurred while you were protected by bankruptcy.
  • You requested assistance/modification, submitted complete documents on time, and were waiting for a decision when the foreclosure sale occurred.
  • Fees charged or mortgage payments were inaccurately calculated, processed, or applied.
  • The foreclosure action occurred on a mortgage that was obtained before active duty military service began and while on active duty, or within 9 months after the active duty ended and the servicemember did not waive his/her rights under the Servicemembers Civil Relief Act.

Q6. How does my mortgage loan get reviewed as part of the Independent Foreclosure Review?

Homeowners meeting the initial eligibility criteria will be mailed notification letters with an enclosed Request for Review Form by December 31, 2011.

If you believe that you may have been financially injured, you must submit a Request for Review Form postmarked no later than April 30, 2012. Forms postmarked after this date will not be eligible for the Independent Foreclosure Review.

If you have more than one mortgage account that meets the initial eligibility criteria for an independent review, you will receive a separate letter for each. You will need to submit a separate Request for Review Form for each account. It is important that you complete the form to the best of your ability. All information you provide may be useful.

Q7. How can I submit the Request for Review Form?

Homeowners meeting the initial eligibility criteria will be mailed notification letters with an enclosed Request for Review Form before the end of 2011. If you received the notification letter, you can send in your Request for Review Form in the prepaid envelope provided, postmarked no later than April 30, 2012.

If your loan is part of the initial eligible population and you need a new form by mail, have questions, or need help completing the form you have received in the mail, call 1-888-952-9105, Monday through Friday, 8 a.m.–10 p.m. ET or Saturday, 8 a.m.–5 p.m. ET.

Q8. Who can submit or sign the Request for Review Form?

Either the borrower or a co-borrower of the mortgage loan can submit and sign the form. The borrower signing the Request for Review Form should be authorized by all borrowers to proceed with the request for review. In the event of a finding of financial injury, any possible compensation or remedy will take into consideration all borrowers listed on the loan, either directly or to their trusts or estates.

Q9. What if one of the borrowers has died or is injured or debilitated?

Any borrower, co-borrower or attorney-in-fact can sign the form. In the event of a finding of financial injury, any possible compensation or other remedy will take into account all borrowers listed on the mortgage loan either directly or to their trusts or estates.

Q10. Do I need an attorney to request or submit the Request for Review Form?

No. However, if your mortgage loan meets the initial eligibility criteria and you are currently represented by an attorney with respect to a foreclosure or bankruptcy case regarding your mortgage; please refer to your attorney.

The Independent Foreclosure Review is FREE. Beware of anyone who asks you to pay a fee in exchange for a service to complete the Request for Review Form.

Q11. If I have already submitted a complaint to my servicer, do I need to submit a separate Request for Review Form to participate in this process?

If your mortgage loan meets the initial eligibility criteria, you should submit a Request for Review Form to ensure your foreclosure action is included in the Independent Foreclosure Review process.

Q12. What happens during the review process?

You will be sent an acknowledgement letter within one week after your Request for Review Form is received by the independent review administrator. Your request will be reviewed for inclusion in the Independent Foreclosure Review. If your request meets the eligibility requirements, it will be reviewed by an independent consultant.

Your servicer will provide relevant documents along with any findings and recommendations related to your request for review to the independent consultant for review. Your servicer may be asked to clarify or confirm facts and disclose reasons for events that occurred related to the foreclosure process. You could be asked to provide additional information or documentation. Because the review process will be a thorough and complete examination of many details and documents, the review could take several months.

The Independent Foreclosure Review will determine whether financial injury has occurred as a result of errors, misrepresentations or other deficiencies in the foreclosure process. You will receive a letter with the findings of the review and information about possible compensation or other remedy.

Q13. How do I know who my servicer is? How do I find them?

The company you sent your monthly mortgage payments to is your mortgage servicer. It is not necessarily the company whose name is on the actual foreclosure documents (although in most cases, it is). If you don’t remember the name of the servicer for your foreclosed property, we suggest you review cancelled checks, bank statements, online statements or other records for this information.

If you are still unsure of who your mortgage servicer is or do not see their name listed in Q4, please call 1-888-952-9105, Monday through Friday, 8 a.m.–10 p.m. ET or Saturday, 8 a.m.–5 p.m. ET.

Q14. If I request an Independent Foreclosure Review, is there a cost or will there be a negative impact to my credit?

The Independent Foreclosure Review is a FREE program. Beware of anyone who asks you to pay a fee in exchange for a service to complete the Request for Review Form.

The review will not have an impact on your credit report or any other options you may pursue related to your foreclosure.

Q15. Where can I call if I need help completing the form or have any questions about the review process?

Call 1-888-952-9105 Monday through Friday, 8 a.m.–10 p.m. ET or Saturday, 8 a.m.–5 p.m. ET. If you have already submitted a Request for Review Form, please have your Reference Number available to expedite your call.

Q16. How are military servicemembers affected by the Independent Foreclosure Review?

In the review, servicers are required to include all loans covered by the Servicemembers Civil Relief Act that meet the qualifying criteria. However, servicemembers or co-borrowers may also request a review through this process. Financial injury may have occurred if the foreclosure action occurred on a mortgage that was obtained before active duty military service began and while on active duty, or within 9 months after the active duty ended.

Q17. How am I affected if I submit a Request for Review Form while in active bankruptcy?

If you submit a Request for Review Form and a review is conducted of your foreclosure process, this will have no impact on your bankruptcy. The letter being sent to you about the Independent Foreclosure Review is not an attempt to collect a debt. If you are in bankruptcy, please refer this letter to your attorney.

Q18. I’m still working with my servicer to prevent a foreclosure sale. Will I still be able to work with them?

Yes, continue to work with your servicer. Participating in the review will not impact any effort to prevent a foreclosure sale. The review is not intended to replace current active efforts with your servicer.

Q19. How long will the review process take and when can I expect a response?

You will be sent an acknowledgement letter within one week after your Request for Review Form is received by the independent review administrator. Because the review process will examine many details and documents, the review could take several months. The Independent Foreclosure Review will determine if financial injury occurred as a result of the servicer’s errors, misrepresentations or other deficiencies in the foreclosure process. You will receive a letter with the findings of the review and information about possible compensation or other remedy. Not every finding will result in compensation or other remedy.

Q20. What happens if the review finds that I was financially injured as a result of errors, misrepresentations or other deficiencies in the foreclosure process?

You will receive a letter with the findings of the review and information about possible compensation or other remedy. The compensation or other remedy you may receive will be determined by your specific situation. Not every finding will result in compensation or other remedy.

Q21. What happens if the review finds that I was not financially injured as a result of errors, misrepresentations or other deficiencies in the foreclosure process?

You will receive a letter with the findings of the review. Not every finding will result in compensation or other remedy.

Q22. What if I disagree with the eligibility requirements or the result of the Independent Foreclosure Review?

The decision of the review is considered final and there is no further recourse within the Independent Foreclosure Review process. The Independent Foreclosure Review will not have an impact on any other options you may pursue related to the foreclosure process of your mortgage loan.

Q23. Does filing a Request for Review Form prevent me from filing other litigation or action against the servicer?

No. Submitting a request for an Independent Foreclosure Review will not preclude you from any other options you may pursue related to your foreclosure.


Home Affordable Unemployment Program (UP)

July 6, 2010

 

The Home Affordable Unemployment Program (UP) is a supplemental program to the Home Affordable Modification Program (HAMP) which provides assistance to unemployed borrowers. The Unemployment Program grants qualified unemployed borrowers a forbearance period which reduces or suspends their monthly mortgage payment.

***Note:  UP is for first lien mortgage loans that are not owned or guaranteed by Fannie Mae or Freddie Mac (Non Government-Sponsored Enterprises (GSE) Mortgages) or insured or guaranteed by a federal agency, such as the Federal Housing Administration (FHA).***

The program is effective for participating HAMP servicers on July 1, 2010; however, servicers may begin to offer UP earlier.

Eligibility

Servicers are required to offer UP when the following criteria is met:

  • Loan is a first lien mortgage, originated on or before January 1, 2009, secured by a one- to four unit property, 1-unit of which is the borrower’s principal residence and the unpaid principal balance (UPB) is equal to or less than $729,750 on 1-unit properties (See Supplemental Directive 09-01 for amounts on 2 – 4 unit dwellings)
  • Loan has not been previously modified under HAMP and the borrower has not previously received a UP forbearance period
  • Borrower is unemployed at the date of the request for UP and is able to document that they will receive unemployment benefits or have been receiving unemployment benefits at commencement of the forbearance plan
  • Servicers have the discretion whether or not to require a borrower to have received unemployment benefits for up to 3 months before commencement of the forbearance plan
  • Borrower is either delinquent but has not missed more than 3 consecutive monthly payments or default is reasonably foreseeable

It is at the servicer’s discretion whether to offer UP if a borrower’s total monthly mortgage payment is less than 31% of the borrower’s monthly gross income.

Additional UP forbearance plan eligibility requirements include that the borrower:

  • Makes a request before the first mortgage lien is seriously delinquent (before 3 monthly payments are due and unpaid). A request for UP may be made by phone, mail or email. Within 10 business days, servicers must confirm the receipt of the request with the borrower via mail or return email.
  • Is unemployed at the date of the request for UP and is able to document that he or she will receive unemployment benefits in the month of the Forbearance Period Effective Date even if his or her unemployment benefit eligibility is scheduled to expire before the end of the UP forbearance period.

Terms

The UP forbearance period is 3 months or upon notification that the borrower has become re-employed; however, it can be extended in accordance with investor and regulatory guidelines.

The monthly payment MUST be reduced to 31% (or less) of the borrower’s gross monthly income. At the discretion of the servicer, monthly mortgage payments may be suspended in full.

Payment amount and due date, if any, is established by the servicer according to investor and regulatory guidelines.

Servicers are prohibited from:

  • Initiating foreclosure action or conducting a foreclosure sale while the borrower is being evaluated for UP
  • After the Foreclosure Plan Notice (FPN) is mailed
  • During the UP forbearance or extension while the borrower is being evaluated for or participating in HAMP or HAFA following, the UP forbearance period

A borrower in a permanent HAMP modification that becomes unemployed is not eligible for an UP forbearance plan.

A borrower who was previously determined to be ineligible for a HAMP modification may request consideration for an UP forbearance plan if the borrower meets all of the eligibility requirements.

If the servicer is requiring a reduced monthly payment, the borrower’s reduced payment MUST be received by the servicer on or before the last day of the month in which it is due.

If the borrower fails to make timely payments, the UP forbearance plan may be canceled and the borrower is not eligible for HAMP consideration.

Reporting Requirements

To Credit Bureaus:

The servicer should continue to report a “full-file” credit report to each major credit repository.


Fannie Mae Relaxes Waiting Period for Buying a New Home After a Short Sale

May 3, 2010

 

In Announcement SEL-2010-05, Fannie Mae updated several policies regarding the future eligibility of borrowers to obtain a new mortgage loan after experiencing a preforeclosure event (preforeclosure sale, short sale, or deed-in-lieu of foreclosure).

The “waiting period” – the amount of time that must elapse after the preforeclosure event – is changing and may be dependent on the loan-to-value (LTV) ratio for the transaction and whether extenuating circumstances contributed to the borrower’s financial hardship (for example, loss of employment). In addition, Fannie Mae is updating the requirements for determining that borrowers have re-established their credit after a significant derogatory credit event.

***Note:  The terms “short sale” and “preforeclosure sale” both referenced in the Announcement have the same meaning – the sale of a property in lieu of a foreclosure, resulting in a payoff of less than the total amount owed, which was pre-approved by the servicer.***

Waiting Period After a Preforeclosure Sale, Short Sale, or Deed-in-Lieu of Foreclosure

Fannie Mae is changing the required waiting period for a borrower to be eligible for a mortgage loan after a preforeclosure event. The waiting period commences on the completion date of the preforeclosure event, and may vary based on the maximum allowable LTV ratios.

Preforeclosure Event Current Waiting Period Requirements New Waiting Period Requirements(1)
 Deed-in-Lieu of Foreclosure 4 years  2 years – 80% maximum LTV ratios,  4 years – 90% maximum LTV ratios,  7 years – LTV ratios per the Eligibility Matrix
 Short Sale  2 years

 

Exceptions to Waiting Period for Extenuating Circumstances
Preforeclosure Event Current Waiting Period Requirements New Waiting Period Requirements (1)
 Deed-in-Lieu of Foreclosure 2 years      Additional requirements apply after 2 years up to 7 years  2 years – 90% maximum LTV ratios
 Short Sale  No exceptions are permitted to the 2-year waiting period

 (1) The maximum LTV ratios permitted are the lesser of the LTV ratios in this table or the maximum LTV ratios for the transaction per the Eligibility Matrix.

Bankruptcies

The multiple bankruptcy policy is being clarified to state that 2 or more borrowers with individual bankruptcies are not cumulative. For example, if the borrower has one bankruptcy and the co-borrower has one bankruptcy, this is not considered a multiple bankruptcy. The current waiting periods for bankruptcies remain unchanged.

Effective Date

This policy is effective for beginning July 1, 2010.

Requirements for Re-Establishing Credit

The requirements for borrowers to re-establish their credit after a significant derogatory event are also being updated. Fannie Mae is replacing the requirements related to the number of credit references and applicable payment histories with the waiting periods and other criteria.

After a bankruptcy, foreclosure, deed-in-lieu of foreclosure, or preforeclosure or short sale, the borrower’s credit will be considered re-established if all of the following are met:

  • The waiting period and the related requirements are met.
  • The loan meets the minimum credit score requirements based on the parameters of the loan and the established eligibility requirements.

The “Catch”?

Now to qualify after that 2 year period, the new regulations state that a minimum 20% down payment will be required; 10% for a down payment, the wait will revert to the 4 year minimum; less than 10% for a down payment, the wait could be even longer — UNLESS there are “extenuating circumstances” such as job loss, health problems, divorce, etc…

But doesn’t pretty much any short sale by default involve “extenuating circumstances”? Just show them the hardship letter you submitted with your short sale docs. Case closed.

Why This Matters?

So why does this matter, and how should you, as distressed homeowners, USE this information?

Well for starters, if you couple this with the Obama administration’s new short sale assistance program (where mortgage servicing companies are paid $1,000 to handle successful short sales and mortgage holders get $1,500 for signing over their property), you’ve now got more compelling reasons than ever to pursue a short sale rather than just throwing up your hands and “letting things go”.


FAQs for Fannie Mae’s Alternative HAMP Modification

March 30, 2010

 What is Fannie Mae’s Alternative Modification (Alt Mod)?

The Alt Mod is an alternative to the Home Affordable Modification Program (HAMP) modification for those borrowers who were eligible for and accepted into a HAMP trial period plan but were subsequently not offered a HAMP permanent modification because of eligibility restrictions.

Are servicers required to offer the Alt Mod?

Yes, for mortgage loans in active HAMP trials initiated prior to March 1, 2010, all Fannie Mae-approved servicers must consider the Alt Mod prior to the initiation of foreclosure for all eligible borrowers who were not offered a permanent HAMP modification after making all required payments under a HAMP trial period plan. All borrowers must meet the eligibility criteria outlined below.

What are the benefits of an Alt Mod?

An Alt Mod offers you a permanent long-term solution to make your mortgage more affordable.

If I didn’t qualify for a permanent modification under HAMP, will I qualify for an Alt Mod?

The requirements for an Alt Mod have been designed specifically to assist borrowers, who were unable to qualify for a permanent modification through HAMP. If borrowers made their HAMP Trial Period Plan payments and have completed the HAMP Trial Period Plan, borrowers are likely a candidate for an Alt Mod. Once the servicer has the borrower’s required information, the servicer will review to see if the borrowers are eligible.

How do I qualify for Alt Mod/What do I need to do to get approved?

To begin the qualification process, review the Alt Mod Loan Modification Agreement and the Hardship Affidavit and return back to the servicer by the specified date.

Why do I need to sign another Loan Modification Agreement…I already did this for HAMP?

Alt Mod is a new loan modification option offered by Fannie Mae (the owner of your loan). It is not a part of the government’s loan modification program, HAMP. The Alt Mod was created for borrowers who were not approved for HAMP. The borrowers’ terms and payment amount should be the same as that of HAMP. All eligible borrowers who want to accept the terms of an Alt Mod, must read, agree, and sign a new Loan Modification Agreement

I am currently paying the trial period payment that was specified under HAMP. Do I keep paying this same amount? Will my payment change if I get an Alternative Modification?

Yes, keep paying the same payment amount you were paying during the HAMP Trial Period. If you are eligible for an Alternative Modification, your payment should stay the same. The Alt Mod Loan Modification Agreement will specify your payment amount and when your payments are due.

When are my payments due?

If you are eligible for an Alternative Modification, you will sign an Alt Mod Loan Modification Agreement which specifies your payment amount and the day each month that your payment is due.

Is there a trial period I have to complete?

No. There is no trial period for Alt Mod. If you are eligible for an Alt Mod, once approved and the Loan Modification Agreement completed, your loan will be permanently modified.

Will I still receive the incentive compensation offered through the HAMP program?

No. An Alt Mod does not offer an incentive compensation for borrowers. The borrower incentive compensation is only available to borrowers who were eligible/qualified for a permanent modification under HAMP.

Is the Alt Mod a temporary servicing policy change?

Yes, Alt Mod cases must be submitted through the HomeSaver Solutions® Network (HSSN) prior to the final date of the program offering, August 31, 2010.

Which Fannie Mae loans are eligible for an Alt Mod?

All conventional mortgage loans held in Fannie Mae’s portfolio and mortgage loans that are part of an MBS pool that has the special servicing option or a shared-risk MBS pool for which Fannie Mae markets the acquired property.

Who qualifies are an Alt Mod?

To be eligible for the Alt Mod:

  • The loan must have been evaluated and considered eligible for HAMP
  • The HAMP trial period must have been initiated prior to March 1, 2010
  • The loan must be secured by a 1- 4 unit owner-occupied property
  • The borrower must have made all required payments in accordance with a HAMP trial period plan, including subsequent payments that may have been due while the servicer attempted to convert the trial period to a permanent modification
  • Any subsequent trial period payment(s) due from the borrower must be submitted prior to executing a permanent modification agreement

Additionally, one of the following is required for Alt Mod eligibility:

  • The monthly mortgage payment ratio based on verified income was less than 31%
  • The target monthly mortgage payment ratio of 31% based on verified income could not be reached using the standard HAMP modification waterfall
  • The borrower failed to provide all income documentation required for a HAMP modification but meets the streamlined income documentation requirements for the Alt Mod as described below

 What are the underwriting guidelines for an Alt Mod?

A servicer must have a property valuation as required for HAMP in Announcement 09-05R. The servicer must use that valuation to underwrite the Alt Mod.

For loans with a current mark-to-market loan-to-value (LTV) of 80% or greater (LTV ratio based upon the HAMP valuation), the payment calculated for HAMP using the standard modification waterfall should be used for the Alt Mod, and verification of income documentation (as described below) is not necessary.

For loans with a current mark-to-market LTV ratio of less than 80%, the payment calculated for HAMP using the standard modification waterfall should be used for the Alt Mod and income verification is required (as described below). However, the Alt Mod mortgage payment may not be reduced below 20% of the borrower’s verified monthly gross income.

  • If the borrower did not qualify for a HAMP modification because the borrower failed to provide all required income documentation but the income documentation meets the streamlined income documentation requirements for the Alt Mod, the servicer may use the payment previously calculated for the HAMP trial period for the Alt Mod provided that the payment meets the criteria outlined above.
  • If, after applying the modification waterfall steps based on verified income documentation, the borrower’s monthly mortgage payment cannot be reduced without going below a 20% monthly mortgage payment ratio, the servicer may not perform the modification without the express written consent of Fannie Mae. A principal write-down or principal forgiveness is prohibited on Fannie Mae mortgage loans.

What are the Alt Mod income verification requirements for loans with current mark-to-market LTV ratios less than 80%?

A servicer may use the verified income documentation required under HAMP to calculate the payment for the Alt Mod. If the borrower is ineligible for a HAMP modification because of failure to provide the required income documentation, the servicer may rely upon the following streamlined documentation requirements for the Alt Mod.

If the borrower is employed: A copy of the most recent paystub indicating year-to-date earnings or if year-to-date earnings are not available, copies of paystubs for the last two months.

If the borrower elects to use other earned income such as bonus, commission, fee, housing allowance, tips, overtime: Reliable third party documentation describing the nature of the income (for example, an employment contract or printouts documenting tip income).

If the borrower is self-employed: A signed copy of the most recent federal income tax return, including all schedules and forms, if available, or signed Internal Revenue Service (IRS) Request for Transcript of Tax Return (Form 4506-T); and copies of bank statements for the business account for the last two months to document continuation of business activity.

If the borrower elects to use alimony or child support income to qualify, acceptable documentation includes: Photocopies of the divorce decree, separation agreement or other type of legal written agreement or court decree that provides for the payment of alimony or child support and states the amount of the award and the period of time over which it will be received; and documents supplying reasonably reliable evidence of full, regular, and timely payments, such as bank deposit slips or bank statements for the last two months.

If the borrower has other income such as Social Security, disability or death benefits, a pension, public assistance or adoption assistance: Acceptable documentation includes letters, exhibits, a disability policy or benefits statement from the provider that states the amount, frequency and duration of the benefit; and the servicer must obtain copies of the most recent bank statement showing these deposits.

If the borrower receives unemployment: Acceptable documentation includes letters, exhibits or a benefits statement from the provider that states the amount, frequency, and duration of the benefit. The servicer must have determined that the income will continue for at least 9 months from the date of the HAMP eligibility determination.

If the borrower has rental income, acceptable documentation includes: Copies of all pages from the borrower’s signed federal income tax return and Schedule E – Supplemental Income and Loss, for the most recent tax year.

  • When Schedule E is not available because the property was not previously rented, servicers may accept a current lease agreement and bank statements or cancelled rent checks.
  • If the borrower has rental income from a 1 – 4 unit property that is also the borrower’s principal residence, the monthly net rental income to be calculated for HAMP purposes must equal 75% of the gross rent, with the remaining 25% being considered vacancy loss and maintenance expense.
  • If the borrower has rental income from a property that is other than the borrower’s primary residence, the income should be 75% of the monthly gross rental income, reduced by the monthly debt service on the property (i.e., principal, interest, taxes, insurance, including mortgage insurance and association fees, if applicable

Income documentation previously obtained during the HAMP evaluation may be relied upon for the purposes of verifying income for the Alt Mod. All other income documentation must not be more than 90 days old from the date of the Alt Mod evaluation.

Is a hardship affidavit required for Alt Mod?

Yes, in all cases a signed hardship affidavit is required. For borrowers that did not provide one under HAMP, a hardship affidavit may be included in the Alt Mod offer package for signature along with the Loan Modification Agreement (Form 3179).

How should servicers treat loans with mortgage insurance?

Fannie Mae is seeking blanket delegations of authority from mortgage insurers so that servicers can more efficiently process Alt Mods without having to obtain mortgage insurer approval on individual loans. Servicers must obtain approval on a case-by-case basis from mortgage insurers that have not provided delegated authority agreements.

Servicers must include the mortgage insurance premium in the borrower’s modified payment and must ensure that any existing mortgage insurance is maintained. Servicers must maintain their mortgage insurance processes and comply with all reporting required by the mortgage insurer for Alt Mod loans.

What are the escrow requirements for Alt Mod?

All of the borrower’s trial period payments under HAMP as well as the payments due under the Alt Mod must include a monthly escrow amount unless prohibited by applicable law.

What are the messaging requirements for the Alt Mod offer from servicers to borrowers?

  • Clearly indicate that, while the Alt Mod contains the same payment terms as the HAMP modification, the borrower did not meet the requirements of HAMP and as a result, the Alt Mod does not include borrower incentive payments that are otherwise payable under HAMP
  • Provide the borrower with a simplified Summary of the Loan Modification Agreement
  • Inform the borrower that, in the event of re-default, the servicer will pursue liquidation options
  • Remind the borrower of the consequences of material misstatements when submitting documentation in connection with a request for a loan modification

What are the timing expectations for Alt Mod offers?

For qualified borrowers who are already identified as ineligible for a permanent HAMP Modification, Alt Mod offers should be sent no later than 30 days from the date of Lender Letter LL-2010-04. Going forward, for other borrowers who:  1) entered into a trial period plan prior to March 1, 2010, 2) fail to qualify for a permanent HAMP modification, and 3) are determined to be eligible for Alt Mod, offers should be sent within 10 days of completion of the trial periods and expiration of the 30-day HAMP Borrower Notice. All Alt Mod offers should also include an expiration date of 30 days from the date of the offer

For borrowers who do not respond to the Alt Mod offer, servicers must conduct follow-up:

  • Between the fifth and the 15th days after the offer is mailed, servicers must attempt at least 3 phone calls.
  • On the 15th day after the offer is mailed, servicers must mail a follow-up letter by either mail or a direct contact, door-knocking campaign.
  • Between the 15th and 30th day, after the offer is mailed, servicers must attempt to contact the borrower a minimum of 3 additional times regarding the offer by either phone calls and/or use of field servicers (door knockers).

What are the incentive fees for Alt Mod?

A servicer will receive compensation of $800 for each completed modification. Incentive fee payments on eligible mortgage loans will be sent to servicers upon receipt of a closed case entered into HSSN. Servicers need not submit requests for payment of modification incentive fees. Modification incentive fees on eligible mortgages will be sent to servicers on a monthly basis.

Unlike HAMP, there are no borrower incentive payments available with Alt Mod.

How should servicers handle a borrower who re-defaults after receiving an Alt Mod?

If a borrower becomes 60 days delinquent on the Alt Mod within the first 12 months after the effective date of the modification, then the servicer must immediately pursue either a pre-foreclosure sale (short sale), deed-in-lieu (DIL) of foreclosure or commence foreclosure proceedings in accordance with applicable state law. Should a servicer determine that another modification is appropriate for the borrower; the servicer must submit the loan information as a non-delegated case into HSSN for Fannie Mae’s prior approval.


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