Details on HUD Emergency Homeowners Loan Program

October 14, 2010


On October 5, 2010, HUD released details about the $1 Billion Emergency Homeowners Loan Program (EHLP) authorized by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

EHLP will offer declining balance, deferred payment “bridge loan” (non-recourse, subordinate loans with 0% interest rate) for up to $50,000 to assist eligible homeowners with payments of arrearages, including delinquent taxes and insurance plus up to 24 months of monthly payments on their mortgage principal, interest, mortgage insurance premiums, taxes, and hazard insurance.

Borrowers living in the following jurisdictions are eligible to receive funds through the EHLP:

TX Texas $ 135,418,959
NY New York $ 111,649,112
PA Pennsylvania $ 105,804,905
MA Massachusetts $  61,036,001
WA Washington $  56,272,599
MN Minnesota $  55,848,137
WI Wisconsin $   51,540,638
MO Missouri $   49,001,729
VA Virginia $   46,627,889
CO Colorado $   41,286,747
MD Maryland $   39,962,270
CT Connecticut $   32,946,864
KS Kansas $   17,748,782
AR Arkansas $   17,736,991
IA Iowa $   17,379,343
LA Louisiana $   16,691,558
UT Utah $   16,577,582
OK Oklahoma $   15,575,381
PR Puerto Rico $   14,714,668
ID Idaho $   13,284,075
NH New Hampshire $   12,655,243
NM New Mexico $   10,725,515
ME Maine $   10,379,657
WV West Virginia $     8,339,884
NE Nebraska $     8,304,512
HI Hawaii $     6,292,250
DE Delaware $     6,048,577
MT Montana $     5,710,580
VT Vermont $     4,830,215
AK Alaska $     3,890,898
WY Wyoming $     2,346,329
SD South Dakota $     2,051,563
ND North Dakota $     1,320,547
Total: $ 1,000,000,000

Program Administration

Delegated Approach: Borrowers who are listed in one of the above 32 states or Puerto Rico will meet with non-profit housing counselors who are part of the National Foreclosure Mitigation Counseling Program administered by NeighborWorks® America to receive funding.

The non-profit housing counselors will provide intake and outreach services including:

  • (i) developing and disseminating program marketing materials, (ii) providing an overview of the program and eligibility requirements, (iii) conducting initial eligibility screening (including verifying income), (iv) counseling  potential applicants, providing information concerning available employment and training resources,  (v) collecting and assembling homeowner documentation, (vi) submitting homeowner application, and (vii) providing transition counseling to explore with the homeowner other loss mitigation options, including loan modification, short sale, deed-in-lieu of foreclosure, or traditional sale of home.
  • The counselors shall also be encouraged to conduct outreach to entities in local communities to provide information on assistance available to unemployed homeowners through this program and shall publicize the list of entities approved to assist potential applicants with applying to the program

State Law Approach: Borrowers or state HFAs that operate loan assistance programs that are determined by HUD to be substantially similar to the EHRF program will receive allocations to fund emergency loans for borrowers in the states below:

Alabama $60,672,471
California $476,257,070
Florida $238,864,755
Georgia $126,650,987
Illinois $166,352,726
Indiana $82,762,859
Kentucky $55,588,050
Michigan $128,461,559
Mississippi $38,036,950
Nevada $34,056,581
New Jersey $112,200,638
North Carolina $120,874,221
Ohio $148,728,864
Oregon $49,294,215
Rhode Island $13,570,770
South Carolina $58,772,347
Tennessee $81,128,260
Washington, DC $7,726,678

Allocation of Program Funds

Recipient Geography: HUD will assist borrowers living in Puerto Rico and the 32 states otherwise not funded by Treasury’s Innovation Fund for Hardest Hit Housing Markets (Hardest Hit Fund) program.

Allocation Amount: The total amount reserved will be based on the state’s approximate share of unemployed homeowners with a mortgage relative to all unemployed homeowners with a mortgage

Targeting Funds to Local Geographies: HUD will provide information that identifies pockets within each of the designated states that have suffered the most from recent spikes in unemployment and/or mortgage delinquencies.  HUD will encourage the use of program dollars in these hardest-hit areas.

Homeowner Eligibility and Program Operation

Income Thresholds: Has a total pre-event household income equal to, or less than, 120% of the Area Median Income (AMI), which includes wage, salary, and self-employed earnings and income.

Significant Income Reduction: Has a current gross income (income before taxes) that is at least 15% lower than the pre-event income.

  • “Pre-event income”: the income prior to the onset of unemployment, underemployment, or medical emergency
  • “Current income”: the income at the time of program application, as well as income during the period that the homeowner continues to receive assistance from the fund

Employment type: Both wage and salary workers and self-employed individuals are eligible.

Delinquency and Likelihood of Foreclosure: Must be at least 3 months delinquent on payments and have received notification of an intention to foreclose.  This requirement can be documented by any written communication from the mortgagee to the homeowner indicating at least 3 months of missed payments and the mortgagee’s intent to foreclose.  In addition, the homeowner can self-certify that there is a likelihood of initiation of foreclosure on the part of their mortgagee due to the homeowner being at least 3 months delinquent in their monthly payment.

Ability to Resume Repayment: Has a reasonable likelihood of being able to resume repayment of the first mortgage obligations within 2 years, and meet other housing expenses and debt obligations when the household regains full employment, as determined by:

Back-end DTI ratio:

Total Monthly Debt Expenses ÷ Total Gross Monthly Income

  • Total monthly debt expenses = mortgage principal, interest, taxes, insurance, & revolving and fixed installment debt

***Note: For this calculation, gross income will be measured at the “pre-event” level***

Principal Residence: Must reside in the mortgaged property and be your  principal residence.  The mortgaged property must also be a single family residence (1 – 4 unit structure or condominium unit).

Creation of HUD Note:  After the first assistance payment is made on behalf of the homeowner, the fiscal agent will create an open-ended “HUD note” and a mortgage to be  in the name of the Secretary HUD of sufficient size to accommodate the expected amount of assistance to be provided to homeowner.

Ongoing Qualification of Homeowner

Termination of Monthly Assistance: Assistance is terminated and the homeowner resumes full responsibility for meeting the first lien mortgage payments in the event of any of the following circumstances:

  • The maximum loan ($50,000) amount has been reached;
  • The homeowner fails to report changes in unemployment status or income;
  • The homeowner’s income regains 85% or more of its pre-event level;
  • The homeowner no longer resides in, sells, or refinances the debt on the mortgaged property; or
  • The homeowner defaults on their portion of the current first lien mortgage loan payments

Income re-evaluation: After initial income verification at application intake, the homeowner shall be required to notify the fiscal agent of any changes in the household income and/or employment status at any point throughout the entire period of assistance

Forms of Assistance

Use of Funds for Arrearages: On behalf of the homeowner, the fiscal agent shall use loan funds to pay 100% of arrears (mortgage principal, interest, mortgage insurance premiums, taxes, hazard insurance, and ground rent, if any)

Homeowner Payments: Homeowner contribution to monthly payment on first mortgage will be set at 31% of gross income at the time of application, but in no instance will it be less than $25 per month

Use of Funds for Continuing Mortgage Assistance: The fiscal agent will make monthly mortgage payments to the servicer of the first lien mortgage in excess of the payments made by the homeowner

Duration of Assistance: If at any time the household’s gross income increases to 85% or more of its pre-event level, assistance will be phased out by the fiscal agent over a 2 month period.  In any event, assistance with monthly payments may not continue beyond 24 months

Repayment Terms

Transition Counseling:   The designated counseling agent shall contact each homeowner that is approaching the last months of program eligibility and remains un/underemployed (3-6 months before the assistance ends) and require the homeowner  to meet with a HUD approved counseling agent to explore other loss mitigation options, including loan modification, short sales, deed-in-lieu of foreclosure, or traditional sale of home

Repayment of HUD Note: Following the last payment on behalf of the homeowner, the fiscal agent will process the homeowner’s “HUD Note” and record a mortgage with a specific loan balance.  The note and mortgage will be in the form of a 5 year declining balance, 0% interest, non-recourse loan, and the mortgage shall be in the form of a secured junior lien on the property

Terms for Declining Balance Feature:  No payment is due on the note during the 5 year term so long as the assisted household maintains the property as principal residence and remains current in his or her monthly payments on the first mortgage loan.  If the homeowner meets these two conditions, the balance due shall decline by 20% annually, until the note is extinguished and the junior loan is terminated

Events Triggering Note Repayment: The homeowner will be responsible for repayment of the applicable balance of the HUD note to the fiscal agent or its successor,  if, at any time during the 5 year repayment period, any of the following events occur:

  • The homeowner no longer resides in the mortgaged property as a principal residence, but maintains ownership;
  • The homeowner defaults on its portion of  the current mortgage; or
  • The homeowner receives net proceeds from selling or refinancing debt on the home.

***Note: Net proceeds — after paying outstanding applicable brokers fees, first balances (and second lien balances, as applicable), and an allowance of $2,000 to the homeowner for relocation expenses when the home is sold — will go towards paying down the HUD note.  In the event that proceeds of a sale or loan refinance are not sufficient to repay the entire HUD note, the remaining applicable balance of the HUD note shall be considered to have been met, and the lien against the property shall be released***

Provisions for Underwater Homeowners: At all stages of the program, “underwater” homeowners will be encouraged to explore participation in short sale or short refinancing programs offered by their servicer and/or the federal government (i.e. Home Affordable Foreclosure Alternatives), which will not trigger repayment of the HUD note

  • Underwater homeowners = homeowners with mortgage debt in excess of the market value of their home

Program Start Date

HUD intends for EHLP to begin taking applications by the end of 2010

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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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