Fannie Mae Launches Distressed Borrower Education Site

August 9, 2010

 

Fannie Mae launches a borrower-facing outreach site designed to educate distressed homeowners on potential retention strategies and foreclosure alternatives.

The online education resource — available in both English and Spanish — offers calculators to demonstrate to borrowers the mechanics of refinance, repayment, forbearance, and modification options if the borrowers would like to keep their home. In addition, it covers information on Fannie’s Deed-For-Lease program, which allows borrowers to become renters in the same property after pursing deed-in-lieu of foreclosure.

For borrowers who would like to leave their home, the online education resource offers possible options such as, a short sale and deed-in-lieu of foreclosure when you can no longer stay in your home but want to avoid foreclosure.

For borrowers who aren’t sure what the best option is for them, the Options Finder can assist you. By answering some questions, the Options Finder determines which option may be right based on your current situation.

When you need additional assistance, the Resources section offers the following and much more:

Fannie Mae Resources

Review what Fannie Mae is doing to assist homeowners and how they can help you.

Contact your Mortgage Company

Find and contact your mortgage company to discuss your situation.

Helpful Forms

Download forms to help you prepare for (and keep track of) working with your mortgage company or a housing counselor.

Calculators

Use the calculators to determine which scenario fits your needs.

Frequently Asked Questions

Search for helpful answers to some of the most common questions regarding your options.

Take Action – What You Should Do Next

Once you ‘ve learned about options that may be available for your situation, it’s time to take action.

Step 1: Research

Be sure to bookmark the page and print the information on the option(s) that applies best to your situation. You will want to refer to this information when speaking with your mortgage company.

Step 2: Gather

Gather the information shown below. You’ll need this information handy so you can refer to it during your discussion with your mortgage company. Use the Financial Checklist to help get organized and prepared.

  • Your mortgage(s): Loan number, past due notices, monthly statement, etc. for your first mortgage and second mortgage or other liens (if applicable).
  • Your other debts: Copies of bills and monthly statements for all other debts such as credit cards, personal loans, auto loans, utilities, etc.
  • Your income: Paystubs, unemployment benefits letter, alimony, child support, etc. for all borrowers on the mortgage.
  • Your hardship: Explain your situation and any hardship that has affected your income or ability to make your payments, etc.

Step 3: Contact

Contact your mortgage company and ask them about the options that are available for your specific situation. Also ask for the name and/or employee number of the mortgage specialist who is helping you and be sure to give them your up-to-date contact information. Use the Contact Log to keep track of your conversations and follow-up items.

Step 4: Discuss

Make sure you are ready to discuss everything about your current situation—the more the mortgage company understands and the more accurate the information, the more they can help you find the right option.

Step 5: Confirm

Ask them to confirm your current situation to be certain there are no other issues. Make sure you understand the next steps involved and if there is anything you will need to complete for the specific option.

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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”.


Bank of America Short Sale Process Presentation

April 19, 2010

 

 On April 8, 2010, Bank of America (BOA) executives held a webinar presentation for over 10,000 Realtors to discuss BOA’s short sale process.

Tip: Refer to the Equator Agent/Homeowner Guide for step-by-step instructions 

Summary

10 Tips to Avoid Delays in Processing Time

  1. Review all documents and images for accuracy prior to uploading in Equator
  2. Ensure that property is listed in the MLS
  3. Negotiate external party fees prior to submission of HUD-1
  4. Supply HUD-1 that is valid for at least 60 days
  5. Ensure that agent and customer tasks are completed as timely as possible in Equator (i.e. accepting short sale assignment, submitting short sale offer, and uploading offer documents within 7 days)
  6. Only submit fully executed purchase offers with all appropriate addendums signed by both buyer and homeowner
  7. Work to get purchase offer representing the best possible fair market value and highest net proceeds for the lender
  8. Set appropriate expectations with buyers/sellers so they understand the complexity and resulting length of time a short sale can take
  9. Work to get a release on outside liens as early as possible
  10. The following situations will cause delays: (1) Change in buyer or agent at any time during the process; (2) Customer files bankruptcy; (3) Deal change after the approval letter is issued

Steps Already Taken to Improve the Short Sale Process

  • Increased staffing and updated training
  • Dedicated Short Sale Call Center:  1-866-880-1232
  • Hours of Operation: 8 AM – 9PM (EST), Monday -Friday
  • Extended Saturday hours – Coming Soon!
  • Equator – primary tool for initiating the short sale
  • Changed procedures to improve associate responsiveness
  • Enhanced the procedure to proactively provide loan status

Steps Underway to Enhance Programs

Home Affordable Foreclosure Alternatives (HAFA):

  • Implemented on April 5, 2010 and are following the HAFA guidelines 
  • HAFA is first in short sale waterfall of options for a homeowner
  • Remember: Some investors (Fannie Mae and Freddie Mac) are not participating; offering a cooperative or traditional short sale
  • Proactive outreach to homeowners
  • Offering a pre-approved short sale solicitation 
  • After offer is submitted, approval within 14 days
  • Promissory Note – Not required with HAFA 
  • Homeowner required to clear second liens
  • Homeowner leaves the home – no deficiency and no contribution

Cooperative Short Sales:

  • Similar in approach to HAFA but wider in scope
  • Includes homeowners who are not eligible for HAFA – non-owner occupied, jumbo loans, Fannie, Freddie
  • Currently in pilot stages with rollout expected 2nd Quarter of 2010

Steps Underway to Educate Agents

Education Materials:

  • Overview of the process so agents can lead process
  • Step-by-Step Guidelines for working through the system as an agent and homeowner
  • Tips to avoid common problems

Outreach Events to Distribute Materials

  • Large Realtor Events
  • Webinars
  • Participation with Short Sale Certification Programs

Want Agents’ Input

  • Developing mechanisms for on-going feedback on process, systems, materials
  • Will act on feedback with continuous improvements

Introduction to Equator

  • 24/7 access to the short sale system
  • Status tracking
  • Direct communication with the Short Sale Negotiator
  • Documents are uploaded directly to Equator instead of faxing
  • Streamlined approval process
  • Historical view of offers and counter offers

Coming Soon in Equator:

  • There are a few specific loan investor types (i.e., FHA/VA) that are not on the Equator system and will be added at a later date
  • Agent feedback, homeowner feedback, and internal data is being leveraged to identify system and/or enhancements for future process rollouts and educational material improvements

Agent Communication within Equator

  • Throughout the process you will receive notifications of the status of the short sale. The system automatically tracks the agent, customer, and bank tasks and will alert you after key milestones have been achieved and to let you know the next steps.
  • For specific questions/concerns you have, the negotiator assigned to the short sale is your primary contact.
  • Please ensure when sending a message in Equator you only select “Negotiator”.
  • We request that you only send messages via Equator and not directly through email. This enables our associates to effectively manage the case load and respond to agent inquires in a timely manner.
  • If you have submitted a request to the Negotiator via Equator AND there has been no response after 2 business days: You should escalate to a “Team Lead” by selecting this role in your message drop down menu.
  • In the event of an urgent issue, such as, a foreclosure sale date within 48 hours: You should immediately escalate to the “Team Lead” and “Manager”; and also call the Short Sale support team at 1-866-880-1232. 

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.


Fannie Mae Introduces Alternative HAMP Modification

March 29, 2010

In Lender Letter LL-2010-04, Fannie Mae introduces the Alternative Modification™ (Alt Mod™),  an alternative to the 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.

For mortgage loans in active HAMP trial period plans 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 payments under a HAMP trial period plan. All borrowers must meet the eligibility criteria outlined below.

A borrower that entered into a trial period plan prior to March 1, 2010 will be considered eligible for the Alt Mod as long as the case is submitted through the HomeSaver Solutions® Network (HSSN) prior to the final date of the program offering, August 31, 2010.

Eligibility

To be eligible for the Alt Mod, the mortgage loan must first have been evaluated and considered eligible for HAMP as described in Announcement 09-05R,  including confirmation that the mortgage loan is secured by a 1 – 4 unit owner-occupied property. The HAMP trial period must have been initiated prior to March 1, 2010. 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.

The Alt Mod may be considered if:

  • 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, or
  • the borrower failed to provide all income documentation required for a HAMP modification but the income documentation meets the streamlined income documentation for the Alt Mod (described in the Underwriting section below).

When a borrower is considered eligible for the Alt Mod, the servicer must:

  • document the borrower’s file to evidence compliance with the requirements for resolving active trial modifications in accordance with Announcement SVC-2010-03,
  • cancel the HAMP modification in HSSN and the Treasury Department’s system of record, and
  • send the borrower the appropriate Borrower Notice as outlined in Announcement 09-36. The servicer must include the Alt Mod offer and Loan Modification Agreement (Form 3179) with the HAMP Borrower Notice when possible.

The Alt Mod offer must 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.

Before any permanent modification can become effective, the servicer must:

  • provide the borrower with a simplified summary of the Loan Modification Agreement (Instructions for Form 3179),
  • inform the borrower that in the event of re-default the servicer will pursue liquidation options, and
  • remind the borrower of the consequences of material misstatements when submitting documentation in connection with a request for a modification.

Timing of Borrower Solicitation & Follow-Up

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 this Lender Letter.

Going forward, for other borrowers who entered into a trial period plan prior to March 1, 2010 and failed to qualify for a permanent HAMP modification, but are determined to be eligible for Alt Mod, offers should be sent within 10 days of completion of the HAMP trial period 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 after the Alt Mod offer has been sent, servicers must conduct follow-up:

  • between the 5th and the 15th day after the offer is mailed, servicers must attempt at least 3 phone calls;
  • on the 15th day after the offer is mailed, servicers must deliver a follow-up letter, by either mail or a direct contact, door-knocking campaign; and
  • between the 15th and 30th day after the offer is mailed, servicers must attempt to contact the borrower a minimum of three additional times by either phone calls or the use of field services (door knockers).

Failure to comply with these guidelines could result in forfeiture of incentive payments to the servicer.

Underwriting

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

Mark-to-Market LTV 80 Percent or Greater

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

Mark-to-Market LTV Less than 80%

When the current mark-to-market LTV ratio is less than 80%, the payment calculated for HAMP using the standard modification waterfall should be utilized for the Alt Mod, and income verification is required (as described in the Streamlined Income Documentation section 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.

Streamlined Income Documentation

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 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 nine 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 canceled rent checks.
  • If the borrower has rental income from a one- to four-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.

Executing the Modification Agreement

The servicer must prepare a Loan Modification Agreement to document the agreed-upon terms of the modification. Servicers must revise the Loan Modification Agreement by amending the existing paragraph No. 5 (d) in such agreement to reflect that the borrower will not be charged for administrative and processing costs as described in the Administrative Costs section below.

Unless a borrower or co-borrower is deceased or a borrower and co-borrower are divorced, all parties who signed the original note or security instrument, or their duly authorized representative(s), must provide income documentation and execute the modification agreement. If a borrower and a co-borrower are divorced and the property has been transferred to one borrower in the divorce decree, the borrower who no longer has an interest in the property is not required to execute the modification agreement. In cases where a borrower and co-borrower are unmarried and either the borrower or co-borrower relinquish all rights to the property securing the mortgage loan through a recorded quitclaim deed or other document sufficient under applicable state law to transfer title, the non-occupying borrower who has relinquished property rights is not required to provide income documentation or sign the modification agreement.

Servicers are reminded that modification agreements must be signed by an authorized representative of the servicer and must reflect the actual date of signature by the servicer’s representative.

Recording the Modification

For all mortgage loans that are modified pursuant to an Alt Mod, the servicer must ensure that the modified mortgage loan retains its first lien position and is fully enforceable. The modification agreement must be executed by the borrower(s) and, in the following circumstances, must be in recordable form:

  • if state or local law requires a modification agreement be recorded to be enforceable;
  • if the property is located in the state of New York or Cuyahoga County, Ohio;
  • if the amount capitalized is greater than $50,000 (aggregate capitalized amount of all modifications of the mortgage loan completed under Fannie Mae’s mortgage modification alternatives);
  • if the final interest rate on the modified mortgage loan is greater than the pre-modified interest rate in effect on the mortgage loan;
  • if the remaining term on the mortgage loan is less than or equal to ten years and the servicer is extending the term of the mortgage loan more than ten years beyond the original maturity date; or
  • if the servicer’s practice for modifying mortgage loans in the servicer’s portfolio is to create modification agreements in recordable form.

In addition, to retain the first lien position, servicers must:

  • Ensure all real estate taxes and assessments that could become a first lien are current especially those for manufactured homes taxed as personal property, personal property taxes, condominium/HOA fees, utility assessments (such as water bills), ground rent and other assessments.
  • Obtain a title endorsement or similar title insurance product issued by a title insurance company if
  • the amount capitalized is greater than $50,000 (aggregate capitalized amount of all modifications of the mortgage loan completed under Fannie Mae’s mortgage modification alternatives), or
  • the final interest rate on the modified mortgage loan is greater than the pre-modified interest rate in effect on the mortgage loan.

Record the executed modification agreement if:

  • state or local law requires the modification agreement be recorded to be enforceable,
  • the property is located in Cuyahoga County, Ohio,
  • the amount capitalized is greater than $50,000 (aggregate capitalized amount of all modifications of the mortgage loan completed under our modification alternatives),
  • the remaining term on the mortgage loan is less than or equal to ten years and the servicer is extending the term of the mortgage loan more than ten years beyond the original maturity date, or
  • the final interest rate on the modified mortgage loan is greater than the pre-modified interest rate in effect on the mortgage loan.

Redefault

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 work with the borrower to pursue either a preforeclosure sale, deed-in-lieu 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.

Late Fees

All late charges, penalties, stop payment fees or similar fees must be waived upon conversion to an Alt Mod.

Administrative Costs

Servicers may not charge the borrower to cover the administrative processing costs incurred in connection with an Alt Mod. The servicer must pay any actual out-of-pocket expenses such as any required notary fees, recordation fees, title costs, property valuation fees, or other allowable and documented expenses. Fannie Mae will reimburse the servicer for allowable out-of-pocket expenses, with the exception of credit report fees, which will not be reimbursed.

Servicer Incentive Compensation

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 the HSSN. Fannie Mae will review eligibility for the modification incentive fee and make the final determination based on information provided by the servicer; therefore, 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.


Fannie Mae Implements Deed for Lease (D4L) Program

November 8, 2009

giving back keys

In Announcement 09-33, Fannie Mae introduces the Deed for Lease Program (D4L) under which qualifying homeowners (or their tenants) facing foreclosure will be able to remain in their homes by signing a lease in connection with the voluntary transfer of the property deed back to the lender (DIL).

“The Deed for Lease Program provides an additional option for qualifying homeowners who are facing foreclosure and are not eligible for modifications,” said Jay Ryan, Vice President of Fannie Mae. “This new program helps eliminate some of the uncertainty of foreclosure, keeps families and tenants in their homes during a transitional period, and helps to stabilize neighborhoods and communities.”

The new program is designed for borrowers who do not qualify for or have not been able to sustain other loan-workout solutions, such as a modification. Under D4L, borrowers transfer their property to the lender by completing a DIL, and then lease back the house at a market rate.

To participate in the program, borrowers must live in the home as their primary residence and must be released from any subordinate liens on the property. Tenants of borrowers in this circumstance may also be eligible for leases under the program. Borrowers or tenants interested in a lease must be able to document that the new market rental rate is no more than 31% of their gross income.

Leases under the new program may be up to 12 months, with the possibility of term renewal or month-to-month extensions after that period. A D4L property that is subsequently sold includes an assignment of the lease to the buyer.

Summary

  • With the D4L program, servicers should follow their regular process – in accordance with Fannie Mae’s workout hierarchy – in considering a borrower for a DIL.
  • If a borrower is eligible for a DIL (as determined by the servicer), the servicer should notify Fannie Mae if the borrower may also be eligible for the D4L program based on an initial screen of predetermined eligibility criteria.
  • Fannie Mae, or its designee, will take the steps necessary to further verify the property and borrower eligibility, determine the rental rate, and, if appropriate, execute the lease agreement.
  • To qualify for D4L, the occupant of the property must have the ability to pay market rent (not to exceed 31% of his or her monthly gross income).
  • The D4L agreement will be contingent on successful completion of the DIL.

Process

  • D4L includes certain responsibilities and requirements for servicers, borrowers, Fannie Mae and property managers (as designated by Fannie Mae). These are detailed in Announcement 09-33. Servicers should also refer to the Interim Instructions for Servicers document. Once automated system enhancements are in place, the automated process will replace the Interim Instructions for Servicers. Fannie Mae will notify servicers when these enhancements are available.

Documentation

Servicers must use the following documents when participating in the D4L program:


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