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HAMP Tier 2

HAMP Tier 2. HCA – June 5, 2012. Prepared by Bob Lukens, Philadelphia Legal Assistance. HAMP Tier 1 - Refresher. Threshold = 31% of PITI Incremental reduction in interest rate 2% floor and step-up after 5 years Extend term incrementally - up to 40 years Principal reduction / deferment

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HAMP Tier 2

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  1. HAMP Tier 2 HCA – June 5, 2012 Prepared by Bob Lukens, Philadelphia Legal Assistance

  2. HAMP Tier 1 - Refresher • Threshold = 31% of PITI • Incremental reduction in interest rate • 2% floor and step-up after 5 years • Extend term incrementally - up to 40 years • Principal reduction / deferment • NPV test (positive, must mod; negative, may mod) Prepared by Bob Lukens, Philadelphia Legal Assistance

  3. HAMP Tier 2 • Except Fannie, Freddie, VA, and FHA loans • 4.625% fixed; 40 year term • Freddie Mac Primary + 50 basis points • http://www.freddiemac.com/singlefamily/service/standardmodrate.html • Revised NPV test • https://www.checkmynpv.com/calculator • Post-modification DTI between 25% and 42% • Modified P&I at least 10% lower than pre-mod P&I • HAMP 1 defaults, P&I at least 10% of HAMP 1 • Principal forbearance for LTV > 115% Prepared by Bob Lukens, Philadelphia Legal Assistance

  4. Eligibility • Failed Tier 1 • Income > 31% of current PITI • Negative NPV • Defaulted on Tier 1 trial plan • Defaulted on Tier 1 permanent mod • 12 months lapsed since last payment or • change in circumstances Prepared by Bob Lukens, Philadelphia Legal Assistance

  5. Getting Tier 1 Defaults Reviewed • upon receipt of a Tier 2 app, a servicer must evaluate for Tier 2 any borrower who previously defaulted on Tier 1 trial plan • Servicers not required to solicit Tier 2 app from any borrower who defaulted on Tier 1 Prepared by Bob Lukens, Philadelphia Legal Assistance

  6. NPV Negs. • If Tier 1 trial plan was based on NPV, servicer must complete new NPV analysis using borrower’s income documentation used from Tier 1 evaluation Prepared by Bob Lukens, Philadelphia Legal Assistance

  7. Process • Capitalize accrued interest, escrow advances to third parties, and any required escrow advances that will be paid to third parties by the servicer during the trial period plan as well those advances made for costs and expenses incurred in performing servicing obligations • Principal Forbearance. • If the loan’s pre-mod mark-to-market loan to value (LTV) ratio is >115%, NPV 5.0 calculates principal forbearance in an amount equal to the lesser of • (i) an amount that would create a post-mod LTV ratio of 115% using the interest bearing principal balance or • (ii) an amount equal to 30% of the post-modified UPB of the mortgage loan (inclusive of capitalized arrearages) • No excessive forbearance limit • Borrower’s post-modification DTI must be > 25% and < 42% • Modified P&I must be at least 10% lower than pre-mod P&I Prepared by Bob Lukens, Philadelphia Legal Assistance

  8. Rental • max 3 of 5 properties may be modified • no “imminent default” rule • must be actual default of 2 months • currently rented or vacant • may be occupied by other family, not by co-borrowers Prepared by Bob Lukens, Philadelphia Legal Assistance

  9. Foreclosure • When evaluating borrower for HAMP Tier 2 after default on Tier 1 trial plan, the servicer cannot refer for foreclosure or conduct foreclosure sale until evaluation is completed Prepared by Bob Lukens, Philadelphia Legal Assistance

  10. Investor Conflicts • If capitalization not permitted, forgive amount to be capitalized or establish a noninterest bearing balloon payment equal to that amount. • If note rate not permitted to be modified below a certain value, • Tier 1, adjust to the greater of the restriction rate or the rate required to achieve the target monthly PITI • Tier 2, adjust to the greater of the restriction rate or the Tier 2 rate. • If note rate not permitted to be permanently modified, • Tier 1, adjust to rate required for target monthly payment for the maximum period allowed by investor and step up to the note rate • Tier 2, convert rate to a fixed rate and move to the next step • If the investor does not permit an adjustable rate to be converted to a fixed rate, the loan is not eligible for HAMP modification in either Tier • If a term extension is limited or not permitted, extend the term as far as allowable and/or re-amortize the remaining term. • If the current remaining term of the loan is greater than 480 months, skip the term extension step. Prepared by Bob Lukens, Philadelphia Legal Assistance

  11. Denial Notices • If both Tier 1 and Tier 2, notice provides Tier 2 denial reason • Does not meet 10% P&I reduction, notice = “Insufficient Monthly Payment Reduction” • DTI less than 25% or greater than 42%, notice = “Post-Modification DTI Outside Acceptable Range” • NPV negative for both Tiers, notice must cite “NPV Negative Result” and NPV inputs Prepared by Bob Lukens, Philadelphia Legal Assistance

  12. Unemployment • Eliminated 31% threshold (no PITI limitation) • Rental or vacant property eligible for UP • If Tier 1 trial default, UP permitted and Tier 1 or Tier 2 are options when re-employed • If Tier 1 mod default, then only Tier 2 is available Prepared by Bob Lukens, Philadelphia Legal Assistance

  13. Servicing Transfer • assigned servicer must assume the assignor’s obligations under the SPA for any eligible loan • “Eligible Loan” means 60 days or more delinquent and otherwise eligible for one of the MHA programs at the time of transfer or assignment Prepared by Bob Lukens, Philadelphia Legal Assistance

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