Module 2: US Treasury’s HAFA Program Home Affordable Foreclosure Alternatives

Supplemental Directives Nov. 30, 2009 HAFA introduced April 5, 2010 Effective date HAMP servicers must participate in HAFA

June 1, 2012 Revisions HAFA extended thru 2013 Guidelines in MHA Handbook

HAFA Short Sale Deed-in-Lieu 13 Home Affordable Foreclosure Alternatives 2-4

HAFA Eligibility $729,750 balance (SFR) 1 st position loans Originated on or before Hardship Delinquent or default reasonably foreseeable 1-4 family dwelling –Non owner-occupied OK

HAFA Features Pre-approved short sale Specified time lines Commissions protected Full release of liability on 1 st and subordinate loans Foreclosure sale suspension

HAFA Features (cont’d.) Payment forbearance or reduction $3,000 to Seller Servicer incentives Up to $8,500 for subordinate mortgage lien holders Investor reimbursement for subordinate mortgage lien releases

Who’s Participating All servicers in HAMP –1 st mortgages –Servicers establish policies based on investor guidelines –Investors in non-GSE loans may not approve HAFA short sales

Who’s Participating (cont’d.) Fannie & Freddie –Are the investors –Separate guidelines

Borrower Solicitation Borrowers solicited if delinquent 14 days to respond

Foreclosure Suspension Potentially eligible borrowers must be considered for HAFA: –Prior to commencing foreclosure –Before foreclosure sale is conducted For non-GSE loans: Pursuant to servicer’s policy

Foreclosure Suspension (Cont’d.) Fannie & Freddie –Special permission required if foreclosure sale is sooner than 60 days

Foreclosure Sale is Suspended While determining eligibility During SSA term Pending RASS approval Prior to closing Troubled borrowers should start HAFA process early

Borrower Already in HAMP Servicer Must Consider Borrower for HAFA …Servicer Must Consider Borrower for HAFA … Within 30 days from date the borrower: –Does not qualify for trial modification –Does not complete trial modification –Is delinquent on modification –Requests a Short Sale

Borrower Not in HAMP Servicer must consider borrower within 45 days from date the borrower: –Requests a Short Sale

If Borrower Not in HAMP Servicer determines eligibility –RMA (Request for Mortgage Assistance) HAMP modification may be offered 18 Borrower cannot be applying for modification while pursuing a short sale or vice versa. 2-16

Bankruptcy? Considered for HAFA if requested

RMA Request for Mortgage Assistance (See Form is Resource Section) 2-18

RMA Pg. 1 Explain Hardship 2-19 Borrower Info.

RMA Pg. 2 Income: Must include all except alimony, child support and/or separate maintenance payment Assets: Do not include life insurance or retirement accounts 2-20 Property Info.

Required Documentation RMA Pg. 3 Other properties 2-21

RMA Pg. 4 Complete only if applying for HAFA on property other than a principal residence This section for Modification; not Short Sale 2-22

Dodd-Frank Cert. RMA Pg. 5 Gov’t. Monitoring 2-23

RMA Pg. 6 Acknowledgement & Agreement 2-24 Pg. 7

HAFA Short Sale Flow Chart Determine if Seller/Borrower meets HAFA eligibility. Servicer has 45 days to determine eligibility, and issue or deny the SSA. Borrower requests short sale & submits complete package including RMA SSA & RASS sent to borrower. Includes list price or Minimum Net Proceeds SSA returned to servicer: Within 14 days Copy of listing Other lien info Marketing: 120 days minimum Extensions possible, up to 12 months total Upon Contract to Purchase: Submit RASS & contract within 3 Biz days of contract acceptance Servicer approves or disapproves contract within 10 Biz Days Closing. Servicer cannot require closing sooner than 45 days from contract acceptance. Seller receives $3,000 relocation assistance & is released from all liability on all liens. 19 Property must be listed 2-25

Determine Seller’s Eligibility Principal residence, 2 nd home or rental property (1-4 family) Must be personal residence for Fannie & Freddie loans Step

Determine Seller’s Eligibility (cont’d.) 1 st mortgage originated on or before Delinquent or default reasonably foreseeable Unpaid balance $729,750 or less Financial hardship Step

1 st Position/Pre 2009 Eligibility based on 1 st loan balance & payments Originated on or before Jan. 1,

Delinquent or Default Foreseeable Delinquent Delinquent – more than 60 days late Imminent default evaluated by servicer based on borrower’s debts, expenses, income & assets Imminent default evaluated by servicer based on borrower’s debts, expenses, income & assets

Maximum Unpaid Balance 1 Unit: $729,750 2 Units: $934,200 3 Units: $1,129,250 4 Units: $1,403,

Financial Hardship Reduction/loss of income Reduction/loss of income Financial circumstances change Financial circumstances change Increase in payment Increase in payment Increased expenses Increased expenses No cash reserves No cash reserves Excessive debt Excessive debt Permanent change of station order Permanent change of station order Divorce Divorce

Financial Information & Payment/Income Ratio Financial info may be required by servicer Financial info may be required by servicer Fannie & Freddie: Monthly payment must exceed 31% of borrower’s income Fannie & Freddie: Monthly payment must exceed 31% of borrower’s income

Request Short Sale Servicer’s forms –Use servicer’s forms –Complete all forms Complete RMA IRS Form 4506T 22 Step

Servicer Evaluation Compares Foreclosure/REO proceeds to Short Sale proceeds based on investor requirements Denial –Not eligible –Does not meet investor criteria –Reasons explained 22 Step

Issuance/Denial of SSA 45 calendar days from receipt of documents and borrower’s request for HAFA short sale consideration 23 Step

SSA & RASS Issued SSA: Short Sale Agreement –Offers borrower pre-approved short sale –14 days to accept & return Property must be listed RASS: Request for Approval of Short Sale –Kept until seller accepts a buyer’s offer 23 Step

Listing the Home Required when SSA returned Licensee must sign SSA Copy returned with SSA

SSA List Price or Minimum Net Servicer sets: –List price or –Minimum net proceeds No increase in minimum net during term of SSA Are terms realistic???

Marketing 120 days minimum Extensions possible for up to 12 months total 24 Step

RASS & Purchase Agreement Contract & Addenda RASS Buyer –Proof of funds or pre-approval letter Subordinate lien info 3 Biz Days to submit to servicer 24 Step

Approval or Disapproval 10 Biz days Approval required if minimums are met Cannot require commission reduction 24 Step

Closing Can be ASAP Servicer cannot require sooner than 45 days 45 days begins at contract acceptance 25 Step