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

Supplemental Directive 09-09R Nov. 30, 2009 HAFA introduced April 5, 2010 Effective date HAMP servicers must participate in HAFA Revised March 26,

Supplemental Directive Issued Dec.28,2010 Effective Feb. 1, 2011 Made significant changes

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

HAFA Eligibility = HAMP Eligibility Personal residence, 1-4 family $729,750 balance (SFR) 1 st position loans Originated on or before Payment on 1 st loan exceeds 31% of gross income Hardship Delinquent or default reasonably foreseeable (Deleted by SD 10-18)

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 $6,000 for subordinate lien holders Investor reimbursement for subordinate 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 –Establish 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 30 days from date the borrower: –Requests a Short Sale

If Borrower Not in HAMP Servicer determines eligibility –RMA (Request for Modification & Affidavit) 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 Modification and Affidavit Wells Fargo calls it a RFAA

RMA Pg. 1 For HAFA: Sell property Primary residence Owner occupied Explain Hardship Other liens

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

Paragraph 5 is for modifications RMA Pg. 3 Use servicer’s form which servicer should have modified for short sale

HAFA Short Sale Flow Chart Determine if Seller/Borrower meets HAFA eligibility. Servicer has 30 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. 22 Property must be listed 2-22

Determine Seller’s Eligibility Principal residence 1 st mortgage originated on or before Delinquent or default reasonably foreseeable Unpaid balance $729,750 or less Financial hardship Step

Principal Residence Exemption: Vacant or rented to a non-borrower up to 12 months prior to issuance of: –SSA or –Alt RASS and Borrower has not purchased another home during 12 months prior to issuance of SSA

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 Other reasons Other reasons

Financial Information & Payment/Income Rati o Financial info may be required by servicer Financial info may be required by servicer Treasury HAFA: Payment not required to exceed 31% of borrower’s income for non-GSE loans Treasury HAFA: Payment not required to exceed 31% of borrower’s income for non-GSE loans Fannie & Freddie require payment to exceed 31% of gross income Fannie & Freddie require payment to exceed 31% of gross income

Request Short Sale Servicer’s forms –Use servicer’s forms –Complete all forms Complete RMA IRS Form 4506T List of servicers at: 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 25 Step

Issuance/Denial of SSA 30 calendar days from receipt of documents and borrower’s request for HAFA short sale consideration 26 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 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 27 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 Step

Approval or Disapproval 10 Biz days Approval required if minimums are met Cannot require commission reduction 28 Step

Closing Can be ASAP Servicer cannot require sooner than 45 days 45 days begins at contract acceptance 28 Step