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

2. 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
NPV test (positive, must mod; negative, may mod)
Prepared by Bob Lukens, Philadelphia Legal Assistance

3. Prepared by Bob Lukens, Philadelphia Legal Assistance
HAMP Tier 2
Except Fannie, Freddie, VA, and FHA loans
4.625% fixed; 40 year term
Freddie Mac Primary + 50 basis points
Revised NPV test
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. Prepared by Bob Lukens, Philadelphia Legal Assistance
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. Prepared by Bob Lukens, Philadelphia Legal Assistance
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
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7. Prepared by Bob Lukens, Philadelphia Legal Assistance
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. Prepared by Bob Lukens, Philadelphia Legal Assistance
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. Prepared by Bob Lukens, Philadelphia Legal Assistance
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. Prepared by Bob Lukens, Philadelphia Legal Assistance
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. Prepared by Bob Lukens, Philadelphia Legal Assistance
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. Prepared by Bob Lukens, Philadelphia Legal Assistance
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. Prepared by Bob Lukens, Philadelphia Legal Assistance
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