Homeowner Affordability and Stability Program

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Homeowner Affordability and Stability Program

• Understanding the Logistics
• Amy Swaney, CMB
• Peoples Mortgage Company

2
Making Home Affordable

• 3 Distinct Areas of Focus
• Home Affordable Refinance Programs
• Home Affordable Modification Programs
• Restoring Confidence in FNMA/FHLMC

3
Understanding the Secondary Market
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Understanding Securitization

The Secondary Market Buys the MBS and Sells to
investors
The Bank Buys or Originates
The Bank Packages into MBS
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Understanding Securitization -Then

Wall Street Firms
FNMA
FHMLC
Private
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Understanding Securitization - Now

Wall Street Firms
FNMA
FHMLC
Private
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Making Home Affordable

• 3 Distinct Areas of Focus
• Home Affordable Refinance Programs
• Home Affordable Modification Programs
• Restoring Confidence in FNMA/FHLMC

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1 -Home Affordable Refinance

• Understanding the Secondary Market
• Federal National Mortgage Association
• (FNMA/Fannie Mae)
• Federal Home Loan Mortgage Corporation
• (FHLMC/Freddie Mac)
• 2 separate entities both currently held in
  conservatorship by the government

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Freddie MacHome Affordable Refinance

• FHLMC must own your 1st mortgage
• You must be current
• Your 1st mortgage must be 105 or less of current
  market value
• If you have a 2nd mortgage, the lender MUST AGREE
  to subordinate
• You must obtain the refinance from your current
  servicer

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Fannie MaeHome Affordable Refinance

• Fannie Mae must own your 1st mortgage
• You must be current
• Your 1st mortgage must be 105 or less of current
  market value
• If you have a 2nd mortgage, the lender must agree
  to subordinate
• You may obtain the refinance from any mortgage
  originator or current servicer

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How Do You Know?

• Is your loan owned by Fannie Mae?
• 1-800-7FANNIE (8 a.m. - 8 p.m. EST)
• http//www.fanniemae.com/homeaffordable
• Is your loan owned by Freddie Mac?
• 1-800-FREDDIE (8am to 8pm EST)
• www.freddiemac.com/avoidforeclosure

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1-Home Affordable Refinance

• General Guidelines for both Programs
• Mortgage Insurance
• If original loan did not require mortgage
  insurance - new loan will not require mortgage
  insurance
• If original loan did require mortgage insurance -
  new loan will require the same amount of coverage
• Loan Level Price Adjustments
• LLPAs reduced

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1-Home Affordable Refinance

• General Guidelines for both Programs
• Streamline Documentation Guidelines
• AVM or Reduced Appraisal
• Income documentation waivers

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Home Affordable Refinance

• Issues
• Loans over 105 LTV - Arizona
• 2nd Mortgage Lenders not required to subordinate
• No determination of how the secondary market will
  price these loans
• Banks still have liquidity issues for funding the
  loans

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2- Home Affordable Modification

• Who is Eligible?
• 1st Mortgages currently owned by FNMA or FHLMC
• Must be owner-occupied, 1- to 4- unit, including
  condos, cooperatives, eligible manufactured
  homes, and conforming jumbo mortgages.
• Mortgages for properties that are abandoned,
  vacant, or condemned are not eligible.
• Mortgages may be previously modified, but can
  only be modified once under the Home Affordable
  Modification Program.

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Home Affordable Modification

• Who is Eligible?
• Eligible borrowers must provide affirmation of
  financial hardship and proof of current income.
• Borrowers may be in foreclosure.
• Any foreclosure action will be temporarily
  suspended while borrowers are considered for
  foreclosure prevention options unless
• the Servicer has completed efforts to contact a
  borrower and has determined
• (1) the borrower has not responded or
• (2) the borrower does not have the capacity or
  willingness to participate in the program.
• Borrowers are still eligible if they are in
  active bankruptcy.

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Home Affordable Modification

• Underwriting
• Underwriting looks to create a 1st mortgage
  housing payment of 31 of household income
• (principal, interest, insurances, taxes,
  homeowner/condo association fees, and escrow
  shortages- PITIAS)
• A new PITIAS amount is established.

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Home Affordable Modification

• Underwriting
• Borrowers must successfully complete a
  three-month trial payment period, during which
  they will be required to pay the estimated new
  monthly payment.
• Servicers enter into a workout/forbearance plan
  with the borrower during the trial period,
  followed by a modification agreement upon
  successful completion.

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Home Affordable Modification

• Incentives
• Borrowers who remain current on their payment
  receive a principal reduction of up to 1,000 per
  year for five years.
• Servicers receive money for each eligible
  modification they establish, and incentives of up
  to 1,000 each year for three years as long as a
  borrower stays current on their loan
• Incentives accrue monthly based on timely payment
  and are awarded yearly. The payment of incentives
  will be forfeited should the borrower become
  90-days or more delinquent at any time.

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Home Affordable Modification

• How Will Lenders Modify?
• Use borrowers monthly household gross income x
  31
• Solve for new monthly affordable payment
  using the following sequential steps until the 31
  percent PITIAS-to-income ratio is achieved
• .

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Home Affordable Modification

• Modification Process
• STEPS
• Calculate New Unpaid Principal Balance
• Principal Balance Escrow Shortages
  Arrearages Unpaid Principal Balance (UPB)
• Calculate a new monthly payment
• Use the new UPB
• The current note rate on the mortgage
• The remaining term
• If an affordable payment is achieved, the
  interest rate will fix permanently at the current
  note rate if not continue
• 3. Reduce the interest rate in decrements of
  0.125 percent to no lower than 2.0 percent
• If the modified interest rate is below the
  market rate, the rate will remain fixed for five
  years. In the sixth year, the interest rate will
  be subject to annual increases of no more than 1
  percent per year, not to exceed the lesser of the
  fully indexed rate at the time the loan was
  originated or the market rate (PMMS) at the time
  the modification documents are prepared.

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Home Affordable Modification

• Modification Process
• STEPS
• Extend the amortization term
• Month-by-month up to 480 months
• Forebear principal
• The interest-bearing principal is not less than
  100 percent of current market value.
• Deferred principal will not be subject to
  interest and requires a balloon payment due upon
  sale, payoff or maturity. Deferred principal will
  be non-interest bearing and non-amortizing.
• 6. If a PITIAS-to-income ratio of no less than 31
  percent cannot be achieved, the borrower does not
  qualify for this program.

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Home Affordable Modification

• Benefits
• Modifications under program available to any
  first lien up to 729,750.
• Incentives for servicers to extinguish 2nd lien
  debt
• Additional Incentives to servicers to facilitate
  short-sales AND deed-in-lieu's for loans not
  qualified for program

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Home Affordable Modification

• Issues
• Loans must be owned or guaranteed by FNMA/FHLMC
• Credit Implications not determined
• Is this delaying inevitable
• No safe-harbor for servicers on private label
  portfolios

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3-Confidence in FNMA/FHLMC

• Continuing the purchase of up to 600 billion in
  GSE debt and GSE Mortgage Backed Securities
• Increase the GSEs retained portfolio caps from
  50 billion to 900 billion

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Marilyn Ferguson

• It's not so much that we're afraid of change or
  so in love with the old ways, but it's that place
  in between that we fear . . . . It's like being
  between trapezes.
• It's Linus when his blanket is in the dryer.
  There's nothing to hold on to.

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More Information

• To receive updates and get on my email broadcast
  list text or email me your name, company name,
  email and phone number
• Amy Swaney,CMB
• 480-529-3008
• amy_at_amyswaney.com