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Revisions to FHA's Loss Mitigation Home Disposition Options Preforeclosure Sale & Deed-in-Lieu
Working Together to Help Families Stay in Their Homes
Presented by :
LEARNING OBJECTIVES
This webinar will provide an overview of the revised requirements for FHA's Loss Mitigation Home Disposition Options (Pre-Foreclosure Sale and Deed in Lieu) as outlined in Mortgagee Letter 2013-23.
Mortgagee Letter 2003-19: Partial Claims: Program Changes and Updates Preforeclosure Sale Program FAQs
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Streamlined Option
Servicer may approve Homeowners meeting Appraisal Validation Requirements specific guidelines without verifying hardship Homeowner Incentive Fee or obtaining a complete mortgage workout Disclosure Requirements packet Participation Requirements Eligibility Requirements Owner-Occupied Non-Owner Occupied Servicemember Requirements Eligible Properties
The policies outlined in ML 2013-23 supersede, where in conflict ML 2008-43, 2002-13, and 2000-05. All other requirements remain in effect.
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Scheduled Foreclosure Sales should not be cancelled to initiate a PFS marketing period for Homeowners meeting the streamlined PFS eligibility requirements Cancel only if Servicer receives an acceptable purchase contract meeting the requirements of ML 2008-43
General Homeowner Requirements Must have negative equity Limited to one FHA insured mortgage Must be an individual - no corporation or a partnership Must notify Servicer of interest to participate in PFS program Servicer must mail a copy of Form HUD-90035 (Information/Disclosure) Cooperate with Servicer requests for any required documentation Homeowner must return signed HUD-90045 Approval to Participate (ATP) to Servicer within 7 days of receiving the ATP form
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Homeowner Profile
Monthly Net Income:
Monthly Expenses: Monthly Mortgage Payment: Credit Score:
Property Information
$ $ $ 2,376.00 450.00 2,300.00 625 Unpaid Principal Balance: Appraised Value: $ $ 198,600.00 168,000.00
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b) False
2. Based on the scenario presented, Ms. Smith is eligible for the Streamlined Option of the PFS.
a) True
b) False
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1. Assuming Ms. Smith must be reviewed under the Standard PFS option, what is Ms. Smiths required cash contribution? a) $ 682.40 b) $ 3,412.00 c) $ 0.00 d) $ 3,000.00
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Appraisal Requirements
Property Value
PFS Properties are to be listed at no less than the As Is appraised value Requires a standard electronically-formatted appraisal from an FHA roster Appraiser As Is Valid for 120 days No Distress Sales Servicer must provide a copy of the appraisal to the Homeowner, their sales agent, or HUD upon request New appraisal may be obtained to ensure current FMV during marketing period
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Appraisal Requirements
Appraisal Validation
Servicer must submit a variance request via EVARS if one of the following conditions exist: The current FHA appraised value is less than the unpaid principal balance (UPB) by $75,000 or greater; or The current appraised value is less than 50% of the UPB
If neither of these conditions exists, the FHA PFS appraisal is acceptable if: Servicer obtains a BPO or AVM that is within 10% of the appraised value A variance request must be submitted through EVARS if the value is not within 10% of the appraised value Variance requests submitted through EVARS must be approved prior to authorizing the marketing of the property
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Appraisal Requirements
Property Condition
Properties that have sustained damage may be eligible for the PFS Option Servicer must obtain the governments cost estimate to repair from HUDs National Servicing Center Servicer must submit a variance request through EVARS to acquire approval Servicers are responsible for the cost of surchargeable property damage As Is properties - Servicer will be required to deduct the governments estimate cost from their claim As Repaired properties is not an allowable settlement cost If property damage is not surchargeable, NSC approval is not required Subsequent damage after approval must be disclosed to the Servicer to determine continued eligibility for the Preforeclosure Sale Option
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Incentive Fees
Owner-Occupant Incentive fee up to $3,000 Homeowners required to make a cash reserve contribution under the Standard PFS option are NOT eligible for the $3,000 consideration Servicer may obligate up to an additional $1,500 from Sale Proceeds for discharging junior liens Used for transition or relocation assistance Non-Owner Occupant Non-owner occupants are not eligible for a Homeowner incentive fee Servicer may obligate up to an additional $1,500 from Sale Proceeds for discharging junior liens
Property must have marketable title Servicers are expected to assist in clearing title issues Homeowners incentive must be applied to satisfy or release any secondary lien(s) If Homeowners incentive is not sufficient, Servicer can obligate an additional amount towards secondary lien(s)
Available monies for payment of Junior Liens
Disclosure Requirements
PFS and DIL Required Disclosure
Prior to approval for a PFS or DIL, Servicer must notify Homeowner in writing of the following: Homeowner must be in default on the date the PFS transaction closes PFS and DIL transactions are reported to Credit Bureaus Servicemembers should obtain guidance from employer regarding the potential impact on security clearance and employment CAIVRS Reporting and potential impact
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Participation Requirements
APPROVAL TO PARTICIPATE
If Homeowner is determined eligible for PFS: Servicer to provide Form HUD-90045 Approval to Participate If the Homeowner is not eligible for a PFS: Servicer must advise in writing Explain the reason for denial, and Allow Homeowner at least 7 calendar days to respond
Anti-Fraud Requirements Servicer may not approve a Homeowner for a PFS if Servicer knows or has reason to know of homeowners fraud or misrepresentation of information Third-party fees may not be included, unless explicitly permitted No charge may be assessed for participation in the PFS transaction
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Marketing Period
Duration
Homeowners have 4 months from the date of the Servicers Approval To Participate in the PFS program to obtain a signed sales contract Homeowners have a pre-approved extension of two additional months to complete the PFS sale if one of the following exists: The Servicer is in the Tier 1 category of the Tier Ranking System, or There is a signed Contract of Sale but settlement has not occurred by the end of the fourth month
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Contract Acceptability
Contract Approval Minimum Net Sale Proceeds: 0-30 days of marketing period - Net 88% of As Is appraised FMV 31- 60 days of marketing period - Net 86% of As Is appraised FMV 61 days - duration of PFS - Net 84% of As Is appraised FMV Net Sale Proceeds is defined as the sales price minus closing/settlement costs
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Contract Acceptability
Allowable Settlement Costs
Up to 6% sales commission Real estate taxes Local/state transfer tax stamps and other closing costs customarily paid by the seller Incentive Compensation paid to qualifying Owner Occupant Seller of $3,000 Up to $1500 for the discharge of junior liens Outstanding Partial Claim Up to 1% of the buyers first mortgage amount if the sale includes FHA financing
PFS Failure Homeowner must be re-evaluated by the Servicer for other loss mitigation options Must be reviewed within 90 days of the expiration of the PFS period, or foreclosure must commence If foreclosure does occur, neither HUD nor the Servicer will pursue the Homeowner for a deficiency judgment as a result of the Homeowners good faith effort in the Preforeclosure Sale program
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Post Closing
Claim Filing
HUD will reimburse Servicer for reasonable and customary costs HUD will not pay property-related costs which were incurred after the PFS closing date HUD will monitor Servicer by selecting and reviewing appraisals for risk assessment purposes
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ML 2013-23: Updated Pre-Foreclosure Sale (PFS) and Deed in Lieu (DIL) of Foreclosure Requirements
Deed-in-Lieu of Foreclosure FAQ
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DEED-IN-LIEU OF FORECLOSURE
DIL allows the Homeowner to voluntarily deed the collateral property to HUD in exchange for a release from all obligations under the mortgage.
Homeowner Benefits Although this option results in the Homeowner losing the property, it is often preferable to foreclosure because: Homeowner mitigates the cost and emotional trauma of foreclosure Owner-Occupant Homeowner is eligible to receive up to $2,000 incentive payment Deed-in-Lieu is generally less damaging than foreclosure to Homeowners ability to obtain credit in the future Servicer Benefits Avoids the time and expense of a legal foreclosure action, and Due to the cooperative nature of the transaction, the property is generally in better physical condition at acquisition
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DEED-IN-LIEU OF FORECLOSURE
Homeowner Requirements Unable to support the mortgage debt Owner-Occupant (Standard or Streamline Option) Non-Owner Occupant (Streamlined Option) Title must be free and clear of all liens
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DEED-IN-LIEU OF FORECLOSURE
General Requirements A complete homeowner workout packet is not required if Homeowner met the Streamlined PFS option All Homeowners named on Note must execute the Deed to convey Homeowners agree to certify compliance with program stipulations concerning property condition Account must be at least 31 days delinquent when the Deed-in-Lieu is recorded or if processed under a Streamline Option, meet the prescribed delinquency requirements
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DEED-IN-LIEU OF FORECLOSURE
Agreement Requirements A written Deed-in-Lieu Agreement must be executed by the Homeowner and Servicer which contains all of the conditions under which the deed will be accepted All conditions can be found in Mortgagee Letter 2000-05
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RESOURCES
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DDS CODE
12-Repayment
DESCRIPTION/REQUIREMENTS
Verbal agreement to increase, reduce or suspend payments Duration < 3 months Verbal financials required for agreements over 30 days Written agreement to increase, reduce or suspend payments Duration minimum 3 months Verified/documented financials required for agreements over 30 days Only option available for homeowner(s) when 85 percent of the surplus income is sufficient to bring the homeowner(s) current within six months
COLLECTIONS
Formal FB
HUD HB 4330.1 REV-5, Chapter 7 ML 2013-32
06 Formal Forbearance
09-Special Forbearance
Cause of default is unemployment, must be owner-occupied Loan must be at least 3 months unpaid but not more than 12 months delinquent PITI Must provide for a minimum duration of 12 months for reemployment Requires subsequent evaluation for a more permanent Loss Mitigation option to cure the default Permanent change in 1 or more of the terms, allows the loan to be reinstated and results in a payment a borrower can afford May include a change in the a) interest rate, b) capitalization of the delinquent principal, interest or escrow items, c) re-amortization of the balance due 3- month Trial Payment Plan required Must have a verifiable loss of income or increase in living expenses Surplus income must be at least the greater of $300 and 15 percent of net monthly income (85 percent of the homeowner(s) surplus income must be insufficient to cure arrearages within six months) Mortgage payment (PITI) must be reduced by the greater of $100 and 10% of the original monthly payment amount At least 12 mos. must have elapsed since the origination date of the loan Borrower may not have previously received a Loan Modification or FHA-HAMP in the previous 24 mos.
HOME RETENTION
Loan Modification
ML 2011-28 ML 2009-35 ML 2013-17 ML 2013-32
This document is intended to provide summary information on HUDs Loss Mitigation Options. It is not intended to substitu te or alter requirements and complete guidelines found in FHA handbooks, mortgagee letters, and other official FHA publications. Content is subject to change.
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DDS CODE
36 - FHA HAMP Standalone Partial Claim Started 37 - FHA HAMP Standalone Modification Started 39 - FHAHAMP Trial 41-FHA HAMP Modification Started
DESCRIPTION/REQUIREMENTS
Allows the use of a Partial Claim up to 30% of the UPB as of the date of default and combine it with a Loan Modification (May allow for only a Partial Claim or only a Loan Modification) One or more borrowers must have stable monthly income Must have a verifiable loss of income or increase in living expenses Must successfully complete a trial payment plan (4 months for imminent default, 3 months for 90+ delinquent) Total of arrearages used in calculating the FHA-HAMP Partial Claim amount is no longer limited to 12 months PITI Lender will advance funds on behalf of the borrower in an amount to reinstate a delinquent loan Borrower may not have previously received a Loan Modification or FHA-HAMP in the previous 24 mos.
HOME RETENTION
DISPOSITION
Allows a borrower in default to sell home and use proceeds to satisfy the mortgage debt even if the proceeds are less than the amount owed Borrower must commit to actively market the property for 4-6 months Streamlined eligibility available for owner occupied and non-owner occupied borrower(s) meeting certain criteria Tiered Net Proceeds Requirements 1st 30 days 88%; 31-60 days 86%; 61 remainder of marketing time 84%; Funds available for discharge of Subordinate Liens. Borrower voluntary deeds collateral to HUD in exchange for release from all obligations under the mortgage Lender must enter into a written agreement with the borrower stating specific actions that the borrower must perform in order to take advantage of this option and receive financial consideration Borrower qualifications: cause of default is incurable; collateral property must be non-occupied at the time of conveyance; good and marketable title Streamlined eligibility available for borrower(s) meeting certain criteria
Deed-in-Lieu (DIL)
ML 2000-05 ML 2013-23 ML 2013-34
44 - Deed-inLieu Started
This document is intended to provide summary information on HUDs Loss Mitigation Options. It is not intended to substitute or alter requirements and complete guidelines found in FHA handbooks, 45 mortgagee letters, and other official FHA publications. Content is subject to change.
ONLINE RESOURCES
National Servicing Center (NSC) Training: Includes information and training schedules for ECLASS,
Classroom Training, and the Loss Mitigation Webinar Series
EDI Webpage
Code of Federal Regulations: 24 CFR 202.2, 203.331, 203.355, 203.356, 203.502, 203.600, 203.606, and
203.608
1-877-622-8525
QUESTIONS: Secretary Held Servicing Contractor: (877) 622-8525 Home Equity Conversion Mortgage (HECM) Servicing: hecmservicing@deval.us Requests for Extensions: extensionrequests@hud.gov Training issues: eclass@hud.gov TRS, Data, CAIVRS, SFDMS Reporting: sfdatarequests@hud.gov Single Family FHA - Claims Processing: Claims Help Desk (FHA_SFClaims@hud.gov)
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RESOURCES
FHA Resource Center Frequently Asked Questions www.hud.gov/answers
Available 24/7
A website containing over 1,300 questions and answers about FHA programs, underwriting, and processing (website available 24/7) The FHA Resource Center acts as the first line of response for the majority of industry and public inquiries about FHA programs and services Searchable by keyword and category Telephone:
1-800-CALL FHA (1-800-225-5342)
Monday-Friday 8:00AM 8:00 PM (Eastern Time)
E-mail: answers@hud.gov
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