HAMP Changes Take Effect Friday June 1

Effective Friday, June 1, 2012 HAMP “Tier 2”  -  which many people have simply referred to as HAMP 2.0  -  will roll out for the Making Home Affordable (MHA) loan modification program.  Like many MHA updates, these changes apply to non-GSE mortgages. 

The goal of HAMP 'Tier 2' is to increase eligibility for homeowners, including:

• those who did not meet the original HAMP guidelines,
• those who may have failed on a HAMP modification, or 
• those who own rental properties.

With HAMP 'Tier 2', many of the initial qualification criteria are still in place:

• loan must have been originated before January 1, 2009, 
• homeowner must be able to document a financial hardship;
• Only loans on properties with one-four units can be modified;
• there is a maximum outstanding loan amount (maximum unpaid principal balance.

But now, a borrower may also be considered for HAMP 'Tier 2' if any of the following also apply:

• they did not successfully complete (defaulted on) a HAMP 'Tier 1' modification;
• their monthly mortgage payment is below the minimum 31 percent front end Debt-To-Income ratio;
• and, most controversially, up to three seperate mortgages may be modified if they secure rental properties

No mortgage loan may be modified more than once in either Tier 1 or Tier 2. 

People interested in learning more about the HAMP program and the new 'Tier 2' changes, can visit the Making Home Affordable website, here.

The Homeownership Advisors Network will continue to focus its attention on helping owner-occupants avoid foreclosure, but may be able to answer some basic questions for rental property owners as well.

HAMP, HAMP 2.0, DTI, VPN, HARP, MHA, GSE... the 'alphabet-soup' of programs, agencies and programs can be overwhelming for struggling homeowners.  In Minnesota, there is a FREE, effective resource available: The Homeownership Advisors Network.  Trained and certified foreclosure prevention experts can work with YOU to find a solution to YOUR mortgage issues.  Don't delay, contact an advisor by visiting the Center's website today.

Finally - Major Changes in the Mortgage Industry

Major regulatory changes are shaking up the how servicers deal with delinquent homeowners.


The number one complaint the Center hears from struggling homeowners is how difficult it is to work with their bank or servicer.  Common complaints include getting lost in overly-complicated voice-mail systems, being routed from one department to another, never being able to speak with the same agent or representative twice, and constantly being told conflicting information when speaking with different agents.  However... a major change is on the horizon that should put an end to all this confusion:


The Making Home Affordable (MHA) program has updated their servicer guidance to require a “Single Point of Contact for Borrower Assistance”. In essence, the new guidance requires servicers to provide a single relationship manager to each struggling homeowner that is applying for help through the Making Home Affordable program or any other foreclosure-prevention option.  This includes HAMP, HAFA, UP and any in-house modification MHA servicers may provide.


The relationship manager will be responsible for communicating with the borrower, tracking their documents, responding to inquiries and coordinating the communication with any other bank/servicer employees. Homeowners should receive notice about being assigned to a contact as well as a toll-free number to use and information about the preferred method by which they should send documents to the servicer. The guidelines state that the relationship manager must be a full-time employee of the servicer, not a sub-contractor, who should be fully trained on the MHA program and the other in-house loss mitigation options available to clients.  Even if the client is not eligible for any loss mitigation options, and the loan is foreclosed, the relationship manager must still be available to the homeowner to answer questions about the status of the foreclosure.


It remains to be seen how well the servicers do implementing these changes, but this is good news for struggling homeowners AND their housing counselors.


Are you, or someone you know struggling with mortgage payments?  FREE, non-biased housing counselors are available to help!  Don't delay, visit www.hocmn.org to learn more about ways to avoid foreclosure in Minnesota.

Single Point of Contact A Reality!

Servicers must assign a "Relationship Manager" to every struggling borrower

Some exciting news was released by the administration of the Making Home Affordable program yesterday (US Treasury and Fannie Mae).  By no later than September 1st, every struggling homeowner that applies for a loan modification under Making Home Affordable must be assigned a single point of contact - who must be an employee of the servicer with a direct, toll-free telephone number - for homeowners to be able to communicate with about their documents, their application and answer questions.  This same point of contact, known as a Relationship Manager, will also be available for non-profit counselors to use when speaking with the servicer about a homeowner's situation. 

Servicers have until November 1st to assign a Relationship Manager to EXISTING MHA Consumers.  (Homeowners that are already in review or in a trial modification).

If implemented correctly... this should end a huge number of the complaints the Center hears from homeowners that are struggling with their mortgage:  "I can never speak to the same person twice,"  "They lose my paperwork,"  "I've had to send in the same document 3 or 4 times"... etc. 

According to the Supplemental Directive 11-04 for Servicers, released on May 18th:

The same relationship manager is responsible for managing the borrower relationship throughout the entire delinquency or imminent default resolution process, including any home retention and non-foreclosure liquidation options, and, if the loan is subsequently referred to foreclosure, must be available to respond to borrower inquiries regarding the status of the foreclosure.

For now, the Supplemental Directive will only be in effect for servicers that are participating in the Making Home Affordable initiative, and have a Program Participation Cap of more than $75mm.  Basically, this covers the largest 20 servicers in the country... and hopefully smaller servicers will follow suit.  Both GSEs (Fannie Mae and Freddie Mac) are currently exempt from this directive.  In Minnesota, given the partnership between Fannie Mae, the Minnesota Home Ownership Center and the Homeownership Advisors Network, there is already a single point of contact through the local non-profit counseling agency.

Will this improve the MHA program?  What other improvements do you think are necessary... leave us a comment and let us know what you think!

New Survey Shows Loan Mod Problems

A new consumer survey of households accross the country that have received, or tried to receive, a loan modification from their bank or servicer shows that banks routinely make errors or blatently break the rules established by the federal Making Home Affordable program.

The survey, by ProPublica, gives empirical evidence to what many of the MN Home Ownership Center's network of Foreclosure Counselors have been hearing for the past year: trying to work with servicers to obtain a loan modification can be an EXTREMELY frustrating undertaking.

Here are some of the results from the survey:

• On average, homeowners had been seeking a modification for more than 14 months.
• Homeowners seeking modifications reported having to send the same documents nearly six times on average.
• 175 homeowners say they were advised, incorrectly, to fall behind on their mortgage in order to qualify for a modification.
• Nearly half of the homeowners reported spending more than 10 hours per month (collecting documents, waiting on the phone, etc.). Most said they call, fax or mail once a week or more.

Most frustrating for those surveyed was that many times the servicers themselves made mistakes that resulted in a denial, and many times homeowners found the reason for denial unclear.


If you've thought about seeking a loan modification with your lender, there are ways to simplify  the process (although it's NEVER easy) and you want to be EXTREMELY careful that any modification they offer is really in your LONG-TERM best interest. The Center's network of Foreclosure Counselors are ready, willing and able to work with you on applying for a modification and help you decide if it will work for you.  In addition... there may be other ways to avoid foreclosure too.  Your counselor can help.

ALSO... we couldn't post about loan modifications without warning Minnesota Home Owners AGAIN, to make sure that they DO NOT PAY for any third-party loan modification service. Deal directly with your lender yourself, or with one of our free, non-profit Foreclosure Counselors. For additional information about preventing foreclosure in Minnesota, click here.

Unemployed? Foreclosure Options

The Home Affordable Unemployment Program (UP) went into effect (for non-GSE mortgages) on the first of July. The UP forbearance plan allows servicers to reduce or suspend a borrower’s payment while they are receiving unemployment benefits. Servicers are required to offer an UP forbearance plan to borrowers who meet the basic HAMP eligibility guidelines and have not previously received a modification through HAMP.
Unemployed borrowers must:

• Make the request for UP forbearance before the mortgage is seriously delinquent (before 90 days delinquent)
• Be unemployed at the date of the request, and be able to documents that he or she will receive unemployment benefits in the month of the "Forbearance Period Effective Date"

Servicers have some leeway pursuant to investor guidelines to require a borrower to receive unemployment benefits for up to three months before the forbearance period will begin, however the homeowner can make the request as soon as they become unemployed and are able to document he or she will receive benefits.

Unemployed borrowers who do not meet the UP forbearance criteria may be offered other forbearance programs. If not offered another forbearance plan, the borrower must be evaluated for HAMP. The HAMP evaluation will not include unemployment or severance payments in the calculation of gross income.

In addition, a borrower who was denied HAMP in the past may request UP if they meet all the eligibility requirements.

The UP forbearance period lasts a minimum of three months or until the borrower has become re-employed. It is up to the servicer’s discretion as to extending the forbearance period beyond three months. During the forbearance period the borrower’s payment will be reduced to 31% or less of the gross monthly income. The servicer has the option to suspend the payments in full, again at their discretion and according to investor guidelines. Any payments due during the forbearance period must be paid in the month due or the plan may be cancelled and the borrower will not be eligible for HAMP.

For additional details on UP, you can visit the Supplemental Directives page from available on the Making Home Affordable administrative website here. 

If you're currently unemployed and receiving (or will receive) benefits... and would like to learn more about this program, contact a FREE non-profit Housing Counselor as soon as possible.  In Minnesota, you can find your local Counselor, here.

HAMP, HARP and Now HAFA too?

Last week we mentioned that HAMP and HARP were members of the duet known as Making Home Affordable... well... the group has added a third band member and is now a trio.

The U.S. Treasury has announced the "Home Affordable Foreclosure Alternatives" (HAFA) Program which is designed to help struggling homeowners who are unable to qualify for a mortgage modification under the Home Affordable Modification Program (HAMP).

HAFA sings backup for HAMP, and provides incentives to servicers/lenders as well as borrowers to move forward with a short sale or deed-in-lieu of foreclosure.

Just as an FYI, in a short sale situation, the mortgage holder allows the homeowner to sell the property for a price short of the balance owed on the property’s loan.

The Center will be working on a more in-depth fact sheet over the coming weeks, but the basics of the program are as follows:

• Should speed up the Short Sale process, as it uses borrower financial and hardship information that was collected when they applied for a HAMP modification.
• Allows borrowers to receive PRE-APPROVED short sales terms (including minimum price accepted, proceeds to owner and real estate agents, etc.) BEFORE listing the property.
• KEY: While in Minnesota, as a non-recourse state, first mortgage debt is fully released from future liability, under HAFA, subordinate lien holders that receive an incentive under HAFA must also FULLY RELEASE that debt as well.  This means that homeowners will not have to sign a promissory note or worry about a future deficiency judgment.  (NOTE: This is ONLY if the junior, or subordinate, lien holder receives money under HAFA.
• Unifies documents, timeframes and deadlines to speed up the process.
• Provides financial incentives for all parties.  $1,500 to the borrower for relocation assistance and $1,000 for servicers to cover admin costs, and up to $3,000 in short sale proceeds to be shared among subordinate lien holders.  In most cases subordinate lien holders see nothing from a short sale... and have been the reason that many short sales have fallen through.  It will be interesting to see if this incentive changes their attitude.  It will be especially interesting to see if junior lien holders will be willing to trade possible FUTURE JUDGMENTS for a rather small ($3,000) incentive today.
• Requires ALL SERVICERS participating in HAMP to implement HAFA.
• Goes into effect on April 5th, but lenders and servicers may begin sooner if they choose.  The program is scheduled to end on December 31, 2012.
• Homeowners that are denied for a HAMP modification MUST receive a notification from their lender/servicer, in writing, of the HAFA option and give the borrower 14 days to respond orally or in writing.

Who qualifies for HAFA?

The homeowner must meet the basic eligibility criteria for HAMP

• the loan must be on their Primary Residence (no investors or second homes);  
• 1 to 4 units, as long as one of the units is the owner's primary residence;
• First lien originated before 2009 Mortgage either delinquent or in imminent danger of default,
• Unpaid principal balance no more than $729,750;
• Borrower’s total monthly PITIA payment exceeds 31% of gross income.

BIG QUESTIONS still remain about the program:

• Will homeowners that won't be able to hold on to their properties go through the extra effort to sell... or simply walk away.  "Post-HAMP-Denial-Strategic-Default"
• What effect will this new program have on already-pressured sales prices?  Short Sales already put a downward pressure on local "comps".  What will happen when there is a FLOOD of HAFA-generated short sales?
• What procedures are in place to prevent fraud?  Real Estate Agents are being called upon to help the bank determine the price they'll accept, and once the price is set, any offer over the minimum amount MUST be accepted by the bank.  This could be a magnet attracting fraud at all kinds of levels.

Feel free to respond in the comments!

Home Affordable Refi Program Extended

The Home Affordable Refinance Program (HARP), the lesser-known half of the "Making Home Affordable" duet, has been extended for one more year, and will now be available through June 30, 2011, according to a statement from the Federal Housing Finance Agency.

The idea behind the HARP program is to allow borrowers who owe up to 25% more than their homes are currently worth* to refinance to a quality, fixed-rate mortgage.   

The Minnesota Home Ownership Center has a fact sheet that can help understand the basics of the entire "Making Home Affordable" program, here.

ALSO... we couldn't post about loan modifications / refis with warning Minnesota Home Owners, AGAIN, to make sure that they DO NOT PAY for any third-party loan modification service. Deal directly with your lender yourself, or with one of our free, non-profit Foreclosure Counselors. For additional warnings about for-profit loan modification companies (and scams)... visit here.  To find your local non-profit Foreclosure Counselor, click here.

* While program guidelines allow for 125% Loan-To-Value (LTV) amounts... most lenders are only allowing 105% or less LTV... one of the major drawbacks to the program.

MN 3rd in the nation for MHA Trial Modifications

Many of our readers are numbers and data fans... so I thought I'd write a short post and link to some interesting reports that we've seen that give some numbers about housing, at both the national and state level, that our readers can dig into:

First, the Treasury has released its "Servicer Performance Report Through October 2009" for the Making Home Affordable Program. The complete report is available here.

That report shows that Minnesota ranks 17th in the nation for the overall number of Trial Modifications initiated under the Making Home Affordable program:

NOW... we've also seen the most recent negative equity report from American CoreLogic (via LoanPerformace.com) ... We'll be posting on the negative equity issue in a later blog post.

The interesting point, for THIS post, is that the American CoreLogic report shows the number of outstanding mortgages, by state. Minnesota ranks # 26th in the country for the number of outstanding mortgages:

IF WE COMBINE THE TWO NUMBERS...

This is where it gets interesting! If we look at the number of Trial Modifications initiated under the Making Home Affordable program AS A PERCENTAGE of ALL outstanding mortgages... Minnesota ranks 3rd in the country!!

Any numbers/data people want to weigh-in on my math skills? (Although trained as an economist... I'm a marketing guy... not a researcher/analyst/numbers guy :) )


As they stand, these numbers speak volumes of the work that our Foreclosure Counseling network does to assist struggling homeowners... and to get the word out about programs and assistance available to Minnesota homeowners! If you're struggling with your mortgage payment, or would like more information about the Making Home Affordable program... visit the Minnesota Home Ownership Center's website here.

Making Home Affordable - First Servicer Participants Announced

While the White House announced in early March the basic outline of the "Making Home Affordable" plan, many homeowners have been frustrated by the fact that, while it appeared as though they would qualify for either the modification or refinance versions of the plan, few lenders/servicers had actually formalized their participation in the plan.

As of Thursday, April 16th... that has changed. Six national servicers, including several with substantial loan portfolios in Minnesota, have formalized their participation and now have procedures in place to accept homeowner inqueries.

Those servicers are: Chase, CitiMortgage, GMAC Mortgage, Saxon, Select Portfolio Servicing, and Wells Fargo Bank.

SO... what should consumers do next? The first step would be to visit the Center's website for a detailed overview of the Making Home Affordable Plan. You can view the information, HERE.

Next, visit the government's official website for the plan: http://www.makinghomeaffordable.gov/ (Don't be fooled by look-alike or scam websites! This is THE governmental website for all Making Home Affordable information).

Follow the steps to see if you are eligible (Click on the large "Find Out If You Are Eligible" button on the Making Home Affordable website).

If it appears you qualify... AND your servicer (where you mail your monthly mortgage checks) is listed above, visit the Making Home Affordable page for contact information for your servicer, HERE.

If you'd like additional information about contacting your lender or servicer, the Center has a fact sheet available HERE:

IF YOUR SERVICER IS NOT LISTED, or if it appears as though you aren't eligible. DON'T PANIC. Many servicers are accepting applications even though they haven't signed the official participation contract with the government. Moreover, the Making Home Affordable plan may be just ONE of the MANY options you have for staying (or getting) current on your mortgage! A FREE, local Foreclosure Counselor can assist you in understanding YOUR options. Don't delay, contact them today! (Link is HERE).

Updated info on "Making Home Affordable Plan"

The Center has updated its website to include additional information about the "Making Home Affordable Plan," whose details were announced earlier today by President Obama. Most importantly, it includes information on where homeowners should turn for next steps.

Feel free to visit the new page: www.hocmn.org/Making-Home-Affordable.cfm