Making Home Affordable | May 2016Making Home Affordable | May 2016Making Home Affordable | May 2016
Understanding the Terms of a HAMP Modification:
Interest Rate Increase, Impact, and Resources Training Presentation for Trusted Advisors
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Agenda
Resources for Homeowners4
HAMP Overview1
HAMP Interest Rate Increase2
Impact to Homeowners3
Options for Homeowners with Additional Hardship5
Resources for Trusted Advisors6
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1.6 MILLION
$41BILLION
$479.67MONTHLYSAVINGS*
HAMP OverviewProgram Highlights
Source: Making Home Affordable Program Performance Report Fourth Quarter 2015
Permanent HAMP modifications.
Median decrease in monthly housing payment under HAMP permanent modifications.
Estimated aggregate payment savings to homeowners who received HAMP 1st lien permanent modifications, to date.
*Excludes the impact of any interest rate increases and re-amortization of capitalized homeowner incentives which may begin to occur after the fifth year of the HAMP Tier 1 modification.
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The Tier 1 Standard Modification
Waterfall is a stated order of successive
steps that must be applied until the
homeowner’s target monthly mortgage
payment ratio is reduced to 31% of his or
her gross income. STEP 1
Capitalization
STEP 2
Interest Rate Reduction
STEP 3
Term Extension
STEP 4
Principal Forbearance
HAMP Tier 1 Standard Modification Waterfall
HAMP Overview
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• HAMP Tier 1 modifications included interest rate reductions to as low as 2% for the first five years to help homeowners avoid foreclosure.
• The terms of the HAMP Tier 1 modification include a gradual interest rate increase after five years.
• Homeowners in HAMP Tier 1 modifications will experience a gradual interest rate increase of 1% per year until their rate adjusts to the market rate at the time of their modification.
HAMP Interest Rate IncreaseUnderstanding the Terms of a HAMP Modification
Why are HAMP Interest Rates Increasing?
Homeowners with Fannie Mae or Freddie Mac owned HAMP loans who will experience a similar rate increase should contact Fannie Mae, Freddie Mac, or their servicer.
6Making Home Affordable | May 2016November 2009 l Making Home Affordable
2005: Nick buys $330,000 home
10% down payment
$297,000 mortgage (30 yr fixed at 6.5%)
2008: Income drops to $47,000 due to illness
HAMP Interest Rate IncreaseInterest Rate Increase Example
Target Monthly PITIA payment for HAMP is $1,214.
Nick’s Current Monthly Payment
Principal & Interest $1,877
Taxes $350
Insurance $105
Association Fee $75
Total Monthly Payment
$2,407
7Making Home Affordable | May 2016November 2009 l Making Home Affordable
HAMP Interest Rate IncreaseInterest Rate Increase Example
HAMP Waterfall Current After HAMP
Step 1 Add $18,722 in unpaid interest and advances
$286,359
Unpaid Principal Balance
$305,131 UPB
Step 2 Reduce interest rate to 2% $2,407
monthly payment
(Principal, interest, taxes, insurance, association fees)
$1,650 PITIA
$1,644 PITIAStep 3 Extend term to 40 years
Step 4 Forbear $46,000 in principal $1,214 PITIA
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HAMP Interest Rate IncreaseInterest Rate Increase Example
Interest Rate
Pre-Mod: 6.5%
Interest Rate Increase
Year 7
After 3rd Increase: 4.9% (Fixed)
Year 6
After 2nd
Increase: 4%
Post-Mod Years 1-5
After 1st
Increase: 3%
Pre-Mod
Post-Mod: 2%
Total Monthly Payment
$2,407
$1,594
$1,476
$1,342
$1,214
Year 8 –Life of Loan
• Starting in year 6, Nick’s interest rate will rise 1% per year until market rate at time of permanent modification is reached.
• In year 8, the interest rate will increase to 4.9% and will be fixed for life of Nick’s loan.
• Nick saved $71,580 in the first five years.
• In year 7, the interest rate will increase to 4%.
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HAMP Interest Rate IncreaseTimeframes
Offer
The first interest rate increase went into effect in Q3 2014 for the earliest group of HAMP modifications.
Source: Making Home Affordable Program Performance Report
Fourth Quarter 2015
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HAMP Interest Rate IncreaseNumber of Increases and Payment Changes
Offer
Overall, 80% of HAMP Tier 1 homeowners will experience an interest rate increase after five years.
The majority of HAMP homeowners will experience two or three rate increases.
Homeowners who received a modification in 2009-2011 are more likely to experience three to four increases than homeowners who received a modification in 2012-2013, most of whom will experience two increases.
Number of Interest Rate Increases
The maximum rate depends on the market rate at time of modification.
For 92% of HAMP homeowners, this will result in a rate at or below 5%, well below the pre-modification interest rate.
The median amount of the first monthly payment increase is $93, and the median monthly payment increase after the final interest rate increase is $206.
Final Rate and Mortgage Payment
Sources: Treasury Notes Blog “HAMP Rate Reset: Just the Facts” (3/12/14) and Making Home Affordable Program Performance Report Fourth Quarter 2015
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• General economic conditions are improving, particularly home price appreciation and job growth.
• Final interest rates are below pre-modification rates for most homeowners.
• However, there are factors that may impact a homeowner’s ability to accommodate the payment increase:
Improvement in the economy has been uneven, and
Homeowners may have experienced additional hardship since modification (i.e., increase in expenses or decrease in income).
• If a payment increase presents a challenge, homeowners should contact a housing counselor or their servicer immediately.
Impact to HomeownersMortgage Payment Changes
Economic Conditions
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Communication Channels
Mortgage Servicer
• Homeowners may contact their mortgage servicer directly with questions regarding rate increases.
Servicer contact information on monthly mortgage pay stub For the list of participating HAMP Servicers and their contact
information, visit: http://www.makinghomeaffordable.gov/ get-started/contact-mortgage/Pages/default.aspx
Homeowner HOPE™ Hotline
• Homeowners may call the Homeowner’s HOPE™ Hotline to speak to live HUD-approved housing counselors or to escalate a case.
1-888-995-HOPE (4673)
Resources for Homeowners
Helping Homeowners Prepare
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Requiring Explanation of Modification Terms Servicers to notify homeowners of the interest rate increase at time of modification.
Resources for HomeownersHelping Homeowners Prepare
What Treasury is Doing
Requiring Mandatory Advance NoticeServicers to provide homeowners with advance notice 120 - 240 calendar days and then 60 - 75 calendars day before first rate increase.
Requiring Financial CounselingLargest servicers in HAMP to offer financial counseling to assist homeowners in staying current on their mortgage payments.
Talking to Homeowners Treasury is collecting as much information as possible and monitoring all interest rate increases.
Training HOPE™ Hotline Call Centers Treasury to provide training to HOPE™ Hotline agents to prepare them to assist homeowners with rate increases.
Training Housing Counselors Treasury to provide training to housing experts that homeowners can turn to for help with preparing for the rate increases.
Providing Information via the Internet Treasury to post more information for homeowners on www.mha.gov and social media.
Working with Servicers Treasury to obtain input from servicers regarding the effect of rate increases on homeowners via Roundtable series.
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MHA Programs
HAMP Tier 2
• Homeowners may be eligible for HAMP Tier 2 if they have a hardship caused by mortgage payment increases.
• HAMP Tier 2 modifications have an interest rate that is fixed for the duration of the loan.
• Servicers must proactively solicit a borrower for HAMP Tier 2 if that borrower loses good standing on their HAMP Tier 1 modification, or at such earlier time as required by applicable law. However, on or after September 1, 2016, a servicer must instead solicit such borrower for all loss mitigation options.
• A loan permanently modified under HAMP may be re-modified, without regard to the loss of good standing, provided that either:
The borrower has experienced a change in circumstance; or At least 12 months have passed since the HAMP Modification
Effective Date.
Streamline HAMP
• Homeowners who are at least 60 days delinquent within a 12 month period following an interest rate increase under HAMP Tier 1 may be eligible for Streamline HAMP, provided their servicer is participating.
Options for Homeowners with Additional Hardship
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MHA and Treasury Programs
Home Affordable Foreclosure Alternatives (HAFA)
• Provides homeowners with a healthy transition to more affordable housing.
Homeowners sell their home as a “short sale” or transfer the title to the lender through a “deed-in-lieu of foreclosure.”
HAFA offers a more efficient process than a traditional short sale. Participating investors, servicers, and homeowners may be eligible
for incentives.
Hardest Hit Fund (HHF)
• If a homeowner lives in a state that is participating in Treasury’s HHF Program, additional assistance may be available via the state’s Housing Finance Agency.
For the list of HHF states and contact information, visit: https://www.makinghomeaffordable.gov/steps/Pages/step-2-program-hhf.aspx
Options for Homeowners with Additional Hardship
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Name Contact Information
HAMP Solution Center • (866) 939-4469• [email protected]
Fannie Mae • (800) 2Fannie, select option 3• KnowYourOptions.com• [email protected]
Freddie Mac • (800) Freddie, select option 2 • FreddieMac.com
FHA LoansFHA National Servicing Center
• FHA National Servicing Center (877) 622-8525• HUD.gov/offices/hsg/sfh/nsc/nschome.cfm
USDA RHS LoanCentralized Servicing Center
• (800) 414-1226
VA Loans • (877) 827-3702• HomeLoans.va.gov
Resources for Trusted Advisors
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phone to
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