First of all, let us agree that it was a great piece of legislation and promulgated with the best of hope. According to this mediation program, homes in Nevada cannot be foreclosed unless homeowners are offered mediation if there are homes are defaulted for non payment after July 1, 2009. So far, it has not done a full blockage to the rapidly rising foreclosure. Only very short numbers of mediators have been assigned and trained. Of course, we have a full time director of mediation hired and fully functional at this time. Mediation, is still governed under the Obama Plan (HAMP). But mediation, by nature is slow, and cumbersome process. Please read my other article on mediation in this blog. Somehow, it is not bringing full result as was expected.
Much forecast has been made by pundits of all sorts on the housing market. I wish the statistics could have been otherwise. However, the latest trends and data is proving it otherwise. It was few weeks ago Moody report which said that it would take 10 years for the housing market to fully recover. Following is another news item supporting this doom and gloom scenario.
Quite often we get calls from our clients and potential clients about tenancy situations in Nevada and where a home has been foreclosed, and the tenants are seeking a remedy. Here, we are posting this section which clealry spells the Nevada laws. Again, our job is to provide the source directly without giving any legal opinion. Of course, we can provide specific opinions to our clients as well.
July 30, 2009 MORTGAGEE LETTER 2009-23
TO: ALL APPROVED MORTGAGEES
SUBJECT: Making Home Affordable Program:
FHA’s Home Affordable Modification Loss Mitigation Option
On May 20, 2009, the President signed the “Helping Families Save Their Homes Act of 2009.” This new law provides the Federal Housing Administration (FHA) with additional loss mitigation authority to assist FHA mortgagors under the Making Home Affordable Program (MHA). The MHA Program is designed to help homeowners retain their homes and to prevent the destructive impact of foreclosures on families and communities.
One key component of MHA provides homeowners the opportunity to reduce their mortgage payments by the use of a loan modification through the Home Affordable Modification Program. When initially introduced to the public, MHA excluded FHA insured mortgages, stating that FHA would develop its own standalone program. This Mortgagee Letter announces a new FHA Loss Mitigation option, the FHA-Home Affordable Modification Program (FHA-HAMP). FHA-HAMP will provide homeowners in default a greater opportunity to reduce their mortgage payments to a sustainable level. This Mortgagee Letter is effective August 15, 2009.
Basic Program Guidelines
The new FHA-HAMP authority will allow the use of a partial claim up to 30 percent of the unpaid principal balance as of the date of default combined with a loan modification. The objective of FHA-HAMP is to assist FHA mortgagors who are in default to modify their mortgage to an affordable payment. According to Mortgagee Letter 2000-05 and subsequent guidance, disposition options (pre-foreclosure sales and deeds-in lieu of foreclosure) are available immediately upon default, if the cause of the default is incurable, i.e. the borrower has no realistic opportunity to replace the lost income or reduce expenses sufficiently to meet the mortgage obligation.
To confirm if the mortgagor is capable of making the new FHA-HAMP payment, the mortgagor must successfully complete a trial payment plan. The trial payment plan shall be for a three month period and the mortgagor must make each scheduled payment on time. The mortgagor’s monthly payment required during the trial payment plan must be the amount of the future modified mortgage payment. The Mortgagee must service the mortgage during the trial period in the same manner as it would service a mortgage in forbearance. If the mortgagor does not successfully complete the trial payment plan by making the three payments on time, the mortgagor is no longer eligible for FHA-HAMP. Prior to proceeding to foreclosure, the Mortgagee must re-examine and re-evaluate the borrower’s financial condition and confirm that none of FHA’s other Loss Mitigation options could assist the mortgagor.
The attachment to this Mortgage Letter supplements program guidelines for FHA-HAMP, including a requirement that the servicer obtain an executed Hardship Affidavit (available at https://www.hmpadmin.com/portal/docs/mod_docs/hamphardshipaffidavit.pdf) from every mortgagor and co-mortgagor seeking an FHA-HAMP. FHA-HAMP is a permanent addition to HUD’s Loss Mitigation Program as of the date of this Mortgagee Letter.
Debt to Income Ratios
To be eligible under FHA-HAMP, the front end debt to income ratio must be as close as possible, but not less than, 31 percent. This ratio is defined as the total monthly mortgage payment (PITI) for the modified mortgage divided by the mortgagor’s gross monthly income (the “Front End Ratio”). The back end debt to income ratio must not exceed 55 percent and is defined as the total monthly mortgage payment plus all recurring monthly debt divided by the mortgagor’s gross monthly income (the “Back End Ratio”). Please refer to the sections in the Attachment regarding Underwriting – Front End and Back End Debt to Income Ratios.
Calculation of Maximum Partial Claim Amount under FHA-HAMP
The maximum partial claim amount under FHA-HAMP consists of the sum of (i) arrearages, (ii) legal fees and foreclosure costs related to a canceled foreclosure action and (iii) principal reduction. Arrearages that may be included in the partial claim shall not exceed 12 months of PITI. The maximum partial claim amount under FHA-HAMP is 30 percent of the outstanding principal balance as of the date of default. The principal deferment on the modified mortgage is determined by multiplying the outstanding principal balance by 30 percent and then reducing that amount by arrearages advanced to cure the default for up to 12 months PITI, and any foreclosure costs incurred to that point subject to the requirements provided in Mortgagee Letter 2008-21. The principal deferment amount for a specific case shall be limited to such an amount that will bring the mortgagor(s) total monthly mortgage payment to 31 percent of gross monthly income.
Mortgagor had a reduction of income and is delinquent 3 full mortgage payments. The unpaid principal balance on the mortgage on the date of default is $150,000 and the monthly payment is $1,220 (consisting of P&I of $920 and escrows, including MIP, of $300). The financial analysis reveals that the mortgagor’s gross monthly income is $3,500 and the total monthly other recurring debt payments are $800.
In order to fulfill the 31% Front End Ratio requirement, the mortgagor(s) total monthly mortgage payment would have to be reduced to $1,085 ($3,500 x 31%). Therefore, P&I would have to be reduced to $785 ($1,085 total monthly mortgage payment less $300 escrow and MIP). Assuming that the loan modification will have an interest rate of 6% and a P&I of $785, the new mortgage amount would have to be $130,931, resulting in a principal reduction of $19,069 ($150,000 unpaid principal balance less $130,931). In this example, the mortgagor’s Back End ratio is 53.9% ($1,885/$3,500), which satisfies the 55% Back End Ratio limitation.
In this example, the maximum principal deferment is $41,340 (30% of $150,000, less the $3,660 delinquency, or $45,000 – $3,660). However, based on their gross income, mortgagor is eligible only for a principal deferment of $19,069 plus $3,660 arrearages (which would include any foreclosure costs incurred to that point, in accord with Mortgagee Letter 2008-21) for the total Partial Claim of $22,729.
Requirements to Use FHA-HAMP
FHA-HAMP can be utilized only if the mortgagor(s) does not qualify for current loss mitigation home retention options (priority order FHA Special Forbearance, Loan Modification and Partial Claim) under existing guidelines (ML 2008-21, 2003-19, 2002-17, 2000-05). To qualify for the FHA-HAMP program, Mortgagees must evaluate the defaulted mortgage for loss mitigation actions using the aforementioned priority order. According to Mortgagee Letter 2000-05 and subsequent guidance, disposition options (pre-foreclosure sales and deeds-in lieu of foreclosure) are available immediately upon default, if the cause of the default is incurable, i.e. the borrower has no realistic opportunity to replace the lost income or reduce expenses sufficiently to meet the mortgage obligation.
If the mortgagor does not successfully execute the loan modification, the mortgagor is no longer eligible for FHA-HAMP. In such cases, per 24 CFR 203.355, the Mortgagee must re-evaluate the mortgagor’s eligibility for the other appropriate loss mitigation actions prior to commencing or continuing a foreclosure.
Mortgagees that utilize FHA-HAMP are eligible to receive incentive payments. Mortgagees utilizing this initiative will be allowed to first file for a partial claim (to bring the loan current and defer principal where appropriate), followed by a loan modification claim (claim type 32). Under FHA-HAMP, the Mortgagee may receive an incentive fee of up to $1,250. This total includes $500 for the partial claim and $750 for the loan modification. Mortgagees may also claim up to $250 for reimbursement for a title search and/or recording fees.
Partial Claim Filing and Document Delivery
Mortgagees must file a claim for insurance benefits for the partial claim within the 60-day timeframe stated in ML 2003-19 to receive incentive fees for the FHA-HAMP loss mitigation action. Any previous outstanding partial claim(s) must be subordinated and the mortgage company must provide HUD’s Secretary-Held servicing contractor (see ‘Remittance’ below) with a subordination agreement to request subordination.
FHA will monitor Mortgagees for compliance with the terms of this Mortgagee Letter and will take administrative actions, including sanctions and penalties, against all parties for non-compliance.
Please note that all provisions described in the aforementioned existing guidelines, such as Repayment Terms, Option Failure and Disclosures apply also, except as specifically changed under FHA-HAMP.
Mortgagees must forward all required documentation, including subordination requests, and advise all parties to send any payments for the Partial Claims to HUD’s Secretary-Held Assets Servicing Contractor which is currently located at:
C&L Service Corp. / Morris-Griffin Corp.
2488 East 81st Street, Suite 700
Tulsa, Oklahoma 74137
Toll Free Phone: (866) 377-8667 Toll Free Fax: (866) 249-0626
Local: (918) 551-5300 Local Fax: (918) 551-5399
Current information about the Secretary-Held Assets Servicing Contractor is located at:
Information Collection Requirement
The information collection requirements contained in this document have been approved by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned OMB control numbers 2502-0060, 2502-0523, 2502-0429, and 1505-0216. In accordance with the Paperwork Reduction Act, HUD may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection displays a currently valid OMB Control Number.
Any questions regarding this Mortgagee Letter may be directed to HUD’s National Servicing Center (NSC) at 888-297-8685 or email@example.com. Persons with hearing or speech impairments may reach this number via TDD/TTY by calling 1-877-TDD-2HUD (1-877-833-2483).
Assistant Secretary for Housing – Federal Housing Commissioner
Attachment – Guidelines for FHA-HAMP
The Obama Plan despite all its handicaps, is still ia viable and working solutions toward the foreclosure crisis in USA, and particularly, in Nevada. Nevada, as we all know, is the forerunner in this foreclosure crisis. Here, is directly from the HUD and not from a second channel. Of course straight from the horse’s mouth.
Helping Families Save their Homes Act 2009
Summary of S. 896 Provisions
HOPE for Homeowners: The bill amends the HOPE for Homeowners Program, to (a) permit reduction of excessive fee levels, (b) provide greater incentives for mortgage servicers to engage in modifications under the Program, and (c) reduce administrative burdens to loan underwriters by making the requirements more consistent with standard FHA practices. Specifically, the bill would:
• Put the HUD Secretary in charge of running the program, relegating the Program Board’s role to an advisory capacity
• Change the upfront fee from 3% to “up to 3%.”
• Change the annual fee from 1.5% to “up to 1.5%.”
• Require the HUD Secretary to weigh both the financial integrity of the program and the bill’s purposes of foreclosure prevention in setting premiums.
• Change the provision for HUD to receive 50% of appreciation profit sharing to authorize “up to 50%” of such profit sharing; allow HUD to share this with the existing first or subordinate lienholders to induce loan writedowns; provide flexibility to assign any profit sharing rights HUD elects to share; cap profit sharing at up to the appraised value of the property when the existing loan was made.
• Permit payments to servicers of existing mortgage loans on the property and to underwriters of the new FHA loan for each successful refinance.
• Include a number of administrative changes, including:
o requiring conformity to FHA single family procedures and standards as much as possible;
o modifying current debt income affordability test to apply it at the time of the new loan application, instead of March 1st of 2008;
o modifying certification of no intentional default on other debts so that it now applies “to any other substantial debt” within the last five years; and eliminating reference to going to jail because of false statements;
o providing for slightly less prescriptive language regarding collection of income tax returns;
o eliminating extraneous LTV restrictions on use of second lien loans to maintain property; and
o barring borrowers with a net worth of more than $1 million.
• Re-instate authority of HUD, with the concurrence of the Board, to conduct an auction to refinance loans on a wholesale or bulk basis.
• Offset the costs of program changes with a reduction in TARP authority of $1.244 billion.
Servicer Safe Harbor: The bill provides a safe harbor from liability to mortgage servicers issuers, trustees, loan sellers, depositors, and any other person” to the extent the person’s cooperation is required to allow the servicer to engage in loan modifications, as long as the servicer provides a modification consistent with the Administration’s program or it utilizes Hope for Homeowners.
Deposit Insurance: The bill amends the Federal Deposit Insurance Act and the Federal Credit Union Act to enhance the liquidity and stability of insured depository institutions to ensure availability of credit and reduction of foreclosures. Specifically, the bill would:
• Extends through 2013 the temporary increase in deposit insurance coverage for both the FDIC Deposit Insurance Fund and the National Credit Union Administration (NCUA) Share Insurance Fund to $250,000 (the temporary increase is currently scheduled to sunset on December 31, 2009).
• Provides FDIC an increase in borrowing authority to $100 billion, while providing a temporary increase until the end of 2010 to $300 billion. Specifically restricts FDIC from using the $300 billion for funding losses under programs established with Treasury under TARP.
• Provides NCUA an increase in borrowing authority to $6 billion, with a temporary increase to $30 billion.
o Any amounts borrowed must be used only for insurance purposes.
o Neither the FDIC nor the NCUA has ever used this borrowing authority.
o The FDIC borrowing authority amount has not changed since 1991, even though the size of the industry has tripled. The NCUA borrowing authority has not changed since 1972 when it was established, even though the size of the industry has increased from $13.8 billion in 1972 to $813 billion at year-end 2008.
o Any money borrowed must be repaid, with interest, pursuant to a repayment schedule that must be in effect prior to receiving any money, and which is subject to a requirement to consult with and report to Congress.
• Allow the FDIC to charge systemic risk special assessments by rulemaking, on both insured depository institutions and depository institution holding companies. For holding company assessments, the concurrence of the Secretary of the Treasury would be required.
FHA Approval: Contains numerous provisions to better ensure that predatory lending entities and individuals are not allowed to participate in the FHA home mortgage insurance program. Specifically, the bill would:
• Require HUD approval of all parties participating in the FHA single family mortgage origination process.
• Allow HUD to impose a civil money penalty against loan originators who are not HUD-approved and yet participate in FHA mortgage originations.
• Make clear that an applicant is ineligible for approval if the entity or any officer, partner, director, principal, or employee of the entity is: a) suspended or debarred by any Federal agency; b) under indictment for, or has been convicted of, an offense that reflects adversely upon the applicant’s integrity, competence or fitness to meet the responsibilities of an approved mortgagee; c) subject to unresolved findings contained in a HUD or other governmental audit, investigation, or review; d) engaged in business practices that do not conform to generally accepted practices of prudent mortgagees; e) convicted of a felony related to participation in the real estate or mortgage loan industry; or f) in violation of provisions of the S.A.F.E. Mortgage Licensing Act.
• Require that HUD receives notice of the debarment and any change in licensing status of a FHA approved mortgagee.
• Require HUD to expand the existing FHA process of reviewing new applicants for FHA approval for the purpose of identifying those representing a high risk to the Mutual Mortgage Insurance Fund and implement procedures that expand the number of loans reviewed by FHA for lenders approved within the last 12 months, and include a process for random reviews that is based on loan volume by newly approved participants.
• Require FHA approved mortgagees to use their HUD registered company names in all advertizing and to keep copies of all advertisements.
FHA and RHS Foreclosure Prevention
• Expands the authority of the Federal Housing Administration (FHA) and the Rural Housing Service (RHS) to engage in foreclosure prevention in their respective single family loan programs, by allowing for both FHA and RHS the following new tools:
• Partial Claims. Permits partial claims of up to 30%, which will allow reductions in debt service down to levels affordable to the homeowner
• Standard for loss mitigation. Permits loss mitigation tools to kick in for loans that face “imminent default” (ie., not just loans in default)
• Assignment Authority. Gives both FHA and RHS authority to facilitate loan modifications through assignment of loans, to address servicer loss mitigation disincentives relating to having to purchase loans from Ginnie Mae pools
McKinney-Vento Homeless Reauthorization
• 1st major program reauthorization in 20 years
• Authorizes $2.2 billion for the program in FY 2010 and such sums in FY 2011
• Expands the federal definition of “homeless” by counting families who will lose their housing in 14 days (current practice is 7), by adding families with children and unaccompanied youth who have experienced a long term period without living independently and can be expected to do so for an extended period, and adding those fleeing domestic violence or dangerous or life threatening situations
• Expands flexibility to use funds to assist families with children not technically defined as homeless – by permitting local continuums to use up to 10% of their funds for such families, by expanding the proportion of funds going to homeless prevention activities (which can serve such families), and by allowing rural areas much more flexibility to serve such families
• Streamlines McKinney-Vento homeless programs by consolidating the competitive grant program and by using a simplified match requirement
• Additional Funding for HUD programs – HUD Authorizations not in House bill: (a) $10 million each of the next 2 years for advertising to increase public awareness or mortgage scams and counseling assistance, (b) $50 million each of the next 2 years for housing counseling in areas with highest foreclosure rates, (c) $5 million in each of the next 2 years for Fair Housing activities in areas with the highest foreclosure rates.
• Tenants Protections: The bill allows bona fide tenants to remain in their residence, pursuant to their lease, following a foreclosure, except when the successor in interest or subsequent purchaser will occupy the unit as a primary residence – in that case the tenant must receive notice to vacate at least 90 days before the effective date of such notice. A lease or tenancy is bona fide if it is the result of arms-length transaction and if the rent is not substantially less than fair market rent.
• Public-Private Investment Partnerships – Requires that any program to create a private-public investment fund must have conflict of interest rules, and requires funds to report on 10 largest positions in the fund and investors with greater than 10 percent interest in fund, to retain records by fund, to acknowledge fiduciary duty, and to develop ethics rules and screening. Allows the Special Inspector General access to books and records of a fund. Requires Treasury to consult with Special Inspector General on the interaction between the Private-Public Investor Program, the Term-asset Backed Securities Loan Facility, and similar programs and to issue conflicts of interest rules, including concerning the potential for excessive leverage as a result of interactions of program. Also makes additional funds of $15 million available to the Special Inspector General.
The House Manager’s Amendment includes the following key clarifications:
• Neighborhood Stabilization Program (NSP) Refinements – Clarifies that states receiving the minimum allocation of NSP funding, that have otherwise fulfilled the targeting requirements of the program, may distribute any remaining funding to areas with homeowners at risk of foreclosure or in foreclosure. Maintains the statutory purpose of the NSP program, which is the rehabilitation and resale of abandoned and foreclosed properties. And eliminates the requirement that NSP properties be purchased at a discount from the current market appraised value.
• Private-Public Investment Partnerships – The language makes clear that Treasury shall write the conflict of interest rules required by the provision. Clarifies that managers are to provide the Secretary information on any investor that holds an equity interest in a fund of at least 10 percent. Clarifies that Special Inspector General shall prioritize audits or inspections of any program funded in whole or part by the Emergency Economic Stabilization Act of 2008.
• Servicer Safe Harbor – inserts language to exclude actual fraud from the loan modifications and transactions protected by the amendment.
An interesting article has been published in NY Times stating that the expectations are falling with the Obama Loan Modification Plan. It had, in fact, not slowed down the rising trends in foreclosure. Here, is this interesting article.
Las Vegas Review Journal has noted in its edition of 30th October, 2009, that lots of so called foreclosure firms would be out of luck if they don’t renew or carry the new bond set up by the Mortgage and Lending Divisions. The dead line is in fact, October 1, 2009. That is a good news for homeowners of Nevada because lots of these scam artists, loan shark companies would be out of business. I get at least 3 to 5 calls every day in my office about these fradulent companies who are plying their trade without any license and without technical and legal knowledge. Homeowners, please remember, it is your home which you need to protect. Remember, a licensed attorney is always a good option. An attorney can analyze your situatin (it may look simpler) in many different ways and find a better plan for you.
Here is the article.
Mortgage Electronic Registration Systems (MERS) is claimed to be a privately held company that controls a confidential electronic registry designed to track mortgages and the changes in servicing rights and ownership of mortgage loans in the United States. Shareholders and owners of MERS include AIG, Fannie Mae, Freddie Mac, WAMU, CitiMortgage, Countrywide, GMAC, Guaranty Bank, and Merrill Lynch. It is argued that the U.S. government may currently control MERS via its control and ownership of many of these MERS’ shareholders.
MERS serves as the mortgagee of record for lenders, investors and their loan servicers in the county land records. MERS claims its process eliminates the need to file assignments in the county land records which lowers costs for lenders and consumers by reducing county recording revenues from real estate transfers and provides a central source of information and tracking for mortgage loans. MERS helped make mortgage-backed securities possible and helped create the United States housing bubble.
MERS is just an electronic fiction which claims to possess loans papers. Judges are increasingly dismissing them as fake and not a real party in interest.
Here is the link to this interesting phenomenon.