Servicing Guide Revised May 1, 2013

Transcription

1 Servicing Guide Revised May 1, 2013 North Carolina Housing Finance Agency Page 1

2 Servicing Guide Table of Contents Note: The North Carolina Housing Finance Agency s Servicing Guide ( Agency Servicing Guide ) is the controlling document. To the extent that a topic is not addressed in the Agency s Servicing Guide, the Servicer should follow the guidelines set forth in the Fannie Mae Servicing Guide. Any questions should be directed to the Agency for clarification. Section 1: Purchasing and Post-Closing Processes for US Bank 1.1 Purchasing Process 1.2 Post-Closing Process Original Recorded Deed of Trust Original Recorded Second Deed of Trust Assignments (Applies to First Deed of Trust Only) Title Policy Mortgage Insurance Any Other Applicable Documentation Section 2: Remittance Responsibilities (all servicers) 2.1 Servicer s Remittance Responsibilities 2.2 Mortgage Accounting Records 2.3 Acceptable Mortgage Accounting Method 2.4 Establishment of Custodial or Trust Accounts 2.5 Monthly Remittance Report Packages 2.6 Partial Prepayments or Curtailments 2.7 Remittance of Funds 2.8 Wiring Instructions 2.9 Custodial Files Held By Bank of New York 2.10 Penalties for Late Remittances and Reports 2.11 Examination of Servicer s Records Series U/V and Future Bond Issues with the same MBS Structure Section 3: Default Management (all servicers) 3.1 Written Procedures 3.2 Reporting Requirements 3.3 HUD-Approved Housing Counseling Agencies 3.4 Delinquency Resolution Guidelines Collection Procedures A Inbound Call Coverage B Outbound Call Attempts North Carolina Housing Finance Agency Page 2

3 3.4.1.C Delinquency Letters D Late Notices E Application of Mortgage Payments and Assessment of Fees 3.5 Breach Letter Day Letter 3.7 Acceleration Chronic Default Abandonment of Property Non-Monetary Default 3.8 Delinquency Guidelines on New Borrowers 3.9 Foreclosure Prevention Alternatives 3.10 Partial Payments Military Indulgence Temporary Indulgence 3.11 Special Forbearance 3.12 Informal Forbearance Plan 3.13 Modification (Recasting, Extending or Re-amortizing) 3.14 FHA HAMP 3.15 Treasury HAMP 3.16 USDA HAMP 3.17 VA HAMP 3.18 Face-to-Face Interviews 3.19 Reporting Delinquencies to Credit Bureaus 3.20 Property Inspections 3.21 Occupancy 3.22 Foreclosure Recommendation Series U/V and Future Bond Issues with the Same MBS Structure 3.24 Breach of Servicing Agreement Section 4: Foreclosure Management (all servicers) 4.1 Foreclose In The Name of North Carolina Housing Finance Agency 4.2 Initiation of Foreclosure Proceedings 4.3 Effects of Service Member Civil Relief Act 4.4 Effect of Environmental Hazards 4.5 FHA Mortgage Loans 4.6 Conventional and Rural Development Loans 4.7 VA Mortgage Loans 4.8 Reinstatements 4.9 Attorney Fees 4.10 Servicer Interest Penalty 4.11 Foreclosure Monitoring North Carolina Housing Finance Agency Page 3

4 4.12 Servicer-Initiated Temporary Suspension of Proceedings 4.13 Bidding Instructions 4.14 Deficiency Judgments 4.15 Property Maintenance and Management 4.16 Eviction Proceedings 4.17 Hazard Insurance Policies 4.18 Credit Bureau Reporting 4.19 Deed-in-Lieu of Foreclosure 4.20 Reporting to NCHFA During and After Foreclosure 4.21 Claims Settled without Acceptance of the Property 4.22 Property Conveyance 4.23 Compliance with Internal Revenue Service (Form 1099-A) 4.24 Compliance with MERS (Mortgage Electronic Registration System) Series U/V and Future Bond Issues with Same MBS Structure Section 5: Bankrupty Management (all servicers) 5.1 Written Procedures 5.2 Confirming Bankruptcy Information 5.3 Establishing Documentation Files 5.4 Reviewing Bankruptcy Reorganization Plans 5.5 Preparing and Filing the Proof of Claim 5.6 Monitoring Borrower Payments and Crucial Dates 5.7 Delays in the Bankruptcy Process 5.8 Managing Bankruptcy Chapters Chapter Chapter A Reorganization Plan B Servicing After Confirmation of the Plan Chapter A Reorganization Plan B Pre-Petition and Post-Petition Payments 5.9 Special Circumstance Bankruptcies Abusive Filers Individuals with Fractional Interest Cram-Downs of the Mortgage Debt 5.10 Application of Payments during Confirmation Process Application of Payments after the Confirmation Process 5.11 Post-Foreclosure Filings 5.12 Referral of Case to Bankruptcy Attorney 5.13 Bankruptcy Reporting Requirements North Carolina Housing Finance Agency Page 4

5 Series U/V and Future Bond Issues with same MBS Structure Section 6: Real Estate Owned (REO) 6.1 Foreclosure Confirmation 6.2 Insurer Requirements 6.3 Maintenance and Preservation of Property 6.4 Inspections 6.5 Final Claims to Insurers Series U/V and Future Bond Issues with same MBS Structure Section 7: Short Sale Procedures 7.1 Short Sale Analysis 7.2 Insurer Approval 7.3 NCHFA Approval (Conventional and USDA Loans) 7.4 Remittance of Short Sale Funds Series U/V and Future Bond Issues with same MBS Structure Section 8: Servicer Claims to NCHFA 8.1 When to File a Servicer Claim 8.2 REO Properties (Conventional or USDA) 8.3 REO Properties (FHA or VA) 8.4 Short Sales 8.5 Reimbursement of Servicer s Foreclosure Expense Request 8.6 Removal of Loan from Servicer s Trial Balance Section 9: Servicing Subordinate Liens 9.1 New Loan Setup 9.2 Monthly Servicer Subordinate Reconciliation Report 9.3 Payoff Quotes Subordinations 9.4 Wiring Instructions 9.5 Satisfactions North Carolina Housing Finance Agency Page 5

6 Section 10: Assumptions 10.1 Assumption Processing Section 11: Exhibits Exhibit 1: Automated Investor-Delinquency Reporting File Format Exhibit 2: Form SFS-25, Letter of Agreement for Servicer s Custodial Accounts Exhibit 3: Variance Letter from HUD regarding Mortgagee Letter Exhibit 4: Short Sale Transmittal Summary Exhibit 5: Servicer REO Securing Notice Exhibit 6: Relocation Assistance Process Steps Exhibit 7: NCHFA Claims-Foreclosure Expense Reimbursement Request Exhibit 8: NCHFA Payoff calculation worksheet North Carolina Housing Finance Agency Page 6

7 Section 1 Purchasing and Post-Closing Processes for US Bank 1.1 Purchasing Process: Lenders will mail to US Bank the closing package and the compliance file. Within 72 hours of receipt of the closing package, US Bank will mail the closing package to NCHFA. NCHFA will review the closing package. NCHFA will the lender regarding any corrections that need to be made to the closing documents, and it will copy US Bank on the correspondence. Once NCHFA has approved the closing package, it will electronically send a letter to US Bank to indicate NCHFA s approval of the closing package. Once US Bank has cleared its contingencies, it will notify NCHFA to clear the US Bank contingencies within the Homeownership system and approve the loan for purchase. Before the time of purchase, NCHFA will notify US Bank regarding the day it plans to purchase the loans and the bond series it will use to fund the loan. US Bank will provide a funding schedule showing the date on which NCHFA plans to purchase the loan from US Bank. Once US Bank has purchased the loan, it will mail the original note to NCHFA. Based on the data in US Bank s funding schedule and the date and series information which NCHFA provided to US Bank, NCHFA will schedule the loan for purchase. NCHFA will scan the original note upon receipt. Then it will mail the closing package including the original note to Bank of New York Mellon. 1.2 Post-Closing Process US Bank will review the following documents in the post-close process: Original recorded Deed of Trust Original recorded second Deed of Trust (if applicable) Assignments (applies to first Deed of Trust only) North Carolina Housing Finance Agency Page 7

8 Title policy Mortgage insurance Any other applicable documentation US Bank will ensure that the documents comply with the following criteria in its review: Original Recorded Deed of Trust: Dated the same as the Note Grantor/mortgagor includes the obligor(s) listed on the Note (and spouse, if applicable) Must reflect the borrower(s) marital status Beneficiary is the originating lender The amount referred to in Borrower owes Lender the principal sum of is the loan amount written in words and numerically Maturity date should agree with the Note Legal description agrees with the Appraisal or the Warranty Deed and Survey, if available Property address should agree with the Note Item 9(e) should show 60 day (FHA loans only) Mortgagor(s) signature should be the same as the typed name under the signature line. It should also agree with how it is listed and signed on the note. The document should be notarized the same day the borrower signed the Deed of Trust If the residence is a condo, it must have a condo rider attached and made a part of the Deed of Trust If the residence is a PUD, it must have a PUD rider attached and made a part of the Deed of Trust The appropriate box must be checked for attachments All corrections must be initialed by the mortgagor(s). If it is necessary for the borrower to sign with a mark, the signature of two witnesses (with names of witnesses typed under their signatures) will be required If the documents have been signed under a Power of Attorney, a copy of the recorded specific Power of Attorney must be obtained. The Power of Attorney must be recorded prior to the recording of the Deed of Trust and the signatures must agree in execution to the names stated in the Power of Attorney The Deed of Trust securing the Note can only be subject to minor easements, rights of way, and similar exceptions customarily acceptable to lenders of funds secured by residential real property and otherwise acceptable to the Agency. North Carolina Housing Finance Agency Page 8

9 If an Affidavit of Correction is required, the Lender must contact North Carolina Housing Finance Agency for direction. When an Affidavit of Correction is recorded for errors and/or omissions to the Deed of Trust, an endorsement to the Title Policy will be required to add the recording information Original Recorded Second Deed of Trust (if applicable): Dated the same as the Note Grantor/mortgagor includes the obligor(s) on Note and spouse, if applicable Must reflect the borrower(s) marital status Beneficiary is North Carolina Housing Finance Agency Trustee is A. Robert Kucab The amount referred to in Borrower owes Lender the principal sum of is the loan amount written in words and numerically Legal description agrees with the first Deed of Trust Mortgagor(s) signature should be the same as the typed name under the signature line. It should also agree with how it is listed on the front of the Note and Deed of Trust. The document should be notarized on the same day the borrower signed the Deed of Trust Assignments (Applies to First Deed of Trust Only): Non-MERS members to provide a copy of recorded Assignment from Lender to MERS MERS members must register the loan in MERS, use MOM instrument and show MIN# MERS should reflect the following: o Beneficiary: NCHFA o Servicer: US Bank o Custodian: Bank of New York Mellon Title Policy: Date of policy must match the date and time the Deed of Trust is recorded. The date of the policy can be after the recording date as long as the proper verbiage is included Address must match the address on the Note and Deed of Trust Mortgage date must match the date on the Deed of Trust Name of the insured should reflect the Lender s name followed by its successors and/or assigns, as their interest may appear, its successors and /or assigns is included in the policy jacket North Carolina Housing Finance Agency Page 9

10 Name of the borrower must match what is reflected on the Deed of Trust Insured mortgage must include borrower s name and marital status, Lender s name, date of Deed of Trust, date and time Deed of Trust was recorded, book #, page #, name of county in which Deed of Trust was recorded, and loan amount Loan amount must match Note and Deed of Trust Land reference must match the legal description on the Deed of Trust Title Policy must include the following endorsements, where applicable: o Alta 8.1 (Environmental Protection Lien) o Alta 9 (Restrictions, Encroachments and Minerals) o Alta 4 (Condominium Endorsement) o Alta 5 (PUD Endorsement) o Alta 7.1 (Manufactured Home Endorsement) The recording of any/all subordinate liens must be reflected on Schedule B Part II of the policy Mortgage Insurance: Title Policy endorsement(s) for corrections (if applicable). Title Policy must be signed by authorized signatory. Title Policy can only be subject to minor easements, rights of way, and similar exceptions customarily acceptable to lenders of funds secured by residential real property and otherwise acceptable to the Agency. Check for the presence and accuracy of the following insurance certificates, depending on the type of loan: Private Mortgage Insurance Certificate for conventional loans with a loan-tovalue greater than 80% Mortgage Insurance Certificate (MIC) for FHA loans Loan Guaranty Certificate (LGC) for VA loans Loan Note Guarantee (LNG) for USDA loans Provide copies of the MI Certificate to Bank of New York-Mellon Any Other Applicable Documentation: Verify accuracy of recorded Affidavit of Correction, used to correct errors and omissions on the recorded Deed of Trust. Verify accuracy of any other applicable documents. North Carolina Housing Finance Agency Page 10

11 Section 2 Reporting and Remitting 2.1 Servicer s Remittance Responsibilities The accounting responsibility of the Servicer includes the following: The accounting for and remittance to NCHFA of the principal and interest portions of monthly payments and any other sums paid by mortgagors which NCHFA may require to be remitted The accounting for and remittance to Fannie Mae of the principal and interest portions of monthly payments and any other sums paid by mortgagors which Fannie Mae may require to be remitted for the Fannie Mae Certificates in the 1985 Series U/V and future bond issues with the same MBS structure The accounting for and remittance to Ginnie Mae of the principal and interest portions of monthly payments and any other sums paid by mortgagors which Ginnie Mae may require to be remitted for the Ginnie Mae Certificates in the 1985 Series U/V and future bond issues with the same MBS structure The accounting for and administration of escrow accounts or amounts deposited by mortgagors for payment of taxes, assessments, ground rents, hazard insurance premiums, premiums due to federal agencies or private mortgage insurers, and other escrowed items 2.2 Mortgage Accounting Records Permanent mortgage accounting records will be maintained for each mortgage. Each individual mortgage record will indicate NCHFA ownership, the bond issue under which the mortgage was purchased, and the assigned 10-digit NCHFA loan number. While NCHFA does not specify the particular system or forms to be used for mortgage records, the Servicer s mortgage accounting system must be capable of producing for each mortgage an account transcript itemizing in chronological order: North Carolina Housing Finance Agency Page 11

12 The date, amount, and breakdown between principal, interest and escrow of each collection The date to which interest is paid The date, amount, and nature of each disbursement, advance, adjustment, or other transaction affecting the amounts due from or to the mortgagor An indication of whether the loan has been modified from its original terms The system must also be capable of producing the current outstanding principal balance of the mortgage, the current escrow balance, and any escrow advance balances. The system must be capable of accounting for Ginnie Mae and Fannie Mae MBS according to Ginnie Mae and Fannie Mae guidelines, and the Servicer shall comply with Fannie Mae, USDA, and private mortgage insurer ( PMI ) requirements regarding mortgage accounting records for the conventional and USDA loans in the Fannie Mae Certificates. The Servicer shall comply with FHA, VA and Ginnie Mae requirements regarding mortgage accounting records for the FHA and VA loans in the Ginnie Mae Certificates Acceptable Mortgage Accounting Method The amortization method of individual loan accounting, with interest calculated in arrears, must be used on all loans serviced for NCHFA. Under this method, the application of an individual mortgage payment to interest and principal is determined by first calculating the interest portion and applying the balance of the payment as a principal reduction. The interest is calculated using not less than the outstanding principal balance after application of the preceding payment. The interest so computed relates to the period preceding the due date of the installment being applied. All monthly interest calculations shall use a 360-day year all partial monthly interest calculations shall use a 365 day year calculation factors must be carried out six decimal places The Servicer is required to use Fannie Mae s amortization method of individual loan accounting for the Fannie Mae Certificates in the 1985 Series U/V and future bond issues with the same MBS structure The Servicer is required to use Ginnie Mae s amortization method of individual loan accounting for the Ginnie Mae Certificates in the 1985 Series U/V and future bond issues with the same MBS structure North Carolina Housing Finance Agency Page 12

13 2.4 Establishment of Custodial or Trust Accounts The Servicer is required to establish and maintain custodial or trust accounts for each bond resolution. These accounts must be demand deposit accounts and established in a North Carolina state bank, national bank, or savings and loan association, the deposits of which are insured by the Federal Deposit Insurance Corporation, or established in a Federal Reserve Bank. Where a Servicer maintains a branch office which NCHFA determines to be adequately equipped to service mortgages and such branch office collects and accounts separately for payments it receives and reports them directly to NCHFA, a separate custodial account may be established for each such branch office. The titles of such accounts will be as follows: [Servicer], as agent, trustee and/or bailee for the holders of NCHFA Single Family Revenue Bonds (specify Resolution) and/or payments of various mortgagors and as Custodian for The Bank of New York Mellon Trust Company (Principal and Interest) [Servicer], as agent, trustee and/or bailee for the holders of NCHFA Single Family Revenue Bonds (specify Resolution) and/or payments of various mortgagors and as Custodian for The Bank of New York Mellon Trust Company (Escrow Account) The Servicer must prepare and forward to NCHFA the original of the Letter of Agreement for Servicer s Custodial Accounts (Exhibit 2), properly executed by the Servicer and certified by the depository bank. The purpose of the Letter of Agreement is to evidence the establishment of Custodial accounts for the deposit of collections of all sums payable under the mortgages owned by NCHFA, and that all such amounts are payable to NCHFA on demand. In the event of any changes in the name and address of the depository bank, the Servicer must prepare a Letter of Agreement for Servicer s Custodial Accounts and submit it within 15 days to NCHFA. All funds received under the provisions of any NCHFA mortgage loan must be deposited in the segregated trust custodial accounts. The Servicer must maintain all such accounts in conformity with the rules and regulations of the deposit insurer and must maintain detailed records as to the respective interest of each mortgagor and NCHFA in the account(s). If at any time the balance in any custodial account should equal or exceed the insured amount, the Servicer must immediately remit the entire balance to the Trustee with the appropriate breakdown(s). North Carolina Housing Finance Agency Page 13

14 Custodial accounts established for NCHFA must be reconciled monthly within 30 days of the statement cycle cutoff date. The Servicer may establish general ledger accounts for internal control purposes only. For 1985 Series U/V and future bond issues with the same MBS structure, the Servicer must follow the Fannie Mae custodial or trust account requirements for the Fannie Mae Certificates. The Servicer must follow the Ginnie Mae custodial or trust account requirements for the Ginnie Mae Certificates. 2.5 Monthly Remittance Report Packages The Servicer will submit all reports and electronic downloads regarding servicing of any mortgage loan at the time and in the form requested or acceptable to NCHFA. Every report, download and all correspondence regarding a particular mortgage must refer to the NCHFA loan number and the related bond issue. It is the Servicer s responsibility to ensure that all reports and downloads required or requested by NCHFA are prepared accurately and submitted promptly. The download must comply with the requirements set forth in Automated Investor- Delinquency Reporting File Format (Exhibit 1). All monthly reports and downloads must have a cutoff date equal to the last business day of the month. Remittance downloads and reports are due at NCHFA no later than (5) business days after the cutoff date There must be no hand-written adjustments on any computer-generated report without prior written approval from NCHFA Remittance downloads and reports must include MBS loans The download must comply with the requirements set for in Automated Investor-Delinquency Reporting File Format (Exhibit 1) Any manual reports are to be forwarded to: (By Mail) North Carolina Housing Finance Agency Attn: Liliana Cely, Finance Business Group P O Box Raleigh, NC North Carolina Housing Finance Agency Page 14

15 (By Courier) North Carolina Housing Finance Agency Attn: Liliana Cely, Finance Business Group 3508 Bush Street Raleigh, NC Partial Prepayments or Curtailments A mortgagor who is current may make payments to reduce the outstanding principal balance of the mortgage loan in any the following ways: The mortgagor may make a full monthly payment (or a payment in multiples thereof) in advance of the due date to create a cushion against the possibility of missing future payments. The mortgagor may make a partial prepayment (curtailment) in accordance with the Note and Deed of Trust. Once the prepayment has been applied as specified by the mortgagor, the mortgagor may not at a later date have the funds applied in a different manner unless the Servicer obtains the written approval of NCHFA or unless such a practice is permitted by FHA, USDA or VA, if the loan is so insured. Prepaid installments and partial prepayments (curtailments) must be included in the regular monthly remittance 2.7 Remittance of Funds Mortgage Payments, Partial Prepayments and Curtailments The Servicer will remit to Bank of New York Mellon, Trustee for NCHFA, all funds due to NCHFA which are received by the close of business on the last business day of the month All funds remitted must be received within five (5) business days of cutoff. NCHFA requires all monthly remittances unless prior approval has been granted by NCHFA and wired to the Trustee; however, the wire instructions must clearly identify the Servicer, borrower name and the breakdown by bond issue(s) for the total wire amount. A copy of the wire instructions or remittance curtailment amounts per series will be sent to NCHFA monthly North Carolina Housing Finance Agency Page 15

16 Prepayments The Servicer will remit to Bank of New York Mellon, Trustee for NCHFA, prepayments (payoffs and foreclosures) within two business days of receipt. 2.8 Wiring Instructions The Servicer must wire the remittance funds to one of the following accounts listed below BONY 1 ST Liens Only Date: Bank Name: Bank of New York Mellon Bank City/State: Jacksonville, FL Bank Credit Account #: GLA TAS A/C # Credit Bank Routing Number: Credit Account Name: North Carolina Housing Finance Agency Borrower Name: Borrower Loan #: WELLS FARGO 2 nd Liens Only Date: Bank Name: Wells Fargo Bank City/State: Raleigh, NC Bank Credit Account #: Credit Bank Routing Number: Credit Account Name: NC State Treasurer Bank Type: Checking Account REF: NCHFA General Account Stif 3 Borrower Name: Borrower Loan #: North Carolina Housing Finance Agency Page 16

17 2.9 Custodial Files Held By Bank of New York Mellon When a mortgage loan has been paid in full, the Servicer must immediately submit a request to Bank of New York Mellon to release the custodial loan file. The Servicer must ensure compliance with NC State Statute to record a satisfaction with the appropriate Register of Deeds office within 30 days of receiving full payment. Bank of New York Mellon website to request the custodial file Penalties for Late Remittances and Reports The penalties are set forth in the servicing contract Examination of Servicer s Records The Servicer will permit representatives of NCHFA to examine during regular business hours the Servicer s records or accounts pertaining to the loan documents and to examine the Servicer s corporate records relating to its capacity and ability to perform its duties hereunder. The Servicer will lend its original records or shall furnish copies at its own expense Series U/V and Future Bond Issues with the Same MBS Structure The Servicer must follow the custodial or trust account, prepayment and remittance requirements for the Fannie Mae and Ginnie Mae Certificates. North Carolina Housing Finance Agency Page 17

18 Section 3 Default Management 3.1 Written Procedures To ensure that its staff is knowledgeable in all aspects of mortgage loan collections and servicing, the Servicer must have fully documented written procedures in place and must also have measures to determine that those procedures have been implemented. The format may vary but the Servicer must address, based on loan type, FHA, USDA, VA, Fannie Mae, Ginnie Mae, and MI requirements with regard to all phases of servicing mortgage loans. For uninsured loans, follow NCHFA s Servicing Guide for matters regarding collections, foreclosure, bankruptcy and REO. For all loan types, follow NCHFA s Servicing Guide for handling Remittances. Servicer s procedures must include a foreclosure management review as part of their process to ensure all investor and insurer loss mitigation requirements were met. 3.2 Reporting Requirements NCHFA requires a monthly delinquency report which is to be received by the fifth (5 th ) business day of the month. The report should contain the following information: Servicer loan number NCHFA loan number Loan type Borrower name Property address Current principal balance Next payment due date Loan status (i.e., Repayment Plan, Special Forbearance Plan, Trial Modification, etc.) Plan successfully completed date Foreclosure scheduled sale date North Carolina Housing Finance Agency Page 18

19 NCHFA requires a quarterly Mortgage Insurance report which is to be received by the fifth (5 th ) business day of the month. The report should contain the following information: Servicer loan number NCHFA loan number Borrower name Loan Type Description ( Conv with PMI, Conv without PMI, etc) MI Payee Original principal Current principal balance Next payment due date MI Due Date MI Amount Due LTV% MI Cancel Date The report should provide a summary of each Loan Type Description and MI Payee then grouped based on the LTV being below or above 80%. The Servicer must comply with FHA, USDA, VA, Fannie Mae, Ginnie Mae, and MI requirements reporting requirements for delinquent loans. 3.3 HUD-Approved Housing Counseling Agencies In compliance with FHA regulations, mortgagees must notify all eligible delinquent borrowers of the availability of home ownership counseling provided by mortgagees or non-profit organizations approved by HUD. This provision applies to all mortgage loans on residential properties in the Servicer s portfolio, whether FHA, USDA, VA or Conventional. The list of HUD- Approved Housing Counseling Agencies for the State of North Carolina should be sent to all delinquent borrowers as soon as delinquent servicing begins. The list of North Carolina HUD approved counselors can be located on NCHFA website North Carolina Housing Finance Agency Page 19

20 3.4 Delinquency Resolution Guidelines The Servicer should treat each mortgage loan as an individual case, based upon the Servicer s knowledge of the borrower, the location and type of property, and the extent of the delinquency Collection Procedures The Servicer must employ collection and foreclosure prevention strategies that are designed to meet the goal of bringing delinquent mortgage loans current in as short a time as possible. The Servicer must document all collection efforts in its permanent mortgage loan files. It is particularly important that the Servicer have procedures to immediately address a one payment delinquency to prevent it from becoming more serious. An early determination of the reason for the delinquency gives the Servicer and the borrower time to arrange an acceptable method for curing the delinquency. If an agreement cannot be reached, the Servicer must work with the borrower to determine the appropriate foreclosure prevention alternative A Inbound Call Coverage Servicers must have a written policy that is sufficient to address inbound call coverage for customer service, collection, and foreclosure prevention departments. The foreclosure prevention staff must be available during inbound and outbound collection activity unless collection staff is also well versed in foreclosure prevention workout options. Servicers are expected to respond to messages left by the borrower within one (1) business day. North Carolina Housing Finance Agency Page 20

21 3.4.1.B Outbound Call Attempts Phone calls are inexpensive and are highly effective when used properly. NCHFA suggests that they be used as the principal form of contact with a delinquent borrower in order to effectuate payment on a delinquent or defaulted account or to solicit foreclosure prevention alternatives. When talking to the borrower, the Servicer must emphasize the importance of making payments on or prior to their due dates. If the borrower is in a position to bring the account current, the Servicer must make arrangements to collect payments on a certain date. If the borrower is not in a position to bring the account current, the Servicer must discuss the types of foreclosure prevention alternatives that are available. Specifically, a Servicer must vary the days of the week and time of day of calls to an individual borrower to effectuate adequate outreach. Servicers should follow established guidelines below: Beginning on the 16 th day of delinquency and ongoing through the foreclosure sale, continue calling and when possible, attempts until: Both a right party contact has been made and a promise to pay or payment is received A reasonable resolution has been negotiated, subject to the requirements of the Servicer Guide and applicable laws Case is removed from the calling queue due to justifiable reasons based on a response from the borrower Contact is established with a minimum of 2 calls per week Servicer is responsible to conduct solicitation and workout follow up along the following guidelines: When any foreclosure prevention solicitation is required, the Servicer must attempt no fewer than 3 phone calls to the borrowers within 5 15 days of sending a solicitation mailing and no response On day 15, follow up correspondence from the Servicer must be sent to attempt right party contact for the intent of qualifying the borrower for a foreclosure prevention solution. Following this, the Servicer is then required to attempt no fewer than 3 phone calls between the 15 th and 30 th day after the initial solicitation North Carolina Housing Finance Agency Page 21

22 During foreclosure prevention review process, the Servicer must continue to contact the borrower to follow up on either missing information or provide a status update weekly during the foreclosure prevention review process. After an offer has been sent to the borrower, the Servicer must follow up with the borrower with a minimum of 2 calls per week and, if necessary, a reminder letter after the offer has been sent, until either the required payment and/or other documentation has been received. If there is no response after the expiration of the offer or any other imposed deadline, the Servicer should document calls made, letters sent and then move forward with other foreclosure alternatives. In situations where an alternative has been approved and payments have not been made in accordance with the agreement, the Servicer must contact the borrower 3 5 business days after payment due date C Delinquency Letters In the early stages of delinquency, a Servicer must contact the borrower to determine their commitment and capacity to cure the delinquency. In order to better evaluate whether some special relief or foreclosure prevention alternative is appropriate, a Servicer must send a foreclosure prevention solicitation letter to the borrower between the 35 th and 45 th day of delinquency. Elements of the letter should include available foreclosure prevention alternatives pertaining to the particular loan type. Servicer may determine the content and format of its solicitation letter, as long as the letter includes the following key points: A statement that the borrower is in default under the terms of the mortgage loan, acknowledging they may be experiencing temporary or permanent financial problems that led to the default An expression of concern indicating that the Servicer wants to work with the borrower to find a mutually agreeable way to resolve the delinquency and avoid foreclosure A summary of the other options that may be available to help the borrower cure the delinquency, with emphasis on how these options can be tailored to fit the borrowers individual circumstances (whether they are permanent or temporary in nature) and a caution that not all of the options are available to everyone. This summary can be a part of the letter or a separate brochure, pamphlet, flyer, etc. North Carolina Housing Finance Agency Page 22

23 A request for basic information about the borrower s circumstances (including preliminary financial information) to help the Servicer determine which options appear to be most appropriate for the borrower. The type of information needed may be listed in the letter or included in any summary of the Servicer s foreclosure prevention options A toll-free telephone number the borrower can call to discuss their situation or obtain more information about the types of relief or foreclosure prevention alternatives that are available A reminder that the borrower is obligated to make all future payments as they become due even while the Servicer is evaluating the types of assistance that may be available, plus a caution that the Servicer cannot guarantee the borrower will receive any (or particular type of) assistance Appropriate disclosure language related to the Servicer s role as a debt collector is required D. Late Notices There are two types of late notices that may be used a payment reminder notice and a first foreclosure prevention solicitation. For most first-lien mortgage loans, the Servicer must send the borrower a payment reminder notice for any payment that has not been received by the 16 th day after it is due. This notice must address the borrower, state a desire to work with the borrower to preserve homeownership, and state the amount of late charges that are due E. Application of Mortgage Payments and Assessment of Fees Full mortgage payments consist of principal and interest payable on the Note, along with the escrow amount The Servicer must apply in the following order, in accordance with the amortization schedule, all payments received for each NCHFA mortgage loan first to interest, then to principal, then to escrow and finally to any late charges/fees due North Carolina Housing Finance Agency Page 23

24 All partial payments must be handled in accordance with FHA, USDA, VA, Fannie Mae, Ginnie Mae, MI requirements and applicable state laws. For uninsured delinquent loans where an agreement has been made, funds should be applied to Unapplied Funds until sufficient funds to make full payments are received. On delinquent loans where contact has not been made, acceptance of partial payments should be analyzed. Consideration should be given to returning the funds to the borrower with a letter advising the reason and providing the total amount due The Servicer must maintain accurate records of all mortgage payments, expenditures for taxes, assessments, mortgage insurance premiums and hazard insurance premiums The Servicer must comply with the State of North Carolina H.B assessment of fees, processing of payments and publication of statements. The Servicer is required to credit mortgage payments within one (1) business day of receipt. The Servicer must notify the borrower within 10 days of any payments not being credited to their account. The Servicer must send the borrower a statement regarding the fee assessment within 30 days and assess fees to the borrower s account within 45 days of being incurred The Servicer assumes full responsibility for administering the borrower s escrow account. The monthly deposits required to ensure funds will be available to pay escrow items as they come due are to be estimated by the Servicer. 3.5 Breach Letter The Breach Letter should be sent to the current owner(s) of the property who signed the Note and Deed of Trust between the 42 nd and 75 th day of delinquency depending on loan type. If the original loan has been assumed and release of liability has not been obtained, copies of the Breach Letter should go to each borrower who signed the Note and Deed of Trust and to the person(s) who assumed the loan. If the original borrower s address is unknown, attempted notification can be accomplished by mailing to the property address. In a divorce situation where one spouse has deeded their interest to the other spouse, the Breach Letter should be sent to each spouse if both signed the Note and Deed of Trust. This, of course, assumes there was no release of liability. The Breach Letter should clearly explain the following: North Carolina Housing Finance Agency Page 24

25 The exact nature of the breach (for example, a default in payment) What action is required to cure the breach The date by which breach must be cured Approximate date foreclosure will begin if breach is not cured by specified date The Breach Letter must comply with Federal and State regulations and FHA, USDA, VA, Fannie Mae, Ginnie Mae, and MI regulations, if applicable. All FHA, NCHFA, USDA, VA, and MI requirements must be followed to protect insurance/guaranty Day Letter The Servicer must give a borrower at least 45 days notice prior to initiating a foreclosure proceeding per HB In addition to informing the borrower of the Servicer s intention to foreclose, the notice must also inform the borrower of the following: Itemization of past due amounts causing the loan to be in default and any other charges that must be paid in order to bring the loan current A statement that the borrower may have options available other than foreclosure The borrower may discuss the available options with the mortgage lender, the mortgage Servicer or a counselor approved by HUD The Servicer must provide the address, telephone number and contact information for the Servicer The Servicer must provide the address, telephone number and contact information for one or more HUD approved counseling agencies located in North Carolina The Servicer must provide the address, telephone number and contact information for the State Home Foreclosure Prevention Project (SHFPP) of the North Carolina Housing Finance Agency. Homeowners can contact the State Foreclosure Prevention Project at NC Housing Finance Agency State Home Foreclosure Prevention Project 3508 Bush Street Raleigh NC North Carolina Housing Finance Agency Page 25

26 The Servicer must register the loan with Office of the Administrator of Courts through the SHFPP database within 3 days of mailing the 45 day letter. 3.7 Acceleration Chronic Default When a mortgage is chronically delinquent and the Servicer has exhausted all reasonable efforts and/or the terms of the FHA, USDA, VA, Fannie Mae, Ginnie Mae, and MI requirements have been met, the Servicer should recommend acceleration in accordance with the terms of the Deed of Trust Abandonment of Property In all cases when the property has been abandoned, whether the loan is in default or not, the Servicer should immediately comply with the requirements of FHA, USDA, VA, Fannie Mae, Ginnie Mae, and MI requirements. Notice of Intent to Foreclose should be submitted to the appropriate insurer or guarantor. In all cases, the Servicer should attempt to locate the borrower and ascertain the reasons for abandonment. The Servicer should take proper action as is necessary for the protection of the mortgaged property to avoid waste, damage and vandalism. It is the responsibility of the Servicer to maintain adequate Mortgagee-Interest-Only Insurance coverage on vacant and abandoned properties Non-Monetary Default The Servicer must immediately inform NCHFA, in writing, whenever it suspects, knows, or becomes aware of mortgage fraud, improper assumption (including unauthorized transfer of deed) or violation of the terms of the mortgage. The Servicer must give the individual case specifics and request advisement from NCHFA. Upon NCHFA s positive determination of borrower non-monetary default and upon written instructions to the Servicer, the Servicer will institute foreclosure proceedings. NCHFA must be informed immediately in the event a borrower initiates legal proceedings in connection with a foreclosure or other servicing related matter. North Carolina Housing Finance Agency Page 26

27 3.8 Delinquency Guidelines on New Borrowers Particular attention should be paid to the promptness with which payments are received from new borrowers. The Servicer must impress upon the borrower the need to make all payments promptly on or before the due date. The reasons for delinquency by a new borrower vary and may include a borrower s misunderstanding of payment requirements. The Servicer should make personal contact with a new borrower on the 15 th day of delinquency to determine the reason for default. 3.9 Foreclosure Prevention Alternatives As permitted by FHA, USDA, VA, Fannie Mae, Ginnie Mae, and MI, the Servicer may make provisions for several foreclosure prevention alternatives to cure delinquencies. Foreclosure alternatives should not be granted unless there is a reasonable expectation that it will restore the mortgage to a current status. Efforts should be made to obtain financial information, to fully explain the nature of the alternative and the borrower s responsibility under the alternative being proposed, to determine the borrower s sincerity regarding the curing of the delinquency, and to obtain the borrower s signature on any formal agreement. In such cases, the Servicer should ensure that the borrower has a complete understanding of the arrangements and the consequences of not meeting the arrangement. It is the responsibility of the Servicer to be familiar with the requirements of FHA, USDA, VA, Fannie Mae, Ginnie Mae, and MI relative to the granting of a foreclosure alternative to qualifying borrowers. Servicers should also be aware of other available assistance resources, such as governmental or private bodies that may provide assistance to borrowers. NCHFA is generally willing to accept any agreement for temporary indulgence, liquidating plan, etc., that the Servicer recommends and that does not jeopardize the priority of the NCHFA lien by reason of the rights of any subordinate lien holder and provided that there is no reduction in the amount of any claim against the insurer or guarantor in the event of foreclosure Partial Payments At all times the Servicer must comply with FHA, USDA, VA, Fannie Mae, Ginnie Mae, and MI guidelines pertaining to accepting partial payments. For uninsured loans, the following steps should be taken: North Carolina Housing Finance Agency Page 27

28 When a partial payment (i.e., payment that is less than the total amount due) is received, the Servicer shall immediately contact the borrower to determine why the full amount was not sent If, in the Servicer s opinion, the borrower has proper regard for the mortgage obligation and is conscientiously trying to meet that obligation, partial payments should be accepted. However, this is subject to the limitation further explained in this section. Such payments will be held as unapplied funds until a full monthly installment of principal, interest and escrow is available for application, provided that the remaining amount owed is expected to be paid in the immediate future based on conversations with the borrower However, should the borrower indicate that the full payment cannot be paid during that time; the Servicer should evaluate the circumstances and determine whether some foreclosure prevention alternative might be used to bring the borrower s account current. The Servicer is not permitted to accept partial payments on a continuing basis, unless formal alternatives are granted. Acceptance of such payments should be judiciously exercised only when it appears that such action will assist in curing a delinquency. Servicers are not expected to accept partial payments from borrowers who are habitual delinquents or who have a history of remitting NSF checks. In these situations, the partial payments should be returned to the borrower with a letter of explanation within applicable state law regarding returning payments Military Indulgence When the borrower is in military service, they may be entitled to benefits under the Service Members Civil Relief Act, as amended. The Servicer should be familiar with, and act in accordance with, the requirements of the Act and other pertinent requirements. NCHFA must be notified immediately of any changes to the interest rate as the result of the requirements under SCRA. The Servicer should attempt to contact the service member annually during the period of active military service to confirm active duty status. Once the service member s active duty period ends, the Servicer will need to notify NCHFA to change its records to reflect the original mortgage interest rate Temporary Indulgence Temporary indulgence, also known as leniency or informal forbearance, is a thirty (30) day period of leniency, which occurs after the 30 th day and prior to the 120 th day of North Carolina Housing Finance Agency Page 28

29 delinquency. This period allows a borrower additional time to cure a delinquency, either through full reinstatement or satisfaction of the mortgage, or by making formal arrangements to liquidate the delinquency through indulgence when it is anticipated that such action will culminate in payment of the total arrearage in a short period of time. Some instances where temporary indulgence should be considered are the following: Pending sale or assumption Insurance settlement being negotiated Assistance through a social agency is forthcoming Additional time is needed to formalize a written agreement 3.11 Special Forbearance At all times the Servicer must comply with FHA, USDA, VA, Fannie Mae, Ginnie Mae, and MI guidelines pertaining to accepting Special Forbearance. Under Special Forbearance, the Servicer can agree to reduce or suspend the borrower s monthly payments for a specified period. After that, the borrower must agree to resume their regular monthly payments and to pay additional money toward the delinquency at scheduled intervals. Special forbearance should be considered when the default is the result of the following: The borrower s death or the death of a member who made a significant contribution towards the monthly payment Illness or some natural disaster that the borrower was not insured against A substantial reduction in income that the borrower could not prevent Some other unusual circumstance that warrants the use of a relief provision and is well documented Special Forbearance Agreements must always be in writing and signed by the borrower. The Agreement should clearly set out the period of reduced or suspended payments, the schedule for making additional payments when the borrower resumes regular monthly payments, and the date on which the forbearance will end. The agreement should clearly state the consequences if the borrower fails to make the agreed monthly payment. For uninsured loans, approval must be obtained from NCHFA if the term of Special Forbearance will exceed 12 months. Servicer must have procedures in place to maintain follow up on payments not received. North Carolina Housing Finance Agency Page 29

30 3.12 Informal Forbearance Plan Under an Informal Forbearance Plan, the borrower must immediately make payments in addition to regular monthly payments to cure the delinquency. Servicers should consider a Repayment Plan when the delinquency resulted from a temporary hardship that no longer appears to be a problem. When the delinquency involves fewer than three (3) monthly payments, forbearance plans may be verbal agreements however, the Servicer must document the agreement in its servicing system. Formal written agreements are required if the delinquency is greater than three months. Each agreement should clearly state the amount and due date of each additional payment, and the date by which the total delinquency must be cured. The agreement should clearly state the consequences if the borrower fails to make the agreed monthly payment. Informal Forbearance Plans may require the following: Monthly payments that are multiples of the regular installment Regular monthly payments one month and multiple payments the next Payments to be made more often than monthly Any other variation in the timing or amount of the payment that will cure the delinquency in the shortest possible time Formal Repayment Plan At all times the Servicer must comply with FHA, USDA, VA, Fannie Mae, Ginnie Mae, and MI guidelines pertaining to accepting a formal repayment plan. A Repayment Plan should include the regular monthly payment plus additional amounts that will bring the loan current within 18 months. The Servicer should consider a Repayment Plan when the delinquency resulted from a temporary hardship that no longer appears to be a problem. The agreement must be signed by the borrower, returned and placed with the permanent mortgage file. North Carolina Housing Finance Agency Page 30