HAFA Servicer Training 1

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1 Home Affordable Foreclosure Alternatives (HAFA) Training for Servicers Agenda HAFA Eligibility Criteria HAFA Policy HAFA Documentation Protections Against Unnecessary Foreclosure Resources What Is HAFA? Home Affordable Foreclosure Alternatives (HAFA) Provide borrowers with a healthy transition to more affordable housing Borrowers sell their home as a short sale or transfer the title to the lender through a deed in lieu of foreclosure (DIL) HAFA offers a more efficient process than a traditional short sale Participating investors, servicers, and borrowers may be eligible for incentives HAFA Servicer Training

2 HAFA Policy Highlights Eligibility criteria for homeowners and properties includes second homes, vacant properties, and investor properties; Allows displaced renters to receive relocation incentives; Optional rather than mandatory dt use of certain ti HAFA documents; Short sale terms may be pre approved; Increased investor reimbursement amounts for payments made for subordinate lien releases; Established guidelines for determining a pre approved hardship. What are the goals of HAFA? Provide assistance to borrowers who need to transition to more affordable housing: Opportunities for release of subordinate liens and personal liability Financial incentives for borrowers, investors and servicers Standardize & streamline the short sale process to address issues such as disjointed communications and lack of follow up by providing: Specified response times and timeframes Upfront disclosure of short sale terms and conditions Agenda HAFA Eligibility Criteria HAFA Policy HAFA Documentation Protections Against Unnecessary Foreclosure Resources HAFA Servicer Training

3 HAFA Eligibility Criteria Existing Mortgage Property Borrower The mortgage loan must be a first lien that was originated on or before January, 009. The mortgage loan must be delinquent or default must be reasonably foreseeable. UPB of the mortgage loan, prior to capitalization, must be less than or equal to: o $9,0 for a one unit property; o $9,00 for a two unit property; p o $,9,0 for a three unit property; o $,0,00 for a four unit property. The property securing the mortgage must not be condemned. The mortgage loan is secured by a one to four unit property. The borrower must be able to document a financial hardship. The borrower must meet deadlines of December, 0, for submission of a request (phone, mail, fax or ) for consideration for short sale or deedin lieu, or approval of an executed sales contract, and September 0, 0 for transaction closing. The borrower must be a natural person. Agenda HAFA Eligibility Criteria HAFA Policy HAFA Documentation Protections Against Unnecessary Foreclosure Resources 8 HAFA Policy The HAFA Policy describes the basis by which borrowers will be considered for HAFA. Additional eligibility requirements Monthly payment requirements Documentation requirements Allowable transaction costs Information on how Minimum Net will be determined Establishing property value and reevaluation criteria Payments to subordinate liens Ability to complete a deed for lease or sale to non profit Note: Deed for Lease can be done with stated purpose that property will be rented or resold to borrower 9 HAFA Servicer Training

4 HAFA Policy Each servicer must complete a HAFA matrix that identifies unique HAFA eligibility criteria and program rules. The matrix should also include: HAFA Matrix Processfor re evaluation e ationof property value Requirements for receipt of relocation assistance Note: The servicer must provide the web address where the matrix is located to the Program Administrator to be posted on MakingHomeAffordable.gov. 0 Agenda HAFA Eligibility Criteria HAFA Policy HAFA Documentation Protections Against Unnecessary Foreclosure Resources HAFA Documentation Documentation Guidelines Servicers are no longer required to use the following documents: Short Sale Agreement, and Alternative Request for Approval of Short Sale. Servicers may use the following forms to document HAFA transactions:: Short Sale Notice o Servicer s terms for approving a Short Sale Deed in Lieu (DIL) Agreement Acknowledgement of Request for Short Sale (ARSS) o Servicer acknowledges receipt of an executed sales contract from the borrower All documents used must reflect the date of issuance from the servicer. Note: If servicers choose not to use the MHA provided forms (Short Sale Notice, DIL, and ARSS), they must use written communications that are substantially similar in content. HAFA Servicer Training

5 HAFA Documentation Documentation Guidelines cont. Prior to closing a transaction, servicers are required to obtain a signed: HAFA Affidavit: representations from the borrower and purchaser regarding the arm s length nature of the transaction and property occupancy and acknowledgement of certain limitations on future resale of the property; and, depending on investor requirements, either Hardship Affidavit; or Request for Mortgage Assistance (RMA) Note: Unless a borrower or co borrower is deceased or divorced, all parties who signed the original loan documents, or their authorized representatives, must execute the Hardship Affidavit/RMA and HAFA Affidavit. Agenda HAFA Eligibility Criteria HAFA Policy HAFA Documentation Protections Against Unnecessary Foreclosure Resources Protections Against Unnecessary Foreclosure Servicers must work to protect borrowers from unnecessary foreclosure All potentially eligible borrowers must be considered for HAFA before: The servicer refers the loan to foreclosure A foreclosure sale is conducted HAFA Servicer Training

6 Protections Against Unnecessary Foreclosure Foreclosure sales may not be completed: While determining the borrower s eligibility and qualification for HAFA Until a date that is business days after the date the servicer sends the notice that a HAFA short sale or DIL is not available While the terms of a pre approved HAFA short sale are effective Pending transfer of property ownership based on an approved sales contract Pending transfer of property ownership via a DIL by the date specified by the servicer in the DIL Agreement, or other notification or agreement Until the servicer has resolved an Escalated Case Agenda HAFA Eligibility Criteria HAFA Policy HAFA Documentation Protections Against Unnecessary Foreclosure Resources Borrower Solicitation A borrower may not be solicited for HAFA until: Borrower has been evaluated for HAMP; OR Borrower has declined HAMP consideration. Borrowers eligible for HAMP should be considered for other loan modification programs offered by the servicer prior to being evaluated for HAFA if: Borrower is not offered a TPP; Borrower does not successfully complete a TPP; Borrower defaults on a permanent HAMP modification; or Borrower declines the offer of HAMP consideration. Note: There is no occupancy requirement and no limit on the number of properties owned by a borrower that may be approved under HAFA. 8 HAFA Servicer Training

7 Borrower Solicitation If CFPB Regulations Apply Under CFPB Regulations, a servicer may be required to consider a borrower for HAFA while considering a borrower for HAMP or other home retention options. Unless the borrower has requested a non home retention option, servicers must determine that the borrower does not qualify for HAMP or any other home retention options prior to offering the borrower HAFA. Any determination regarding HAFA made by the servicer must be communicated to the borrower in accordance with the timelines for evaluating a Loss Mitigation Application. 9 HAFA Consideration Possible HAMP eligible borrowers must be considered for HAFA within 0 calendar days of the date the borrower: Does not qualify for a TPP (HAMP Tier or HAMP Tier ) Does not successfully complete a TPP and is not being evaluated for another modification Loses good standing on a HAMP permanent modification as long as the borrower is not being evaluated for another modification Note: Changes to this policy are being updated based on the guidance on a complete loss mitigation application issued in SD Pre Approved Short Sale Previously submitted Hardship Affidavit or RMA Within 0 calendar days of request, the servicer must consider the borrower for HAFA and provide written: Approval for HAFA and the terms of a pre approved HAFA short sale or DIL if the borrower is determined eligible; Notification of other options the borrower may be eligible for, if any, if the borrower is determined ineligible for a HAFA short sale or DIL; or Non approval of any short sale or DIL. HAFA Servicer Training

8 Pre Approved Short Sale Pre Determined Hardship; No previously submitted Hardship Affidavit or RMA Within 0 calendar days of request, the servicer must consider the borrower for HAFA and provide written: Approval for HAFA and the terms of a pre approved HAFA short sale or DIL if the borrower is determined eligible; Notification of other options the borrower may be eligible for, if any, if the borrower is determined ineligible for a pre approved HAFA short sale or DIL; or Non approval of any short sale or DIL. Note: A borrower has a Pre Determined Hardship if the borrower is delinquent on his or her mortgage by 90 days or more, and has a FICO score of below 0. Pre Approved Short Sale No previously submitted Hardship Affidavit or RMA and Pre Determined Hardship Within business days of request, the servicer must send written confirmation to the borrower which should include the following: Copy of the Hardship Affidavit RMA, if applicable Description of servicer s Bankruptcy Considerations Borrowers in bankruptcy must be considered for HAFA if requested. Servicers are not required to proactively solicit borrowers in bankruptcy. Time allowances are acceptable for bankruptcy related delays. HAFA Servicer Training 8

9 Notice for Ineligible Borrowers When a HAFA short sale or DIL cannot be offered, the servicer must communicate such decision in writing to the borrower that: States the decision made and the reason why a short sale or DIL under HAFA cannot be offered. Provides a toll free number that the borrower may call to discuss the decision. Includes the borrower s eligibility for a proprietary short sale or DIL alternative. Includes the Homeowner s HOPE Hotline Number ( HOPE) with an explanation that the borrower can seek assistance at no charge from HUD approved housing counselors. Includes any information, disclosures or notices required by the borrower s mortgage documents and applicable federal, state and local law. Note: A foreclosure sale may not be conducted until business days after sending a notice stating that the borrower was determined to be ineligible for HAFA. Property Valuation and Assessment Assess current value of property Perform financial analysis of anticipated recovery Determine availability of a clear title Determine Minimum Net Determine the minimum acceptable net proceeds amount, which: Is expressed as either a fixed dollar amount, a percentage of the current market value of the property, or a percentage of the list price as approved by the servicer Must be at least equal to or less than the list price, minus the sum of allowable costs that may be dd deducted dfrom gross sale proceeds (or acceptable sale proceeds) Must include allowable transaction costs by considering reasonable and customary real estate transaction costs for the community in which the property is located HAFA Servicer Training 9

10 Determine Minimum Net After sending the Short Sale Notice or other pre approval terms for a HAFA short sale, the Minimum Net requirement may not be increased until the initial date for expiration of the pre approved HAFA short sale terms is reached. The servicer must: Determine the allowable transaction costs the investor is willing to pay from the sale proceeds Apply its HAFA Policy to outline the basis by which the minimum acceptable net proceeds will be determined 8 Arm s Length Transaction The short sale must be an arm s length transaction with the net proceeds being applied to a discounted mortgage payoff acceptable to the servicer. The servicer may approve optional sale to non profit organization with the purpose of rental or resale to the borrower, as long as all other HAFA requirements are met. 9 Other Considerations Mortgage Insurance Approval The servicer or investor must obtain mortgage insurance approval for loans that have mortgage insurance coverage for HAFA foreclosure alternatives. Payment Amounts The servicer must identify in the Short Sale Notice, DIL Agreement or any proprietary form DIL notice or agreement, the amount of the monthly mortgage payment that the borrower is required to make, if applicable. 0 HAFA Servicer Training 0

11 Short Sale Notice Short Sale Notice If the servicer determines a short sale is in the best interest of the investor, the servicer will prepare and send a Short Sale Notice to the borrower. Servicers are encouraged, but not required, to use the Short Sale Notice found on HMPadmin.com. If the servicer does not use the Treasury form posted on HMPadmin.com, the servicer s Short Sale Notice should include specific information as detailed in the guidance within the Handbook. Note: The borrower is NOT required to sign or return the Short Sale Notice. Short Sale Notice The servicer s Short Sale Notice should include the following: Fixed termination date not less than 0 calendar days from the effective date of the Short Sale Notice List price approved by the servicer, or acceptable sales proceeds expressed as a net amount that the servicer will accept from the transaction Notice that the servicer will allow a portion of gross sale proceeds to be paid to subordinate lien holders in exchange for release liens Notice that upon successful closing of a short sale, the servicer will record a mortgage lien release and the borrower will be released from all liability for repayment Respond to Offer Pre approved Short Sale Notice Within three business days of receipt of an executed sales offer, the borrower or the borrower s listing agent must send the executed purchase offer and other documents the servicer requires being delivered to the servicer. Net sale proceeds exceed Minimum Net If the net sale proceeds from a pre approved HAFA short sale equal or exceed the Minimum Net established by the servicer and the offer meets all other sales term and conditions of the pre approval, the servicer must notify the borrower of its approval of the proposed sale within 0 business days of receipt of the Offer Documents. HAFA Servicer Training

12 Respond to Offer Pre approved Short Sale Notice Net sale proceeds are less than Minimum Net If the net sale proceeds from a pre approved HAFA short sale are less than the Minimum Net established by the servicer or the offer fails to meet any other sales term or conditions of the pre approval, the servicer, within 0 business days of receipt of the Offer Documents, must notify the borrower of its approval or disapproval of the offer, or intent to make a counter offer. Under HAFA, servicers are not prohibited from accepting an offer with net proceeds that are less than the Minimum Net so long as the sale is in the best interest of the investor. Note: The sale closing should take place within a reasonable period following acceptance of the executed sales contract, but no less than calendar days from the date of the sales contract unless the borrower consents. Response to Offer Sales Contract Prior to Pre Approved Short Sale Terms Borrowers with an executed Sales Contract can request that the servicer approve a short sale under HAFA before the issuance of a Short Sale Notice by delivering the Sales Contract to the servicer. Within business days of receipt of an executed sales contract, the servicer must send written acknowledgment of receipt of the borrower s request using the ARSS form or any other written communication similar in content. Servicer must determine the borrower s eligibility for HAMP, notify the borrower of such eligibility, and allow the borrower to request HAMP consideration, if applicable. Borrower Scenarios Previously submitted executed Hardship Affidavit or RMA, if applicable Within 0 calendar days of receipt of an executed sales contract, the servicer must verify the borrower s eligibility for HAFA and communicate approval or disapproval of the sale, or provide a counter offer. No previously submitted Hardship Affidavit or RMA and Pre Determined Hardship Within 0 calendar days of receipt of an executed sales contract, the servicer must verify the borrower s eligibility for HAFA and communicate approval or disapproval of the sale, or provide counter offer HAFA Servicer Training

13 Borrower Scenarios No Hardship Affidavit or RMA and/or Pre Determined Hardship Within 0 calendar days of receipt of an executed Hardship Affidavit, the servicer must verify the borrower s hardship and eligibility for HAFA and communicate approval or disapproval of the sale, or provide counter offer. Subordinate Lien Considerations Subordinate lien holders are paid in order of priority. Servicer authorizes the settlement agent to allow any portion of the gross proceeds to be distributed as payment to non mortgage subordinate lien holders. All proceeds distributed as payment to subordinate lien holders are conditioned on receipt of lien releases and full release of borrower from liability. Servicers may establish an aggregate cap with regard to the amount of gross sales proceeds such lien holders may be paid, provided such cap is not less than $,000. (Must be included in HAFA Matrix) Servicers must document the agreement in their servicing system and/or mortgage loan file. 8 Subordinate Liens Roles and Responsibilities Borrower Deliver clear marketable title Servicer Subordinate Lien Holder Negotiate with subordinate lien holders on behalf of the borrower (not mandatory) Authorize settlement agent to use portions of gross sale proceeds to pay off subordinate lien holders Release borrower from liens and liability Provide written commitment to release the borrower from all claims 9 HAFA Servicer Training

14 Relocation Assistance Borrower who occupies the property as a principal residence and is required to vacate may be eligible to receive $0,000 in relocation assistance for a HAFA short sale or DIL closing Borrower may be eligible to claim relocation assistance for a tenant who occupies the rental property as a principal residence if the tenant is required to vacate as a condition i of the short sale or DIL Borrower must provide servicer with evidence that the borrower, tenant, or other non borrower occupant was residing in the property as a principal residence Servicer may not authorize a closing that includes HAFA relocation assistance unless and until the servicer has received evidence of occupancy and executed Dodd Frank Certification(s) and, if applicable, Non Owner Occupant Certification 0 Short Sale Notice Termination The servicer may terminate the terms of the pre approval before its expiration for the following reasons: The borrower s financial situation improves The borrower and/or listing agent fails to act in good faith in listing, marketing, or closing the sale A significant change occurs to the property condition and/or value Evidence of fraud or misrepresentation Borrower files for bankruptcy and court does not approve the sale Litigation is initiated or threatened that could affect title or interfere with conveyance The borrower fails to make the monthly payment (if stipulated in the Short Sale Notice) Deed in Lieu Servicers can use their discretion to offer and accept a DIL as part of the HAFA program, in accordance with its HAFA policy and investor guidelines. Borrower, tenant, or other non borrower occupant must agree to vacate the property Property must be left in broom clean condition Borrower must deliver clear, marketable title Note: Servicer may typically require that a borrower make a good faith effort to list and market the property before they will be willing to accept a DIL. HAFA Servicer Training

15 Deed in Lieu Terms The following terms apply to a HAFA DIL: Borrower conveys clear title to servicer and investor The written DIL communication must specify the property vacate date DIL may provide option for borrower to rent property or buy it back later Amount of the monthly mortgage payment required until closing, if any Notice that servicer will record a mortgage lien release upon successful closing of the DIL Note: Written communication must be provided from the servicer to the borrower detailing the terms of a DIL, whether the servicer uses the Short Sale Notice, DIL Agreement or other written notice or agreement. Agenda HAFA Eligibility Criteria HAFA Policy HAFA Documentation Protections Against Unnecessary Foreclosure Resources HAFA Resources HAFA Servicer Training

16 Resources Additional Resources Servicer Integration Team HAMP Solution Center Training Resources NPV tools and documents Reporting resources Live webinar training calendar Discussion/Questions Thank You HAFA Servicer Training