Home Affordable modification Program
Making Home Affordable
William Tanner & Patrick Ulibarri
• On March 8th 2009, The Home Affordable Modification Program
(HAMP) also known as Making Home Affordable (MHA) was
announced and was designed to help 3 to 4 million homeowners avoid
• The program was set up to provide clear and consistent loan
modification guidelines that the entire mortgage industry could use.
• HAMP required, that If a servicer took part in TARP II bailout funds,
they had in fact, pre-agreed to sign on to this program.
• Servicer: Chase, BofA, Citi, Wells Fargo, Ocwen, Aurora, etc
• Investor: Fannie Mae, Freddie Mac, WFMBS 2007-AR6 (REMIC)
• Most of the time a servicer is not the investor
• Pooling and servicing agreement (PSA)
• Trustee of Pool
• Modification provisions
• Loss sharing between 38% and 31% of a reduced payment
• Paid for every modification completed
• Paid for every year homeowner pays on-time
• 1) Borrower is delinquent on their mortgage or faces imminent risk of
default resent in 120 days, less than 3 months PITI resrves (GSE: loss
of job, Divorce, death of a spouse, fraud)
• 2) Property is occupied as borrower's primary residence
• 3) Mortgage was originated on or before Jan. 1, 2009
• 4) Unpaid principal balance must be no greater than $729,750 (one-
unit) & $934,200 (two-unit) properties.
• If 1 through 4 meet terms, the next step is to see if the loan is
modified, will it lower the payment?
• 1st mortgage principal and interest
• Monthly Property Tax Proration
• Monthly Property Hazard Insurance Proration
• Home Owners Association Dues/Assessment
31% lower or higher?
• Present situation has a PITIA of $2,000 (A)
• Household Gross Income is $5,000.00 (B)
• 31% of $5,000.00 is $1,550.00 (C)
• If (A) is greater than (C) the homeowner passes the first test
• In this case the home owners PITIA payment would need to be
reduced to a target $1,550.00. $450.00 per month savings.
• Servicer has three tools to reduce the the payment to 31%
All household sources of income can be used, if they can be
• Types: Pay-stubs, Profit & Loss, Award Letters, boarder rents, leases,
non-mortgagee contribution (spouse, child, etc), child/spousal support
• Non-taxable income will be grossed up 125% ($100 = $125 after gross
• Rental/Boarder income will be calculated at 75% ($100 = $75 after
• Rents/Boarder income will need to have been on tax return previous
• Self-Employment should be 18 months min duration
• Pay-stubs with overtime will be averaged YTD
New unpaid principal balance
• It is important to know the loan’s present principal balance and the
amount of past due interest and impounds, if any. (late fees are
• By combining these amounts you will get the loan’s new “unpaid”
• The servicer will take the UPB and subject it to the following “waterfall”
• First, reduce the interest rate by .125% to as low as 2%,
• Next, if necessary, extend the loan term to 40 years,
• Finally, if necessary, forbear (defer) a portion of the principal until the
loan is paid off and waive interest on the deferred amount.
• Note: Servicers may elect to forgive principal under HAMP on a stand-
alone basis or before any modification step in order to achieve the
target monthly mortgage payment.
Net Present Value (NPV)
• If the waterfall reaches the target 31% PITIA payment, a NPV test will
• NPV is a proprietary tool created by the US Treasury Dept. to
determine if the investor will make more money by foreclosing (FAILD
NPV) or if the investor will make more money by modifying the loan
(PASS NPV) under the HAMP guidelines.
• If there is a failed NPV test the servicer must send a non-approval
notice to the homeowner within 5 days of the NPV Fail, providing the
33 inputs used on the NPV test. There is a 30 day window to dispute
any inaccurate inputs. The servicer cannot foreclosure during this
The will see if you pass the initial guidelines *
Call in financials and servicer
SEND IN RMA ANYWAY from HAMP website
• If it passes, the servicer sends out a HAMP package incl an RMA
form, 4506-T and a list of documents to support income, prove
occupancy and hardship
• Once the servicer receives the documents they will check to make
sure all items necessary to process the package were submitted
• If more documents are needed a 30 day letter will be sent and then a
15 day letter
• Once all documents are received the file is sent to a negotiator (single
• Escrow info is obtained internally to get updated UPB
The Process (cont)
• Now a formal NPV test is run with verified info
• If it passes, a 3 month trial plan will be sent
• If it fails, a non-approval letter must be sent within 3 days and the
homeowner will have 30 days to dispute any of the 33 inputs used. If
the home value is questioned, it can be disputed for a upfront fee for
an appraisal (around $200).
• Once in a trail plan the only reason for denial should be if the
homeowner does not make the plan payment on time.
• After the trail is complete, a final offer is sent to be signed and sent
• After 1st finalized payment is made the fully executed mod is sent
back to homeowner for records.
• The foreclosure process should be suspended while in review. Every
servicer has a different definition of what “review” means.
• No foreclosure sale until the HAMP review and in-house mod review
• Can apply up to 5 days before a trustee sale
• Notices must be sent to homeowner: 30 day, 15 day, non-approval 30
4(.5*) types of HAMP/MHA
• Fannie Mae
• Freddie Mac
• Unemployment HAMP/MHA*
On the Web
• NPV Test: https://checkmynpv.com/
• Servicer List: