Florida Unemployed Mortgage Relief

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					                              HFA Hardest Hit Fund

                            General Program Description
On February 19, 2010, President Obama announced additional funding for innovative measures
to help families in the states that have been hit the hardest by the aftermath of the burst of the
housing bubble. The HFA Hardest-Hit Fund will help housing finance agencies ("HFAs") in 10
states further respond to the most pressing problems in their communities. HFAs have an
understanding of the most urgent local challenges and an ability to address them expeditiously.
For that reason, the Obama Administration originally committed $1.5 billion, with another
allocation of $600 million added March 26, 2010, in funding under the Emergency Economic
Stabilization Act of 2008 ("EESA") to help HFAs expand their assistance to struggling
homeowners and innovate new ways to address housing challenges. The HFA Hardest-Hit Fund
is designed to allow the maximum possible flexibility to eligible HFAs in designing programs
that are tailored to the needs of their state. All programs must protect home values, preserve
homeownership, promote jobs and economic growth, and provide accountability to the public.


                   Treasury Initiatives to Help Homeowners
Unemployed borrowers meeting certain eligibility criteria will have an opportunity to have their
mortgage payments temporarily reduced to an affordable level for a minimum of 3 months, and
possibly up to six months for some borrowers, while they look for a new job. If homeowners
don’t find a job before the temporary assistance period is over or if they find a job with a reduced
income, they will be evaluated for eligibility for a permanent modification through the Home
Affordable Modification Program (HAMP) or may be eligible for HAMP’s alternatives to
foreclosure program. HAMP is a part of Making Home Affordable, a plan to stabilize the
housing market and help struggling homeowners get relief and avoid foreclosure. HAMP
provides eligible homeowners the opportunity to modify their mortgages to make them more
affordable.

To expand the use of principal write-downs, servicers will be required to consider an alternative
modification approach that emphasizes principal relief. This alternative modification approach
will include incentive payments for each dollar of principal write-down by servicers and
investors. The principal reduction and the incentives will be earned by the borrower and lender
based on a pay-for-success structure.

Other program enhancements are designed to help more borrowers complete a HAMP
modification. Borrower outreach and communications rules will be clarified and strengthened to
protect responsible borrowers from unnecessary and costly foreclosure actions and to expand
modification opportunities for borrowers in bankruptcy. Servicers will receive increased
incentives, allowing them to expand borrower outreach and counseling efforts. With the
introduction of FHA-HAMP, the HAMP modifications and incentives will be expanded to
include borrowers with FHA loans.
For borrowers who continue to struggle and are unable to complete a modification, these
program enhancements will help homeowners move to more affordable housing. Relocation
assistance payments to borrowers who use the foreclosure alternatives program will be doubled
and incentives will be increased for servicers and lenders to raise participation.

                       Unemployed/Underemployed Strategy
Florida was one of five initial states chosen for this program due to our high levels of both home
price declines and unemployment. Unemployment in Florida has now reached 12.2%. Of the
initial $1.5 billion in federal funds allocated, Florida has received $418 million. Treasury just
announced that another five states will receive an additional $600 million in funds for the same
purpose.

Most loss mitigation options on mortgage loans only allow for a limited forbearance 1 when a
borrower becomes unemployed. After that point, the loan is sent to foreclosure. In the current
economic environment in the hardest hit markets of Florida, four months is not enough time for
the borrower to become re-employed at a salary that is sufficient to continue making his
mortgage payments. Moreover, loss of income is the leading reason why homeowners are unable
to qualify for a modification of their mortgage under the federal HAMP Program 2.

Using these funds to help families who were current on their mortgage until suffering a dramatic
decrease in their household income due to unemployment provides temporary assistance to the
people who need it most. These are families who have been an active part of their communities
and who want to stay in their homes but need more time to get back on their feet. This strategy is
not designed to help people who are able to continue making their mortgage payments but who
choose not to do so because they feel that their home has depreciated too much in value.

Florida Housing intends to help homeowners achieve the goal of sustainable homeownership by
partnering with banks and credit unions as well as mortgage investors, such as Fannie Mae and
Freddie Mac, to extend the time period for homeowners to become re-employed at a salary that
is sufficient to either resume making full mortgage payments or qualify for a mortgage
modification that will lower the payments and terms of the mortgage to an affordable level.
Florida Housing will use these funds to pay up to 6 to 9 months of mortgage payments on behalf
of a homeowner in return for the bank, credit union or mortgage investor forgiving or forbearing
6 to 9 months of payments.

Initial screening of the homeowner for eligibility would look at factors that may affect the
homeowner’s ability to eventually qualify for a mortgage modification, assuming that they are
able to become re-employed. Those factors may include the level of consumer debt, current loan-
to-value, number of months in arrears, whether they were ever able to afford the house that they
purchased and other items to help determine whether sustainable homeownership is a realistic
goal for these homeowners.


1
  According to US Bank Home Mortgage MRBP Division, which services loans under Florida Housing’s First Time
Homebuyer Program, Fannie Mae and Freddie Mac currently allow only a four month forbearance for
unemployment.
2
  Based upon data provided by both US Bank and Bank of America.
Targeting Methodology
To ensure that funds are allocated to the hardest hit areas in Florida, a draft allocation
methodology has been developed to allocate Florida’s funding. The methodology uses three
elements to evaluate “hardest hit”: housing price decline, unemployment and the proportion of a
county’s active loans that are seriously delinquent (90+ days due or in foreclosure). The
proposed methodology includes notes that further describe the data and detail of the
methodology. As the program details are finalized, the funding amounts will be allocated based
on the proposed methodology.

Homeowner Eligibility
  • The home must be the homeowner’s primary residence.
  • The home may not be held in a condominium form of ownership.
  • The mortgage loan must be from a regulated financial institution.

Discussion Points
   • For the program to be most effective, what is the maximum underwater amount the HFA
       Hardest Hit Fund should assist with mortgage payments?
   • How many month-for-month match payments will banks, credit unions or mortgage
       investors be willing to provide to gain access to HFA Hardest Hit Fund mortgage
       payments?
   • If the program is to assist arrearage payments, what should be the maximum number of
       months of arrearage payments the HFA Hardest Hit Fund should make?
   • Should there be a cap on the actual amount of assistance received through this
       unemployed/underemployed strategy?
   • What is the maximum Area Median Income (AMI) and original mortgage amount that
       should be allowed?
   • What other Homeowner Eligibility criteria should be considered for entry into the
       program?

                                     Delivery Model
Florida Housing is considering two separate delivery models.

Homeowners would apply for this assistance through participating local governments or local
housing counseling agencies and be screened based upon specific eligibility criteria and the
likelihood that, given more time to find a job, the homeowner would be able to achieve the goal
of sustainable homeownership. This method of providing assistance would have at least two
important program benefits: 1) Borrowers would have knowledgeable advocates assisting them
through the negotiation process with the servicers of their loans; and 2) unemployed borrowers
are likely to have other short term credit issues as a result of their employment situation that
counselors can assist them in resolving/managing.

Florida Housing would also work directly with community banks, credit unions and servicers of
Federal First Time Homebuyer loans from both state and local Housing Finance Agencies in
Florida to identify unemployed or underemployed borrowers who meet the specific eligibility
criteria and who have the best chance to achieve a sustainable homeownership outcome. These
lenders typically hold many loans in their own portfolios and, therefore, should be very
interested and capable of working directly with this program in a timely way. The benefit of this
assistance method would be its efficiency.

Discussion Points
   • Florida Housing would like there to be dedicated staff for each delivery model from the
       partners participating in the program. Would this be possible?

Terms of Assistance
Payments made on behalf of a homeowner will be in the form of a forgivable loan. Earned
forgiveness will be 20% per year as long as the homeowner remains in the home and s current on
their mortgage payments. This will be subject to US Treasury approval.

Discussion Points
   • Should other terms of assistance be considered?

Principal Reductions
Once a homeowner becomes re-employed, the goal of this strategy is that they will be able to
resume making their mortgage payments or qualify for a loan modification. The HAMP loan
modification process follows a progression of steps in attempting to bring the borrower’s
monthly payments down to no more than 31% of their monthly income. The first step is to
reduce the interest rate to as low as 2%. Then, if more assistance is needed, the term of the loan
may be extended to up to 40 years. Next, the lender may forbear arrearages owed to the end of
the loan. Finally, reduction of the principal owed by the borrower may be considered, but is not
required of the lender. However, if principal reduction is still necessary in order to achieve a
modification, Florida Housing proposes using some of these funds for that purpose as long as the
credit union, bank or mortgage investor agrees to match the amount paid by Florida Housing on
a one-to-one basis.

Discussion Points
   • For the program to be most effective, what is the maximum underwater amount the HFA
       Hardest Hit Fund should assist with a Principal Reduction?
   • Should there be a cap on the actual amount of assistance received through this Principal
       Reduction strategy?

Subordinate Lien Reductions
There are instances where a loan modification is not achievable because subordinate mortgage
holders will not agree to modify or accept a partial payment of their loan. Florida Housing
proposes using some of these funds to help negotiate a settlement with the subordinate lien
holder that will result in a successful modification of the first mortgage loan.

Discussion Points
   • Should this payment be similar to what the subordinate mortgage holder would receive
       under current short sale guidelines (3% or $3,000, whichever is lower)? If not, what
       would be the appropriate amount needed to extinguish the debt?

				
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