HUD NATIONAL SERVICING CENTER

WEBINAR I: HUD Early Delinquency Activities & Loss Mitigation Program Overview
Working Together to Help Families Stay in Their Homes
Presenters:

Luke Harry & Stacey Brown

National Servicing Center

How to Participate Today

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LEARNING OBJECTIVES
At the completion of this course, you will better understand:
How the National Servicing Center is structured, who to contact with questions, and how to find additional resources. What HUD requires of lenders to participate as an approved Servicer. How FHA defines key timelines in the Servicing environment. What HUD requires of FHA-approved Servicers to address Early Delinquency. Collection Outreach: Best practices for Servicers to manage customer needs. The role of the HUD-approved Housing Counseling Agency. How HUD Servicers are required to apply loss mitigation tools to customers need. How to correctly report servicing activity in SFDMS. When extensions of time and/or variance approval from the NSC is required.

This presentation is provided for informational purposes and its contents are subject to change. It is not intended to substitute or alter requirements and guidelines found in FHA handbooks, mortgagee letters, and other official FHA publications.

NSC ORGANIZATIONAL STRUCTURE

Director Deputy Director

Program Director Branch 1

Program Director Branch 2

Program Director Branch 3

Contract Oversight Business Service Provider

Contract Oversight Call Center

Contract Oversight Secretary-Held Servicing

Procurement, Audit and Compliance

FHA Servicing Resolution Loss Mitigation Resolution

Post Asset Sale Complaints Good Neighbor Next Door

System Development and Reporting (SFDWS, TRS, etc.)

Training Development NSC Frequently Asked Questions

Home Equity Conversion Mortgage (HECM) Servicing

Single Family Default Monitoring System and CAIVRS

Predatory Lending issues

235 Recapture Process

NSC Internet and Intranet Development

Foreclosure Holds

Nehmiah Housing Grants

FHA SERVICER REQUIREMENTS

FHA SERVICER REQUIREMENTS

General Requirements
FHA has delegated authority and responsibility to lenders to mitigate mortgage losses
Servicers must utilize loss mitigation whenever feasible to avoid foreclosure Servicers have latitude in selecting the appropriate loss mitigation strategy for each FHA borrower FHA Servicers and sub-servicers require FHA approval FHA Servicer participation is not optional

FHA SERVICER REQUIREMENTS

Monitoring
Management Foreclosure Review Committee
Management Review Notification of Other Parties to the Mortgage Omitted Actions MRB Triggers Timing: Minimum & Maximum

Lenders who violate FHA Programs, Statues, Regulations, and/or Handbook requirements, may be subject to:
Loss of incentive compensation Reduced reimbursement of foreclosure and acquisition cost Interest curtailment related to foreclosure delays Referral to the Mortgagee Review Board
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KEY TERMS
PAYMENT DUE DATE:
months consist of 30 days FHA considers payment due on the 1st day of every month; all

IMMINENT DEFAULT:

Borrower is either current or less than 30 days past due on their mortgage, and is experiencing a significant reduction in income or some other hardship that will prevent them from making their next mortgage payment

DELINQUENT: 1+ days past the oldest unpaid installment (OUI) DATE OF DEFAULT (DOD): 30 days past the oldest unpaid installment (60 days delinquent)
Example: Last paid installment (LPI) Feb. 1 First payment missed March 1 Date of default - April 1

FIRST LEGAL DEADLINE (FLD):

6 months past the date of default (8 months)

Last paid installment May 1, 2011 Oldest unpaid installment June 1, 2011 Date of default July 1, 2011 First legal deadline = Jan. 1, 2012

Example:

LOSS MITIGATION OPTION PRIORITY

Home Retention Options:
Special Forbearance Loan Modification Partial Claim FHAs Home Affordable Modification Program (HAMP)

Disposition Options:
Pre-Foreclosure Sale Deed-In-Lieu of Foreclosure
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HUD LOSS MITIGATION OPTIONS AT-A-GLANCE

HUD recommends borrowers be evaluated for loss mitigation as early as 30 days past the last paid installment. This enables the Servicer to begin the process early, allowing time to validate financials and be ready for the borrower to sign an agreement at the appropriate time of delinquency.
Minimum # of Installments Due and Unpaid Days Past Due (DPD) 0 Imminent 1 1+ 2 31+ 3 61+ 4 91+

Type

DDS Code
12Repayment 12Repayment 09-Special Forbearance

Description/Requirements
Verbal agreement to increase, reduce or suspend payments. Duration < 3 months Verbal financials required for agreements over 30 days. Written agreement to increase, reduce or suspend payments. Duration minimum 3 months Verified/documented financials required for agreements over 30 days. Structured plan to repay a loan delinquency over time (initial period for financial recovery followed by a payment schedule based on the borrowers ability to repay) Cannot exceed 12 months PITI Duration minimum 4 months - SFB Type I increased payments. Duration minimum 6 months - SFB Type I on a combination of suspended, reduced or increased payments. Special Provision Type I - CAUSE OF DEFAULT IS UNEMPLOYMENT Duration minimum 12 months. May be used to reinstate a loan to facilitate the eventual sale or assumption of the property.

COLLECTIONS

Informal FB
HUD HB 4330.1 REV-5, Chapter 7

Formal FB
HUD HB 4330.1 REV-5, Chapter 7

Special Forbearances
(SFB) ML 2011-23 ML 2002-17

Type I

RETENTION

Type II

08 - Type II/Special Forbearance / Trial Payment Plan 08 - Type II/Special Forbearance /Trial Payment Plan 28Modification Started

Combines a short term SFB and a Loan Mod or Partial Claim Requires 3 month trial prior to execution of permanent Loan Mod or Partial Claim Cannot exceed 12 months delinquent PITI Loan Mod or Partial Claim is concurrent with the end of the SFB Type II Permanent change in 1 or more of the terms, allows the loan to be reinstated and results in a payment a borrower can afford May include a change in the a) interest rate, b) capitalization of the delinquent principal, interest or escrow items, c) extension of the time available to repay the loan and/or, d) re-amortization of the balance due 3- month Trial Payment Plan required

Loan Modification
ML 2011-28 ML 2009-35

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HUDS LOSS MITIGATION OPTIONS AT-A-GLANCE

Minimum # of Installments Due and Unpaid Days Past Due (DPD) Type DDS Code
08 - Type II/Special Forbearance/Trial Payment Plan 10 - Partial Claim Started 0
Imminent

1 1+

2 31+

3 61+

4 91+

Description/Requirements Lender will advance funds on behalf of the borrower in an amount to reinstate a delinquent loan (not to exceed 12 months PITI) Borrower executes promissory note and subordinate mortgage payable to HUD (carries no interest and not payable until the borrower either pays off the first mortgage or no longer owns the property) 3-month Trial Payment Plan required Allows the use of a Partial Claim up to 30% of the UPB as of the date of default and combine it with a Loan Mod Must successfully complete a trial payment plan (4 months for imminent default and 3 months for 90+ delinquent) Front ratio not less than 31% and back ratio must not exceed 55% Allows a borrower in default to sell home and use proceeds to satisfy the mortgage debt even if the proceeds are less than the amount owed. Commit to actively market the property for 4-6 months Borrower qualifications: occupy as primary residence; list property with licensed real estate broker with a cancellation clause in the even the terms of the PFS sale are not acceptable to HUD; make good effort to aggressively market property, perform all normal maintenance and repairs; standard As Is FHA appraisal; marketable title; Non-Owner Occupant Exceptions available; Tiered Net Proceeds Requirements 1st 30 days 88% - 2nd 30 days 86% - Remainder of marketing time 84%; Funds available for discharge of Subordinate Liens.

Partial Claim
(PC) ML 2003-19

Retention

FHA HAMP
ML 2009-23 ML 2009-35

39 - FHA-HAMP Trial 41-FHA HAMP Modification Started 15 - PreForeclosure Acceptance Plan Available

PreForeclosure Sale (Short Sale)

ML 2008-43

DISPOSITION

Deed-in-Lieu
(DIL) ML 2000-05

44 - Deed-in-Lieu Started

Borrower voluntary deeds collateral to HUD in exchange for release from all obligations under the mortgage Lender must enter into a written agreement with the borrower stating specific actions that the borrower must perform in order to take advantage of this option and receive financial consideration Borrower qualifications: cause of default is incurable; occupy the property as a primary residence; collateral property must be non-occupied at the time of conveyance; good and marketable title Occupancy Exceptions: Verifiable that the need to vacate was related to the cause of default (job loss, transfer, divorce, death), and the subject property was not purchased as a rental investment, or used as a rental for more than 18 months.

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ADDRESSING EARLY DELINQUENCY

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EARLY DELINQUENCY SERVICING

HUD-approved Servicers must do the following:
Evaluate loans no later than the 90th day of delinquency Become proactive early in the default Continuously attempt to contact borrowers and offer Loss Mitigation options from early delinquency through foreclosure sale Review/qualify borrowers and offer HUD Home Retention or Disposition options in a timely manner

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EARLY DELINQUENCY SERVICING

Communication and Collection Techniques Contact is the most effective tool
Servicer determines the most cost-effective form of contact with borrower during delinquency Allows Servicer to address one-payment delinquencies immediately Allows Servicer the opportunity to review a defaulted loan and determine which foreclosure-avoidance measure should be considered Address chronic delinquency
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EARLY DELINQUENCY SERVICING

Collection Options & Alternatives Partial Payments:
Acceptance of Partial Payments Return of Partial Payments

Servicers may use:

Delinquency Counselors

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EARLY DELINQUENCY SERVICING

HUDs Minimum Early Delinquency Servicing Requirements
1st day of month Payment Due Date for FHA-insured mortgages 17th of the month Late Charges may be Assessed 20th day of the month Send Automatic Notices and/or Personal Letters 30th day of delinquency - Lender must report to the Single Family Default Monitoring System 45th day of delinquency Servicers are subject to homeownership counseling notification requirements:
HUD notice PA-426-H pamphlet How to Avoid Foreclosure

Service members Civil Relief Act (SCRA) Notice: Toll-free military one-source number (1-800-342-9647)
HUD-approved Housing Counseling Agencies

( 1-800-569-4287) If unable to reach homeowner Property Inspection completed by 45th day of delinquency 90th day of Delinquency Lender is to evaluate Homeowner for HUDs Loss Mitigation Program
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HUD-Approved Housing Counseling Agencies

Section 169 of the Housing and Community Development Act of 1987 provides borrowers behind in their mortgage payment must be provided a list of HUD-Approved Counseling Agencies Role of HUD-Approved Housing Counselor (HCA) Screening Interview Contact Borrower Creditors Referrals to Local Organizations Contact NSC for Ticket Assignment

EARLY DELINQUENCY SERVICING

Quiz Show
1. HUD Servicers are mandated to a priority sequence for Loss Mitigation and the use of Retention tools. True or False?

2. Servicers are required to offer FHA Loss Mitigation Retention programs to minimize losses to the FHA insurance fund. True or False?
3. Servicers are subject to homeownership counseling notification requirements on all FHA-insured loans. True or False?

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GENERAL PROGRAM REQUIREMENTS

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GENERAL PROGRAM REQUIREMENTS

Owner-Occupancy
Only owner-occupants qualify for home retention options Allowable exception on Pre-Foreclosure Sale or Deed-In-Lieu if: Rental does not exceed 18 months, Property was not purchased as investment, OR The need to vacate is related to the reason for default NSC variance approval request required for any owner-occupancy exceptions

Multiple FHA Loans

Must use CAIVRS to validate Borrower may not own other real estate subject to FHA insurance Borrower can not have been a primary borrower for a FHA loan claim paid out within the past 3 years Servicers are authorized to make reasonable exceptions for borrowers that: Acquired FHA insured property through inheritance, OR Co-signed to enhance the credit of another FHA borrower
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GENERAL PROGRAM REQUIREMENTS

Financial Evaluation Requirements
Financial analysis:
May be obtained initially by phone; must document/verify for all HUD Loss Mitigation retention and disposition options Verbal financials required for informal & formal forbearance plans over 30 days Documented financials required for any delinquency or repay plan over 60 days Monthly income and expense fluctuations for proposed Special Forbearance OR A minimum of 3 months for all other options, AND Net montly surplus income estimate
Example: Net income Expenses = Surplus Income Surplus Income /Expenses = Surplus Income Percentage
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Financial calculations must include:

GENERAL PROGRAM REQUIREMENTS

Servicer Requirements:
Upon Receipt of Notice of Bankruptcy Filing
Provide sufficient instruction to facilitate workout discussions Offer HUD Loss Mitigation Options through borrowers attorney, prior to discharge or dismissal Offer HUD Loss Mitigation Options to borrowers without an attorney, and may need Bankruptcy Trustee approval

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LOSS MITIGATION FOR IMMINENT DEFAULT

Forbearance Agreement:
Informal Agreement Formal Agreement

FHA- HAMP:
Borrower must successfully complete a 4 month trial modification period (3 month trial required for borrowers in default)

All other HUD Loss Mitigation options are NOT available for imminent default cases.

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LOSS MITIGATION FOR IMMINENT DEFAULT

Cause and Documentation

Borrower must be able to document the cause of the imminent default, such as:
A reduction in or loss of income that was supporting the mortgage loan A change in household financial circumstances

Data Reporting Requirements

Report all standard Loss Mitigation activities prior to the FHA-HAMP Option
Upon HUDs request, provide requested documentation related to FHA mortgages

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FORECLOSURE
May not be initiated until all HUD Loss Mitigation options have been
considered
Documentation to support the review must be available in the claim file

May be initiated without considering other HUD Loss Mitigation

options if:
Property has been abandoned in excess of 60 days Borrower advises in writing that they do not wish to continue making the mortgage payment after being clearly advised of available options for relief Property is not the principal residence of the borrower and is occupied by a tenant whose rental payments are not being applied to the mortgage debt

Property is owned by a corporation or partnership

Must be initiated no later than the first legal deadline date (6 mo. from date
of default)
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QUIZ SHOW
What defines the Date of Default?
A. B. C. 30 days delinquent past the oldest unpaid installment 60 days delinquent past the oldest unpaid installment 90 days delinquent past the oldest unpaid installment

Mortgagees must commit to which of the Following to participate as a HUD Servicer?

A. Evaluate delinquent loans no later than the 90th day B. Re-evaluate delinquent loans monthly until resolution C. Document compliance with and report monthly according to HUD Loss Mitigation Program requirements. D. Initiate foreclosure within 6 months of the default date unless pursuing a HUD Loss Mitigation Option. E. All of the above.

Which HUD Home Retention option is the only available for imminent default?
A. Special Forbearance B. Loan Modification C. HAMP D. Deed in Lieu
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EXTENSION OF TIME AND VARIANCE REQUESTS

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EXTENSION OF TIME AND VARIANCE REQUESTS

Key Terms
Automatic 90-Day Extension of Time: Servicers are entitled to a one-time 90-day
automatic extension of the foreclosure deadline if they have: 1. Initiated a Special Forbearance, Loan Modification or Partial Claim within the initial 6 months from the date of default, and 2. Reported the action in SFDMS, but are unable to complete the process

Extension of Time Request: A formal request that requires HUD National

Servicing Centers approval to extend the timeframe required to meet the first legal deadline associated with the foreclosure process.

Variance*: A formal request that requires HUD National Servicing Centers approval
that allows the Servicer to vary from HUDs policy (HUD Form 90041).
NOTE: Variances and extension of time requests for Pre-Foreclosure Sales must be submitted on HUD Form 90041. Variance requests for all other loss mitigation options must be submitted on company letterhead.
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EVENTS THAT IMPACT FIRST LEGAL DEADLINE

Servicers do not need to submit Extension of Time requests for approval from the NSC for the following circumstances:
90 days from the date of bankruptcy release/dismissal*

90 days from the expiration date of a Presidential declared disaster

9 months from date of discharge for soldiers on active duty through 12/31/12 - see Soldiers and Sailors Relief Act SSRA)/Servicemembers Civil Relief Act (SCRA)

120 days from vacancy date (if in default) or 6 months from the date of default, whichever is earlier.
* Servicers must also adhere to applicable state/local laws and moratoriums.
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HUD SYSTEMS REPORTING REQUIREMENTS

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SINGLE FAMILY DEFAULT MONITORING SYSTEM (SFDMS)

The SFDMS is HUDs primary source of data used to track and measure Servicer performance. Servicers enter data to comply with HUDs reporting requirements for delinquent FHA insured single-family mortgages. Servicers must report loss mitigation actions taken for all delinquent FHA loans The data entered into SFDMS by Servicer and staff is only as good as the information entered Data entered directly impacts the Tier Ranking System (TRS) of the Servicer Servicers are required to report the status of all FHA Single Family mortgages that are 30, 60 or 90+ days delinquent

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SINGLE FAMILY DEFAULT MONITORING SYSTEM (SFDMS)

Key Terms
SFDMS: HUDs primary source of data used to track and measure Servicer
performance. Servicers enter data to comply with HUDs reporting requirements for delinquent insured single-family mortgages.

MONTH: HUD recognizes all months to be 30 days; any loan that remains unpaid on
the last day of the month is considered to be 30 days (or 1 month) delinquent and must be reported to HUD.

DELINQUENCY/DEFAULT REASON (DDR) CODES: DDR codes are required to

indicate the REASON that the borrower is delinquent. Servicers can only enter one reason code at a time, so the most appropriate appropriate should be chosen, then subsequent reasons can be provided throughout the process.

DELINQUENCY/DEFAULT STATUS (DDS) CODES: DDS codes are required to

indicate each action taken by the Servicer/borrower during the course of the loss mitigation process. These must be reported no later than the 5th working day of the following month.
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CREDIT ALERT INTERACTIVE VERIFICATION REPORTING SYSTEM (CAIVRS)

What is CAIVRS?
CAVIRS is a Federal government database of delinquent Federal debtors that allows Federal agencies to reduce the risk to Federal loans and loan guarantee programs
It is a database of delinquent borrower records from various government agencies which reduce the risk to Federal loans and loan guarantee programs CAIVRS is accessible only to authorized Servicers via the Internet or telephone

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THE TIER RANKING SYSTEM (TRS)

HUD implemented the Tier Ranking System (TRS) in 2000 in order to measure Servicer utilization of HUDs Loss Mitigation Program.
Servicers ranked in Tier I are eligible for additional Loss Mitigation incentives during the calendar year. (No additional incentives provided for non-Tier I lenders) Tier Ranking Scores represent Servicers Loss Mitigation (LM) efforts as compared to foreclosure claims paid during the aforementioned Performance Period using the formula:
Forbearances + LM Retention Claims + PFSs + DILs + ACDs Forbearances + LM Retention Claims + PFSs + DILs + ACDs + Foreclosures

Scores are released quarterly, based on data from a rolling 12-month rating period
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ONLINE RESOURCES
Code of Federal Regulations: 24 CFR 202.2, 203.331, 203.355, 203.356, 203.502, 203.600,
203.606, and 203.608

HUD Handbook 4330.1 Rev-5: Administration of Insured Home Mortgages, Chapter7

National Servicing Center Website
E-Class Servicer Training Tier Ranking System

NSC Loan Servicing Guidance

Loss Mitigation Mortgagee Letters NSC Loan Servicing and Loss Mitigation FAQ HUD Approved Counseling Agencies

Single Family Delinquency/Default Reporting

SFDMS Reporting (FAQs) Fatal Error Codes EDI Webpage Neighborhood Watch FHA Connection Error Codes for HUD Default Reporting
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NSC CONTACT INFORMATION

U.S. Department of HUD National Servicing Center 301 NW 6th Street, Suite 200 Oklahoma City, OK 73102 1-877-622-8525
Secretary Held Servicing Contractor: (877) 622-8525 Home Equity Conversion Mortgage (HECM) Servicing: HECMServicing@hud.gov Requests for Extensions: extensionrequests@hud.gov Training issues: support@hudtulsa.org TRS, Data, CAIVRS, SFDMS Reporting: sfdatarequests@hud.gov
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WHERE TO GET MORE INFORMATION

FHA Resource Center Frequently Asked Questions
www.hud.gov/answers
Available 24/7

A web site containing almost 1,300 questions and answers about FHA programs, underwriting and processing (website available 24/7) The FHA Resource Center acts as the first line of response for the majority of industry and public inquiries about FHA programs and services Searchable by keyword and category Telephone: 1-800-CALL FHA (1-800-225-5342) Monday-Friday 8:00AM 8:00 PM (Eastern Time) E-mail: answers@hud.gov
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