FORECLOSURE PREVENTION AND LOSS MITIGATION OVERVIEW FEBRUARY 24, 2011 FAITH-BASED AND NEIGHBORHOOD PARTNERS FORECLOSURE

1. FORECLOSURE PREVENTION AND LOSS MITIGATION OVERVIEWFEBRUARY 24, 2011FAITH-BASED AND NEIGHBORHOOD PARTNERSFORECLOSURE PREVENTION EDUCATION WORKSHOP

2. Today’s Agenda Reasons For Default Foreclosure Prevention Tips FHA’s Loss Mitigation Program Strategic Foreclosures Mortgage Scams Resources Questions

3. The Crisis Continues

4. Reasons for Default • Poor money management • Over extended obligations • Loss of income • Lack of concern or Understanding mortgage obligation • Illness • Divorce

5. Foreclosure Prevention Tips • Don’t ignore the problem/Open and respond to mail • Contact Lender and HCAs • Prioritize spending • Know Your Mortgage rights • Understand Foreclosure Prevention Options

6. FHA Loss Mitigation General Criteria • Borrower must be Owner Occupant • Loan must not be delinquent more than 12 months (PITI) • LM is mandatory on FHA loans that are delinquent • LM Options are in order of effectiveness

7. FHA’s Loss Mitigation Program Home Retention Tools: • Special Forbearance Agreement • Loan Modification • Partial Claim • FHA-HAMP

8. FHA’s Loss Mitigation Program Home Disposition Tools: • Pre-Foreclosure Sale (Short Sale) • Deed In Lieu

9. Home Retention Tools Special Forbearance Agreement: • Written agreement between lender and borrower which contains a plan to reinstate the loan • Three months delinquent but no more than 12 months • Minimum duration of four months – no max • Late fees not accessed

10. Home Retention Tools Loan Modification: • A permanent change in the terms of a Mortgagor’s loan. • Interest Rate shall be reduced. • Legal fees and related foreclosure costs may be capitalized. • Allows a loan to be reinstated

11. Home Retention Tools Partial Claim: FHA advances funds on behalf of a borrower in an amount necessary to reinstate a delinquent • Not to exceed the equivalent of 12 months PITI. • Promissory Note is executed • Mortgage is subordinated to HUD • Interest rated shall be reduced • Not due and payable until the borrower pays off the 1st mortgage or no longer owns property

12. FHA-HAMP FHA’s Home Affordable Modification Program: Designed to help homeowners retain property and prevent foreclosure: • Provides borrowers with reduced mortgage payment • Combines Loan Mod with Partial claim • Results in a 30 year fixed rate mortgage • Imminent default or default mortgage

13. Home Disposition Tools Pre-Foreclosure Sale (Short sale): Allows a borrower in default to sell their home and use sale proceeds to satisfy mortgage debt. • At the time of sale, the property must be at least 31 days, but no more than 12 months • PFS is unavailable if a property has been abandoned or Mortgagor has ability to pay the debt. • The PFS must be an outright sale of the property.

14. Home Disposition Tools Deed In Lieu (of foreclosure): Borrower voluntarily deeds collateral property to HUD in exchange for a release from all obligations under the mortgage • No walk aways/owner-occupant status • Borrower may receive up to $2,000 (Must be used to help pay off liens if needed) • Property must be left in good condition

15. Strategic Foreclosures • Borrowers with mortgages appraised significantly lower than property value often just walk away from their principal residence • This occurs when negative equity in the home reaches a level whereby, the mortgage substantially exceeds the property value • FHA’s Buy and Bail Policy

16. Mortgage Scams • Be cautious of companies making donations to the church or requesting church approvals • Work with HUD Approved Housing counseling agencies, or verify authenticity of Housing Counselors/agencies invited to church events • Borrower should never make payments to anyone but lender or lender approved entity • Be aware of fake “government” modification programs

17. Mortgage Scams Common Scam Types • Phantom Help – The “rescuer” charges high fees for work that the homeowner could do for themselves, or charges for strong representation that never materializes • Bailout – Includes various schemes where homeowners surrender their house title thinking that they will be able to remain as renters and buy the house back

18. Mortgage Scams • Bait and Switch – Homeowners think they are signing documents for a new loan making the mortgage current, but actually sign away rights to the home. They are left still holding the mortgage payments. • Equity Stripping – A buyer purchases the home for the amount of the arrearage and flips the home for a quick profit.

19. HUD/FHA Resourceswww.hud.gov

22. HUD/FHA Resources • Join HUD’s email list: http://www.hud.gov/offices/hsg/sfh/ref/hsgregst.cfm Receive email notification of important industry announcements such as new mortgagee letters, handbooks, FHA mortgage limit increases, events and training opportunities. • For borrowers facing foreclosure, struggling with their mortgages and/or trying to avoid foreclosure, visit www.MakingHomeAffordable.gov • Join Free FHA Webinars: http://www.hud.gov/offices/hsg/sfh/events/events.cfm Sign up and join other National FHA Mortgage industry partners • HUD’s Office of Inspector General: http://www.hud.gov/offices/oig/hotline/ Contact OIG to report fraud, waste, abuse, mismanagement or violations of law, rules or regulations by HUD employees or HUD program participants. Call: 1-800-347-3735

23. HUD/FHA Resources • FHA Call Center 1-800 Call FHA 800-225-5342 • Loss Mitigation – hsg-lossmit@hud.gov • HECM (Reverse Mortgages) – hecmhelp@hud.gov • National Servicing Call Center – 1-877-622-8525 • HUD Approved Housing Counseling Agencies www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm

24. Questions Vickie Johnson FHA Account Liaison Vickie.L.Johnson@hud.gov