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Baltimore Homeownership Preservation Coalition 2009 Forum Christine Eldarrat, Executive Advisor Federal Housing Financ

Baltimore Homeownership Preservation Coalition 2009 Forum Christine Eldarrat, Executive Advisor Federal Housing Finance Agency April 21, 2009. FHFA Regulatory History . OFHEO -- Federal Housing Enterprises Financial Safety and Soundness Act of 1992 Fannie Mae Freddie Mac

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Baltimore Homeownership Preservation Coalition 2009 Forum Christine Eldarrat, Executive Advisor Federal Housing Financ

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  1. Baltimore Homeownership Preservation Coalition 2009 Forum Christine Eldarrat, Executive Advisor Federal Housing Finance Agency April 21, 2009

  2. FHFA Regulatory History • OFHEO -- Federal Housing Enterprises Financial Safety and Soundness Act of 1992 Fannie Mae Freddie Mac • FHFA – Safety and Soundness Regulator, Housing and Economic Recovery Act (HERA), July 30, 2008 FHFB -- Federal Home Loan Banks OFHEO -- Fannie Mae and Freddie Mac HUD – GSE-Mission Office • FHFA – Conservator, September 6, 2008 Oversee the affairs of Fannie Mae and Freddie Mac for the purpose of bringing them back to financial health. • FHFA – Federal Property Manager, Section 110 of the Emergency Economic Stabilization Act of 2008 (EESA) directs Reports to Congress – Monthly Federal Property Manager’s Report

  3. FHFA Foreclosure Prevention and Consumer Protection • Mandatory Mortgage Fraud Reporting Rule – Effective July 28, 2005 • Mortgage Metrics /Foreclosure Prevention Report -- Quarterly (1Q2008) & Monthly (August 2008) • Streamlined Modification Program (SMP) – November 11, 2008 • Federal Property Manager -- Reports to Congress (December 2, 2008) • Mandatory Loan Origination Identifiers (S.A.F.E. Mortgage Licensing Act) – Announced January 15, 2009 and Effective January 1, 2010 Loan Origination Company Loan Originator Field Appraiser Supervisory Appraiser • Homeowner Affordability and Stability Plan (HASP) – February 18, 2009 • Making Home Affordable Modification Program Guidelines (Treasury) -- March 4, 2009 • Supervisory Directive 09-01 (Treasury) -- April 6, 2009

  4. Fannie Mae and Freddie Mac – Guarantors and Investors • Coordination with Treasury, HUD, FHFA, HOPE Now, and Other Federal Regulators Treasury Home Affordable Modification Program Guidelines -- March 4, 2009 Supervisory Directive 09-01 – April 6, 2009 • Communication of terms and guidelines Fannie Mae Announcement 09-05, March 4, 2009 and Announcement 09-05R, April 21, 2009 Freddie Mac Bulletin 2009-6 and Guide Chapter C65, March 11, 2009 and Bulleting 2009-10 and Guide Chapter C65, April 21, 2009 • Modification Approvals Delegated approval authority to servicers – within HASP guidelines Retained approval authority -- exceptions to HASP guidelines

  5. Fannie Mae and Freddie Mac – Treasury Agents • Broad communication – March 4, 2009 • Data collection and reporting requirements – March 2009 • Servicer registration (portal) and participation (Servicer Participation Agreement) – Week of March 23, 2009 (Top 6), Week of March 30, 2009 (Top 30 – 35), April 15 (+1300 servicers) • Three-Month Trial Period Start – April 1, 2009 • Servicer Portal www.HMPadmin.com and NPV Model Release – April 15, 2009 • Compliance and oversight of servicers – April 21 – May 7, 2009 • HMP recorded overview tutorial (Treasury site) – May 1, 2009 • Compliance and oversight of loan-level transactions – May 15, 2009 and after • Trial loan set-up completion and payments with validation – June 29, 2009 • Program administrator and paying agent for Treasury – August 6, 2009 (July data)

  6. Modification Program – Eligibility • Loan – originated on or before January 1, 2009 and unpaid principal balance up to $729,750 • Property – primary residence, owner-occupied, not vacant • Account status -- current and default is imminent or delinquent • Borrower – financial hardship • Mortgage payment – greater than 31% of monthly gross income • Documentation -- Borrower Income – Federal Tax Return, Form 4506-T, two most recent wage stubs. Occupancy -- Federal Tax Return, two most recent wage stubs and one other form of documentation. Hardship – Hardship Affidavit • Documentation -- Servicer Credit Income – credit bureau report Property Value/Condition – automated valuation model (AVM) or broker price opinion (BPO) Cost-benefit Analysis – net present value (NPV) model • Performance – three-month successful Trial Period with payments at modified terms • Counseling – to reduce total indebtedness, required if back-end ratio is equal to or greater than 55%

  7. Modification Steps / Waterfall Objective: Achieve a modified payment (PITIA) of 31% of monthly gross income. Step 1: Determine monthly mortgage payment (PITIA= principal, interest, taxes, insurance and homeowner dues) at 31 % of month gross income. Step 2: Capitalize arrearage and calculate modified unpaid principal balance – past due interest, tax and insurance payments, and delinquency expenses. If PITIA is at 31% of gross monthly income, stop. Step 3: Reduce interest rate in increments of .125% to a floor of 2.00%. If modified interest rate is below the current market rate, rate will step up after year five at 1% per year to current market rate. With each rate reduction, if PITIA is at 31% of gross monthly income, stop. Step 4: Extend term for up to 480 months years and reamortize the mortgage. If PITIA is at 31% of gross monthly income, stop. Step 5: Forbear principal – no interest and no amortization; amount collected at payoff. If modified unpaid principal balance equals 100% of the fair market value, stop.

  8. Modification Program – Incentives • Borrowers $1,000 per year for performance for up to five years. Credited to unpaid principal balance. • Servicers $1,000 incentive for successful Trial Period and execution of Modification Agreement. Additional $500 incentive for successful Trial Period and execution of Modification Agreement if borrower is current and default is imminent. $1,000 per year for borrower’s performance for up to three years. • Investors $1,500 incentive for successful Trial Period and execution of Modification Agreement if borrower is current and default is imminent. Reimbursed for 50 percent of the dollar difference between monthly mortgage payment at 31 percent DTI and 38 percent DTI for up to five years.

  9. Modification Resources • Treasury’s Financial Stability for the American Economy www.financialstability.gov • Making Home Affordable www.makinghomeaffordable.gov • Home Affordable Modification Program for Servicers Supplemental Directive 09-01, April 6, 2009 www.HMPadmin.com • Freddie Mac Bulletin 2009-6 and Guide Chapter C65, March 11, 2009 Freddie Mac Bulletin 2009-10 and Guide Chapter C65, April 21, 2009 www.freddiemac.com/sell/guide/bulletins/ • Fannie Mae Announcement 09-05, March 4, 2009 Fannie Mae Announcement 09-05R, April 21, 2009 www.efanniemae.com

  10. Refinance Program – Eligibility • Investor / Guarantor – Fannie Mae or Freddie Mac • Account status -- current(not more than 30-days late in last 12 months) • Loan-to-Value – New principal balance not greater than 105% of fair market value; no CLTV limit • Credit – No minimum FICO score; based on mortgage payment history

  11. Refinance Resources • Making Home Affordable www.makinghomeaffordable.gov • Making Home Affordable Administration Site for Servicers www.HMPadmin.com • Freddie Mac Bulletin 2009-5, Freddie Mac Relief Refinance Mortgages, March 4, 2009 www.freddiemac.com/sell/guide/bulletins/pdf/bll095.pdf • Fannie Mae Announcement 09-04, Fannie Mae Home Affordable Refinance – March 4, 2009 www.efanniemae.com

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