July 2016 - Lessons Learned

TheMReport — News and strategies for the evolving mortgage marketplace.

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48 | TH E M R EP O RT O R I G I NAT I O N S E R V I C I N G A NA LY T I C S S E C O N DA R Y M A R K E T SERVICING THE LATEST SERVICING LOCAL EDITION One Servicer Searches for a Needle in a Haystack DITECH FINANCIAL AND HLP ARE WORKING TO ASSIST THE RELATIVELY FEW BORROWERS ELIGIBLE FOR THE FHFA'S PRINCIPAL REDUCTION MODIFICATION PROGRAM. PENNSYLVANIA // The FHFA's Principal Reduction Modification program announced in mid-April has the potential to benefit up to 33,000 borrowers nationwide. This number represents a small share of the approximately 3 million underwater homeowners nationwide, which might make finding borrowers who qualify seem like looking for a needle in a haystack. That is not stopping Ditech Financial and HLP from trying to find eligible borrowers, however. Ditech Financial, a nonbank mortgage lender and ser - vicer headquartered in Pennsylvania and owned by Walter Investment Management, and HLP, a non-profit created in 2009 to help families achieve and sustain homeowner- ship, announced in mid-May an agreement to implement a borrower outreach effort to identify and assist borrow- ers who are eligible for the FHFA's Principal Reduction Modification program. "We are committed to rolling out FHFA's Principal Reduction Modification Program to reach and provide personal assistance to eligible homeowners whose loans we service, in an effort to help them avoid foreclosure and stay in their homes," said David Schneider, President of Ditech. "In keeping with our goal to become a lifelong partner in homeownership, we want to help families and individuals to take advantage of this program when that is the right option for them. HLP's platform will be an integral part of our effort to reach and assist those who are eligible for the loan forgiveness program." The combined outreach effort of Ditech and HLP involves using HLP's collaborative communication plat - form to integrate HUD-approved housing counselors with Ditech's mortgage servicing operations. The integration between HLP's platform and Ditech's servicing operations will help HUD's counselors more easily identify eligible borrowers. In order to be eligible for the Principal Reduction Modification program, homeowners must meet three requirements: • They must be severely delinquent as of March 1, 2016. • They must currently be severely delinquent on monthly mortgage payments. • They must have an LTV ratio of at least 115 percent (at least 15 percent underwater). Mortgage servicers must solicit eligible borrowers for the program no later than October 15, 2016. "In the past it was operationally prohibitive for residen - tial mortgage servicers to effectively and securely utilize the advocacy world in loss mitigation," said Cam Melchiorre, CEO of HLP. "HLP's primary feature has conclusively overcome this process-burden through its centralized, neutral communication hub and its open architecture. This framework enables secure collaboration and rapid deployment of foreclosure relief programs among major stakeholders in the residential mortgage finance industry in fulfillment of HLP's mission as a social enterprise to assist consumers to obtain and retain homeownership." Servicers, Get Ready for Record Low Mortgage Modification Rates In mid-May, the GSEs dropped the benchmark interest rate for mortgage modifications to its lowest level ever. F annie Mae and Freddie Mac recently announced a big change to the benchmark mortgage modification interest rate that will help servicers. In an effort to match the already historically low interest rates, the GSEs revealed that the standard mortgage modification rate would decrease from 3.750 percent to 3.625 percent. Beginning on May 13, 2016, the benchmark rate for both Fannie and Freddie fell to its lowest level ever, which should bode well for servicers. The new rate is a full percentage point lower than when the GSEs established the mort - gage modification interest rate in January 2012 at 4.625 percent. It was also 4.625 percent in September 2013. The rate has since fluctuated but has only fallen below 4 percent three other times. March 2016 was the previous low for the modifica - tion rate at 3.750 percent, while in February 2016 and November 2015, the rate was 3.875 percent. Fannie Mae stated its standard modification interest rate is sub- ject to periodic adjustments based on an evaluation of prevailing market rates. The servicer must use the current modification rate when evaluating a borrower for a conventional mortgage loan modification, excluding Fannie Mae HAMP Modifications. Freddie Mac said servicers must use its standard modifica - tion interest rate when deter- mining the terms of a standard modification trial period plan, Freddie Mac streamlined modification trial period plan, or a capitalization and exten - sion modification for disaster relief trial period plan. In these situations, the same modification interest rate used for the trial period plan must also be used for the final modification. "By adjusting the interest rate from time to time, you will have the ability to provide borrowers with a rate that aligns more close - ly to current market conditions," Freddie Mac said in its Standard Modification FAQs.

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