New Streamlined Refinance Offering for High LTV Borrowers: HARP Extended through September 2017

Press release, Washington, D.C. – The Federal Housing Finance Agency (FHFA) today announced that Fannie Mae and Freddie Mac (the Enterprises), at FHFA's direction, will implement a new refinance offering aimed at borrowers with high loan-to-value (LTV) ratios.  The new refinance offering will provide much-needed liquidity for borrowers who are current on their mortgage but are unable to refinance through traditional programs because their LTV ratio exceeds the Enterprises' maximum limits. 
"Providing a sustainable refinance opportunity for high LTV borrowers who have demonstrated responsibility by remaining current on their mortgage makes financial sense both for borrowers and for the Enterprises," said FHFA Director Melvin L. Watt.  "This new offering will give borrowers the opportunity to refinance when rates are low, making their mortgages more affordable and thus reducing credit risk exposure for Fannie Mae and Freddie Mac."

Eligibility

In order to qualify for the new offering, borrowers: (1) must not have missed any mortgage payments in the previous six months; (2) must not have missed more than one payment in the previous 12 months; (3) must have a source of income; and (4) must receive a benefit from the refinance such as a reduction in their monthly mortgage payment.  Full details will be available in the coming months through the Enterprises, but the offering will make use of the lessons learned from the Home Affordable Refinance Program (HARP) and its streamlined approach to refinancing.
The new high LTV streamlined refinance offering is more targeted than HARP but as with HARP, eligible borrowers are not subject to a minimum credit score, there is no maximum debt-to-income ratio or maximum LTV, and an appraisal often will not be required.  However, unlike HARP, there are no eligibility cut-off dates connected with the new offering, and borrowers will be able to use it more than once to refinance their mortgage.  Borrowers with existing HARP loans are not eligible for the new offering unless they have refinanced out of HARP using one of the Enterprises traditional refinance products.

HARP Extended into 2017
The new high LTV streamlined refinance offering will not be available to borrowers until October 2017.  To ensure that high LTV borrowers who are eligible for HARP will not be without a refinance option while the new refinance offering is being implemented, FHFA is creating a bridge to this future program by also directing the Enterprises to extend HARP through September 30, 2017.  HARP continues to be one of the most successful crisis-era programs with more than 3.4 million homeowners already having refinanced their mortgage.  More than 300,000 U.S. homeowners could still refinance through HARP.  Visit HARP.gov and follow @FHFA on Twitter, LinkedIn and YouTube for more information.

Fannie Fact Sheet link
Freddie Fact Sheet link

Foreclosure Odds Drop 42% with THDA Homebuyer Ed

Press release, (August 24, 2016) – A first-of-its-kind study uses THDA home loan data to identify the impact of homebuyer education classes on default and foreclosure rates.
The new study shows the odds of foreclosure were 42 percent lower among participants in THDA’s down payment assistance program who completed a homebuyer education (HBE) class compared to participants who did not.
THDA began offering down payment assistance as part of its home loan program in January 2002 but did not start enforcing a requirement to attend an HBE class until July of that year. As a result, study author Scott Brown, a Ph.D. student in the Community Research and Action program at Vanderbilt University’s Peabody College, recognized a unique opportunity to compare two sets of otherwise identical homebuyers: down payment assistance recipients from the first half of the year who did not take an HBE class and those from the second half of the year who were required to take HBE.
“This is one of the first studies on the effectiveness of homebuyer education to provide evidence similar to an experiment with a control group,” said Brown.
“Because all of the homeowners in this study qualified for and received a home loan with down payment assistance from THDA in the same calendar year, their demographic, geographic, and financial characteristics are nearly identical. This is very helpful from a scientific perspective because it largely controls for factors other than homebuyer education when comparing one group to the other,” he explained.
Brown’s results were recently published in the prestigious Journal of Policy Analysis and Management. According to the study:
By the end of the seven-year study time period, only 10.6 percent of borrowers with HBE had foreclosed compared to 17.6 percent of those without HBE.
After adjusting for borrower, mortgage, and local economic differences, this amounted to 42 percent lower odds of foreclosure. (Please note, the odds of a foreclosure is not the same thing as the foreclosure rate.) Even after adjusting for differences in borrowers, mortgage loans, and local economies, borrowers who took HBE were still significantly less likely to have their mortgage end in foreclosure seven years later.
“There is a dramatic reduction in the likelihood of foreclosure. These classes make a real difference in people’s lives,” said Ralph M. Perrey, executive director of THDA. “It’s important that THDA does more than just provide families with the financing they need to get in the front door. We’re also preparing them to be successful homeowners for years to come.”
“Foreclosures are expensive and disruptive on all sides, including the borrower, the loan holder, and the mortgage guarantor, and this study shows that HBE classes are a relatively low-cost approach to preventing them in a significant percentage of cases,” said Brown.
The percentage of homeowners falling into default (being at least 90 days behind on payments at some point during the study) was not significantly different between the two groups: 32.6 percent for homeowners without HBE compared to 30.7 percent for those with HBE.
“Both program income limits and need for down payment assistance may have generated a pool of homeowners who are more vulnerable to disruption in their incomes. So these classes may have been more limited in being able to prevent program participants from ever falling a couple months behind on payments,” said Brown. “But HBE may still provide these homeowners with an understanding of how to adapt and be proactive when trouble hits, enabling them to prevent a default from escalating into a foreclosure.”
Another factor in the default data may be that homebuyers tend to participate in HBE classes near their loan closing date, long after a house is selected and an offer made. By this point, the opportunity to influence the price range of homes under consideration and down payment amount, and thus the size of the monthly home loan payment, has already passed.
“More research is needed into the timing of HBE classes and when in the buying process they have the strongest influence,” said Brown. “However, there are other approaches that can reduce the likelihood of default, even after the loan is closed. For example, a study by Stephanie Moulton and colleagues suggests that low-cost follow-ups with new homeowners, such as a quarterly call from a financial coach, could also help lower default rates by catching trouble early.”
Brown’s report cites research indicating, “Half of low-income first-time homebuyers face significant unplanned home repairs or major increases in utility costs, property taxes, or homeowner's insurance within the first two years of ownership.” When facing these or other hardships, homeowners who completed HBE appear to be significantly better prepared to recover and become current on their payments once again. Among borrowers defaulting for the first time, Brown found the odds of foreclosure was reduced 55 percent among those who took HBE compared to those who did not.
“The numbers in this study represent more than just dollars. These are Tennessee families of moderate-to-low income who are trying to make smart decisions about where to raise their kids and how to build up a safe nest egg for their future,” said Perrey.
Additional highlights from the study:

• Among borrowers who defaulted, HBE was associated with both an increased probability of becoming current on payments again and of avoiding a later foreclosure. Policymakers should consider the timing and intensity of HBE programs needed to influence default risk and how HBE may promote sustainable homeownership by influencing borrowers’ help-seeking behavior and strategies for resolving defaults.
• HBE appears to affect both the overall rates and timing of foreclosures. Though borrowers with and without HBE were defaulting at similar rates for the first four years after they received their mortgage, remarkably few foreclosures occurred in the HBE group during this time.
• Borrower credit scores were strongly connected to whether they were ever 90 days or more late on their payments. HBE did not appear to be particularly helpful in avoiding default or foreclosure for those with the lowest credit scores compared to those with higher credit scores.
• Only 16.7 percent of borrowers with HBE had their first default end in foreclosure compared to 37.8 percent of borrowers without HBE.

The full study as published in The Journal of Policy Analysis and Management is available online: http://onlinelibrary.wiley.com/doi/10.1002/pam.218...
Scott Brown is currently a Ph.D. student in the Community Research and Action program at Vanderbilt University. He served as an intern in the Research & Planning division of THDA in 2009.

My Comment:  The agency I work for offers the Homebuyer Education referenced above.  If you know someone seeking to become a homeowner have them call 615-833-9580 for more information.  If you already own a home and are in default or facing default, call me and let me see if I can help you. Rod Williams, 615-850-3453.

Consumer Financial Protection Bureau Expands Foreclosure Protections

Press release, Aug. 4, 2016, Washington, D.C. – The Consumer Financial Protection Bureau (CFPB) today finalized new measures to ensure that homeowners and struggling borrowers are treated fairly by mortgage servicers. The updated rule requires servicers to provide certain borrowers with foreclosure protections more than once over the life of the loan, clarifies borrower protections when the servicing of a loan is transferred, and provides important loan information to borrowers in bankruptcy. The changes also help ensure that surviving family members and others who inherit or receive property generally have the same protections under the CFPB’s mortgage servicing rules as the original borrower.

“The Consumer Bureau is committed to ensuring that homeowners and struggling borrowers are treated fairly by mortgage servicers and that no one is wrongly foreclosed upon,” said CFPB Director Richard Cordray. “These updates to the rule will give greater protections to mortgage borrowers, particularly surviving family members and other successors in interest, who often are especially vulnerable.”

Mortgage servicers are responsible for collecting payments from the mortgage borrower and forwarding those payments to the owner of the loan. They typically handle customer service, collections, loan modifications, and foreclosures. To address widespread mortgage servicing problems, the CFPB established common-sense rules for servicers that went into effect on January 10, 2014.

The CFPB issued proposed amendments to those rules in November 2014, and the final rule issued today adopts many of the proposed provisions. However, the Bureau made a number of changes in the final rule after considering comments received from the public.

The rule issued today establishes new protections for consumers, including:

• Requiring servicers to provide certain borrowers with foreclosure protections more than once over the life of the loan: Under the CFPB’s existing rules, a mortgage servicer must give borrowers certain foreclosure protections, including the right to be evaluated under the CFPB’s requirements for options to avoid foreclosure, only once during the life of the loan. Today’s final rule will require that servicers give those protections again for borrowers who have brought their loans current at any time since submitting the prior complete loss mitigation application. This change will be particularly helpful for borrowers who obtain a permanent loan modification and later suffer an unrelated hardship – such as the loss of a job or the death of a family member – that could otherwise cause them to face foreclosure.
• Expanding consumer protections to surviving family members and other homeowners: If a borrower dies, existing CFPB rules require that servicers have policies and procedures in place to promptly identify and communicate with family members, heirs, or other parties, known as “successors in interest,” who have a legal interest in the home. Today’s final rule establishes a broad definition of successor in interest that generally includes persons who receive property upon the death of a relative or joint tenant; as a result of a divorce or legal separation; through certain trusts; or from a spouse or parent. The final rule ensures that those confirmed as successors in interest will generally receive the same protections under the CFPB’s mortgage servicing rules as the original borrower. 
• Providing more information to borrowers in bankruptcy: Under the CFPB’s existing mortgage rules, servicers do not have to provide periodic statements or early intervention loss mitigation information to borrowers in bankruptcy. Today’s final rule generally requires, subject to certain exemptions, that servicers provide those borrowers periodic statements with specific information tailored for bankruptcy, as well as a modified written early intervention notice to let those borrowers know about loss mitigation options. Servicers also currently do not have to provide early intervention loss mitigation information to borrowers who have told the servicer to stop contacting them under the Fair Debt Collection Practices Act. Today’s final rule generally requires servicers to provide modified written early intervention notices to let those borrowers also know about loss mitigation options.
• Requiring servicers to notify borrowers when loss mitigation applications are complete: Whether a borrower is entitled to key foreclosure protections depends in part on the date a borrower completes a loss mitigation application. If consumers do not know the status of their application, they cannot know the status of those foreclosure protections. Today’s final rule requires servicers to notify borrowers promptly and in writing that the application is complete, so that borrowers know the status of the application and have more information about their protections.
• Protecting struggling borrowers during servicing transfers: When mortgages are transferred from one servicer to another, borrowers who had applied to the prior servicer for loss mitigation may not know where they stand with the new servicer. Today’s final rule clarifies that generally the new servicer must comply with the loss mitigation requirements within the same timeframes that applied to the transferor servicer, but provides limited extensions to these timeframes under certain circumstances. If a borrower submits an application shortly before transfer, the new servicer must send an acknowledgment notice within 10 business days of the transfer date. If the borrower’s application was complete prior to transfer, the new servicer must evaluate it within 30 days of the transfer date. If the new servicer needs more information to evaluate the application, the borrower would retain some foreclosure protections in the meantime. If the borrower submits an appeal, the new servicer has 30 days to make a determination on the appeal.
• Clarifying servicers’ obligations to avoid dual-tracking and prevent wrongful foreclosures: The CFPB’s existing rules prohibit servicers from taking certain actions in foreclosure once they receive a complete loss mitigation application from a borrower more than 37 days prior to a scheduled sale. However, in some cases, borrowers are not receiving this protection, and servicers’ foreclosure counsel may not be taking adequate steps to delay foreclosure proceedings or sales. The CFPB’s new rule clarifies that, if a servicer has already made the first foreclosure notice or filing and receives a timely complete application, servicers and their foreclosure counsel must not move for a foreclosure judgment or order of sale, or conduct a foreclosure sale, even if a third party conducts the sale proceedings, unless the borrower’s loss mitigation application is properly denied, withdrawn, or the borrower fails to perform on a loss mitigation agreement. The clarifications will aid servicers in complying with, and assist courts in applying, the dual-tracking prohibitions in foreclosure proceedings to prevent wrongful foreclosures.
• Clarifying when a borrower becomes delinquent: Several of the consumer protections under the CFPB’s existing rules depend upon how long a consumer has been delinquent on a mortgage. Today’s final rule clarifies that delinquency, for purposes of the servicing rules, begins on the date a borrower’s periodic payment becomes due and unpaid. When a borrower misses a periodic payment but later makes it up, if the servicer applies that payment to the oldest outstanding periodic payment, the date the borrower’s delinquency began advances. The final rule also allows servicers the discretion, under certain circumstances, to consider a borrower as having made a timely payment even if the borrower’s payment falls short of a full periodic payment. The increased clarity will help ensure borrowers are treated uniformly and fairly.

Today’s final rule makes additional changes to the CFPB’s mortgage servicing rules. These changes include providing flexibility for servicers to comply with certain force-placed insurance and periodic statement disclosure requirements. The changes also clarify several requirements regarding early intervention, loss mitigation, information requests, and prompt crediting of payments, as well as the small servicer exemption. Further, the changes exempt servicers from providing periodic statements under certain circumstances when the servicer has charged off the mortgage. Finally, concurrently with the final rule, the CFPB is issuing an interpretive rule under the Fair Debt Collection Practices Act relating to servicers’ compliance with certain mortgage servicing provisions as amended by the final rule.

Most of the provisions of the final rule will take effect 12 months after publication in the Federal Register. The provisions relating to successors in interest and the provisions relating to periodic statements for borrowers in bankruptcy will take effect 18 months after publication in the Federal Register.

View final rule
View interpretive final rule

My Comment: If you are in default of your mortgage or know circumstances are going to change that may put you in default or make your loan unaffordable, seek help early.  Don't try to navigate the complex world of resolving a mortgage default or determining the best course of action all by yourself.  You need help from someone who specializes in the field.  You need to talk to a HUD-approved Housing Counselor. If in the Nashville area, call me at 615-850-3453. Rod Williams