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faith · 07-05-2009, 06:10 PM

Jmayflower55,

Participating loan servicers will be required to use a net present value (NPV) test on each loan that is at risk of imminent default or at least 60 days delinquent. The NPV test will compare the net present value of cash flows with modification and without modification. If the test is positive, meaning that the net present value of expected cash flow is greater in the modification scenario, the servicer must modify absent fraud or a contract prohibition.

Parameters of the NPV test are spelled out in the guidelines, including acceptable discount rates, property valuation methodologies, home price appreciation assumptions, foreclosure costs and timelines, and borrower cure and redefault rate assumptions.

Servicers will follow a specified sequence of steps in order to reduce the monthly payment to no more than 31 percent of gross monthly income -DTI. The making home affordable mortgage modification sequence requires first reducing the interest rate (subject to a rate floor of 2 percent., then if necessary extending the term or amortization of the loan up to a maximum of 40 years, and then if necessary forbearing principal. Principal forgiveness or a Hope for Homeowners refinancing are acceptable alternatives.

The monthly payment includes principal, interest, taxes, insurance, flood insurance, homeowners association and/or condominium fees. Monthly income includes wages, salary, overtime, fees, commissions, tips, social security, pensions, and all other income. The program will share with the lender/investor the cost of reductions in monthly payments from 38 percent DTI to 31 percent DTI.

Servicers that modify loans according to the guidelines will receive an up-front fee of $1,000 for each modification, plus pay for success fees on still-performing loans of $1,000 per year.

Homeowners who make their payments on time are eligible for up to $1,000 of principal reduction payments each year for up to five years. The program will provide one-time bonus incentive payments of $1,500 to lender/investors and $500 to servicers for modifications made while a borrower is still current on mortgage payments.

The program will include incentives for extinguishing second liens on loans modified under this program. No payments will be made under the program to the lender/investor, servicer, or borrower unless and until the servicer has first entered into the program agreements with Treasurys financial agent.

Source:
U.S. DEPARTMENT OF THE TREASURY

07-05-2009, 06:10 PM	#14 (permalink)
faith Homeowner & Forum Guide Join Date: Feb 2008 Location: San Diego Posts: 885 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: B of A Did'nt sound Promising! Jmayflower55, Participating loan servicers will be required to use a net present value (NPV) test on each loan that is at risk of imminent default or at least 60 days delinquent. The NPV test will compare the net present value of cash flows with modification and without modification. If the test is positive, meaning that the net present value of expected cash flow is greater in the modification scenario, the servicer must modify absent fraud or a contract prohibition. Parameters of the NPV test are spelled out in the guidelines, including acceptable discount rates, property valuation methodologies, home price appreciation assumptions, foreclosure costs and timelines, and borrower cure and redefault rate assumptions. Servicers will follow a specified sequence of steps in order to reduce the monthly payment to no more than 31 percent of gross monthly income -DTI. The making home affordable mortgage modification sequence requires first reducing the interest rate (subject to a rate floor of 2 percent., then if necessary extending the term or amortization of the loan up to a maximum of 40 years, and then if necessary forbearing principal. Principal forgiveness or a Hope for Homeowners refinancing are acceptable alternatives. The monthly payment includes principal, interest, taxes, insurance, flood insurance, homeowners association and/or condominium fees. Monthly income includes wages, salary, overtime, fees, commissions, tips, social security, pensions, and all other income. The program will share with the lender/investor the cost of reductions in monthly payments from 38 percent DTI to 31 percent DTI. Servicers that modify loans according to the guidelines will receive an up-front fee of $1,000 for each modification, plus pay for success fees on still-performing loans of $1,000 per year. Homeowners who make their payments on time are eligible for up to $1,000 of principal reduction payments each year for up to five years. The program will provide one-time bonus incentive payments of $1,500 to lender/investors and $500 to servicers for modifications made while a borrower is still current on mortgage payments. The program will include incentives for extinguishing second liens on loans modified under this program. No payments will be made under the program to the lender/investor, servicer, or borrower unless and until the servicer has first entered into the program agreements with Treasurys financial agent. Source: U.S. DEPARTMENT OF THE TREASURY __________________ Regards, Faith "Pay it forward"