Home Affordable Modification on 40 yr mortgage and navigating Chase

[gordilox86]

Lainy/Art,

Here is how you can figure out a ballpark "magic number."

If you have a "Trial Period Plan" executed by Chase you are in the HAMP program and should expect a permanent modification, unless 1) your financial situation changed or 2) Freddie Mac is required to forbear principle and your NPV test is negative.

Here is how the permanent modification is supposed to work according to guidance Freddie Mac has released to their Servicers (refer to video as I mentioned 8/20/09 above).

In the event an interest rate reduction and term extension are not enough to acheive the Target Payment, Servicers have been instructed by Freddie Mac to forbear principle (not forgive principle).

The term "Forbear" principle in this context, means a portion of the principle balance is tacked onto the end of the loan term as a balloon payment.

If Chase is required to forbear principle then the Servicer will perform a NPV test. The NPV test has historically been used by banks to determine if it makes business sense to modify a loan as opposed to move to foreclosure.

Hint: In July 2009 the US Treasury released a NPV calculator for Servicers to use for HAMP NPV calculation.

The US Treasury calculator is tightly guarded, however, the basic mechanics work like this:

NPV is negative when foreclosure is more profitable than modification (foreclosure>modification)
NPV is positive when modification is more profitable than foreclosure(foreclosure
Here is how to determine (within a reasonable ballpark), whether your loan is NPV negative or positive.

Step - 1 Calculate Proceeds from Foreclosure:

Hint: Typically the bank loses $40k - $60k through the foreclosure process (court filings, damage to home, realtor commissions, escrow, title etc...).

Market Value of Home $500,000*
Less: Cost of Foreclosure <$40,000>
Foreclosure Proceeds $460,000

Step - 2 Calculate Net Present Value of Discounted Cash Flows for your Modified Loan (you will need a financial calculator or CPA assistance for this calculation)

Hint: Bear in mind, you must first apply the reduced interest rate of 2%, then extend term of 40 yrs, and lastly tack on a balloon payment of principle until you acheive the Target Payment.

Compare Step - 1 to Step - 2 and again, if it makes business sense to foreclosure, your NPV is negative and bank will reject your modification. If your NPV is positive, it makes business sense to modify, you loan will be modified.

[Lainy09]

HI there--thanks for all the wonderful info you post. Unfortunately mine is not Freddie, it is an investor-owned loan (I think they called it a "mortgage backed security" or something to that effect) so I don't believe in my case Chase has to play by any particular set of rules.

We are only doing a trial "repayment" plan at this point..no promises, no guarantees, but at least it's something. We did sign an agreement recently, and received a call that our payment had been received (thru Western Union Quick Collect--what an adventure that was) and that the "plan was in place". By the end of November we should either have something else in place, or they could be telling us to hit the road. I wish I could offer some guidance, but I'm just as confused as everyone, but have reached more of an "acceptance" phase at this point.

[c150000]

GORGILOX86
i have a question for you
i have a 15 year balloon,(2007) loan balance is 283.500.00 with a balloon of 212.000.00 at the end ..(reg payment is prin and intr)

how do they figure npv on that?
and i too am on the 3 month plan to start in sept waiting for packet

the video says get it as close to 31% if income,,
i put my numbers in the mortgage calculator and even at 2% for 40 years
the 31% payment they gave me of 1620.00 -684.00 tax and insurance=978.00 p-i thats useing 100% of gross BUT........

also i have rental income as i understand that they only count 75% of that as said in the video,, but chase did not take 75% for gross they took 100% of it and based my payment on that.. if they take 75% out my
pri and int payment goes way down from 978.00....
to like 650.00 and at that amount even at 40 years 2% wont pay my balance....what do you think?
can they raise it highter than 31% the video also states get payment close to 31% so it can be higher than correct

how can i figure out how much they would have to forbe at that 650.00
amount?

thanks cheryl

[RAMD05]

Anyone, please help to answer these questions? I am confused.....


1. How much should be a surplus per month?fficeffice" />>>

2. If my "Trial Payment" is $1,360 + $500 of "HOA" fee totalling $1860, so my total cash reserve when combined (checking and savings) cannot be more then $5580? My original monthly payment prior to Trial period was $3,100 per month. So, the cash reserve cannot be more then 3 x “Target Payment” or more then 3x “unmodified original payment” ????>>

3. My hardship is a separation, (so now it is 1 income instead of 2), but no official divorce paper. Can that be a problem? Will they only consider an office divorce paper? Complicated divorce may take more then 6 months before granted. (There is a separation agreement, signed back in March, though). ?????

>>
Thanks a lot in advance for help!

[determined1]

Thanks for the info Gordi.

[gordilox86]

Cheryle,

These calculations can be made easily with a financial calculator, however, if you do not have a financial calculator I would strongly suggest taking this information to your CPA. Tell him or her to calculate the Net Present Value of Cash Flows under each scenario.

[gordilox86]

RAMD,

1) When you use the term Surplus, you are talking about Gross Income less Expenses correct? If so, the surplus figure to shoot for should be greater than $500 per month after loan modification. This figure was provided to me by the HUD Hope Analyst and a book I read on loan modification.

2) If you are a current borrower then there are 2 tests Servicer will perform to determine whether you are at risk of Imminent Default; 1) Debt Coverage Ratio, 2) Cash Reserve Test. Cash reserves cannot exceed 3 x current PITIAS (Principle Interest Taxes Insurance Assoc). If you are in the Trial Period and your loan has not actually been modified permanently, then the current PITI would be your original loan payment. This is my interpretation. Take a look at the Freddie Mac video which explains further https://freddiemactraining.webex.com...ingID=34405247

3) This is a question for a loan officer. Your loan will go through an underwriting process similar to a new loan before modification. My understanding is that if your ex is no longer living in the household and you are legally separated, then you would use your income only, which would be a hardship for "Household Financial Circumstances Have Changed."

Hope this helps. Good luck

[c150000]

hi gordilox86
about $that is left over after mod... of course your surplus after mod would be way over 500.00 wouldnt it...if your now payng say 39-45% and they are trying to put you closest to 31%, that woukd leave most with way over 500.00 surplus
anything higher of my income would be over the 1.20 debt to income ratio........requried,,,,,, mine is after tax and bills 1.14 if they were to modif at 31%
i would have 582.00 surplus BUT at my figures i dont even make the 2% 40 year mark
i owe 283.000 31% would be 700.00 prin and intrest a month at 31%
in order to get that i miss the prin intrest by 147.00 it comes out to 847.00 a month for 40 years
i just can not figure how much they would have to forbear?
i did see the video,, it states get the borrower as close to 31% as they can, maybe it will work that way......
i have no one to help me understand this so, just trying to figure out if even have a chance

cheryl

cheryl

[snapple candy]

Hi gordio,
thanks for all the help you are giving everyone and me. I finally got a day off from work and starting to dig into this to "get ready" for the final mod term scenario and the phone call. I m to understand that the fannie mae negotiator for Chase is the one to do the final review on my perm mod. Does this sound right?

[gordilox86]

My understanding is a Chase/Wamu underwriter, may call you with questions prior to sending out the Modification Agreement for permanent modification. Per Chase Executive Resolution Analyst, "the rates she has seen on the permanent HAMP modifications is around 4-5%, since Chase is adjusting term before looking to rate to acheive Target Payment."

You are not bound to accept anything until you actually sign and return the Modification Agreement and make your first modification payment under the new loan.

To get the most out of this, watch the Freddie Mac video I posted on August 20th and understand the "waterfall" approach your underwriter is required to apply to your loan.

Might be a good time to take out the tape recorder and start taking authorized tapings of all conversations.

[gordilox86]

Cheryl,

The Target Payment is no more than 31% of Gross Income. The Target Payment, otherwise known as the Trial Period Payment is static. In otherwords, the Target Payment should not change, (unless your financial situation has changed since original submission of financial information). All other parts are moving based on the "waterfall" approach, (ie... interest rate, term, principle forbearanc). These moving parts are all dependant on acheiving the Target Payment. So, if you know the Target Payment, rate is 2%, and Term is 40 years, then the calculation of how much principle to forbear (tack onto back of loan) is a simple calculation if you have a financial calculator with Present Value functions.

[snapple candy]

Im getting ready to sit down and watch Gordio. Yeah I will get my recorder out too!

When you say "permanent HAMP modifications is around 4-5%, since Chase is adjusting term before looking to rate to acheive Target Payment."

What do you mean? Can you explain further?

[Marie T]

Gordilox - you have provided some great info - thanks! Not sure how much applies to me since I do not have FannieMae or FreddieMac backed loan, WAMU kept my loan so no separate investor either so WAMU/Chase doesn't have to follow same rules then.

When you say, "Might be a good time to take out the tape recorder and start taking authorized tapings of all conversations.", what would make it authorized, telliongthem you are taping them?

[lexusfrank]

Thank you all for the threads, I was going nuts as to what to do as I have an auction date of 10/7 with Chase and didnt know if I should try to work something out with them directly. I called Kevin Winn at NACA , he called me back (I left a message late at night ) the next day around noon. VERY NICE guy, works directly with and for Bruce Marks . He advised me to stay under the NACA "umbrella" ,he says due to the servicing agreements they have with the lenders (if they have one with yours) they cant foreclose while you are under the NACA umbrella or working with the lender via NACA. He says the issues with getting things done are with the servicers not them. He said they just push a button and send it but the servicers arent up to speed or have enough people to handle all the requests. He also indicated they cant get postponements on sales dates till you are within a few weeks of the sale date, he said the lenders wont even field their call/message until then. He said the easiest thing they do is get dates delayed but not until its close to the sale dates (wonderful huh?) I feel better now but still worry. Anyone been behind with Chase and have good success with NACA? I'm tempted to work directly with Chase but am trying to let NACA do their job. Any suggestions? Hope this helps.

[azdmsmith]

My FedEx package with my trial period docs and 1^st trial payment was received by Chase. The payment that I sent was due 9/1 and has cleared my bank. They didn’t ask for cashier’s check and I preferred to use a personal check so I could track it as others here seemed to have trouble with payments being lost.

Of course I haven’t received a response to my request to get copies of my signed trial period docs yet. However the good ol’ BBB is continuing to follow up on my complaint. The latest info they sent me was that Chase told them I would received a response by 9/14/09 and the BBB inquired if that satisfied my complaint. Ha! If only I had a dime for every time Chase told they would get something done and never followed up. I responded to the BBB telling them that 3156 indicates “This Plan will not take effect until both I and the Lender sign it and Lender provides me with a copy of this Plan with the Lender’s signature”. I indicated that my complaint will not be satisfied until I receive a signed copy of form 3156 so the proposed Plan is in effect.

For those of you who aren’t getting your questions answered in this thread, may I gently suggest you start a new thread with your specific topic so your question doesn’t get lost in here?

[snapple candy]

AZ,
I just got a phone call this am at 6:50am (im on the left-coast and they on east) from Chase Executive office about the issue of the signed contract. I actually was surprised to hear from them since the Exec office a few days ago sent email to the "handler" of the account and she basically told me that the Trial Mod contract was an "informal" agreement and that I wouldnt be receiving a signed copy back.
Well this lady is supposidly looking into it and going to provide me a copy of it signed. We'll seeeeeeee.Surprised they arent asking for a cashiers check from you. First I have heard of this occuring.

Gordio,
I have watched the video in its entirety and it is very good and does explain alot. Too bad we cant access that NPV Treasury calculator as well as other info. I am starting to get a handle on it and trying to prepare for the phone call from the underwriter. I have paid close attention to the "Waterfall" approach and appreciate you identifying where Chase might try to circumvent the steps. Because I am not a CPA or have one or understand the financial calculator clearly, I am struggling with financial lingo as well as the process of how to apply the calculations appropriately. I think I am getting the gist though of how Chase underwriter is extending the terms first before applying the interest rate adjustment.

I downloaded the calculator and ran the numbers as AZ did.....I dont reach my target payment (starting at 2%, 5yr, cap of 5.22%) unless they forbear 70K (almost down to BPO appraisal amount). This is at 40 year term. My loan amount (w/capitalization of arrearages) is 330K and target payment $1146.00. Any thoughts?

[c150000]

Gordilox86
thanks................

[gordilox86]

Snapple,

Sounds like you and I are on the same page.

If your calculation is correct and Chase must forbear $70k then Chase will run the NPV test, one more time. If the NPV is positive you will receive modification. If NPV is negative your file will be rejected and you must re-apply when your gross income is higher.

Since you are in a Trial Period Plan Chase has already run the NPV test once prior to placing you in the plan. So you should be in good shape for the second NPV test, if applicable.

[azdmsmith]

Things have been kind of quiet since I finally started my trial period. I did receive a call from exec resolutions. Apparently I've been assigned yet another new rep (I think this is the 4th). At this point really all I am waiting on from Chase is a signed copy of the trial plan (form 3156). Although I still havent received it yet, my exec resolutions person is really good about calling me every 10 days or so to see if I have received it so it's good to at least be on her radar.

Also, the BBB continues to be GREAT about following up with me. Their last call indicated that Chase had requested an additional 30 days to respond to me (so by 10/14/09) and the BBB wanted to know if I would agree to that. I agreed since my original complaint was about the lack of service and my proposed resolution was to be placed in a HAMP trial plan. Once I get the signed form 3156, they have resolved my original complaint. I filed complaints with every place I could imagine and I believe I would still be fighting for a trial period had it not been for the BBB.

I will continue to make my trial payments via personal check and see what happens after #4. I was current on my payments going into the trial so per the FannieMae guidelines I must complete 4 trial payments prior to a permanent mod.

[snapple candy]

Az, glad you are enjoying some quiet.
You mentioned making a 4th payment pursuant to the fannie mae guidelines.
I have only made 3 and also fannie mae. I had not heard about a required 4th payment. Can you enlighten me on that?

[azdmsmith]

From the FannieMae guidelines (09-05R):

"The trial payment period is three months long for mortgage loans where the payment is already in default and four months long for mortgage loans where the servicer has determined that a borrower's payment default is imminent but no default has occured"

I was current when my trial period started but did meet the imminent default guidelines.

[snapple candy]

Thanks AZ.
I was already in default, but the Chase rep on my 2nd told me after a lengthy discussion to make that 4th payment or I would be rejected and ineligible for incentive plan and never get a HAMP mod.

[DenieLisa]

I have a few questions...

After being approved by SPS and making 2 of my 3 trial payments, I'm now told I'm being denied due to failing the NPV test.

Why do they not run this test before telling me I'm approved?

Is the NPV Calc from the FDIC so much different that the one used in the HAMP? Because, I pass with the FDIC NPV calc.

And, how can I get the results (the actual data) of SPS npv test to see what numbers they used? They told me all they get is a pass or fail from the treasury department. I know this is BS.

Thanks!

[litehouse01]

You would have thought they would run an NPV test to see if you quailified to begin with....instead of putting you thru this.. I thought they did that before granting trials? Maybe I'm wrong but I thought they did...

[davephx]

The FDIC test is not being used for HAMP but since the HAMP test is so secret no one knows the details to evaluate.