How to prepare for negotiator?

[mom_of_two]

I made my first trial payment on Oct 1, when called yesterday, I was told that they have all my paperwork and I should call mortgage outreach's underwriter's dept. at 866-413-4560 and see if I have a negotiator assigned. I just want to be prepared for all the questions negotiator asks, also I am afraid what if they deny, what should I say then

My case:
Servicer: CitiMortgage
Investor: Citibank
Interrest only loan: 499,999 at 5.75 due to reset 2010
Gross income: 5864 (31% PITI is 1814, that is possible only with 2% and 50,000 baloon and 40 years term, this is what my trial payment is now)
Current value of the property: 575,000
Property location: Forest Hills, New York
Hardship: Ex-husband stopped helping (but cannot document it, as he is on SSI and was helping me by buying groceries and babysit our 6 years old son)

I would appreciate any advice, I have two children and dont want to short sell and move.

[Evan Bedard]

Hi mom of two,

I made my first trial payment on Oct 1, when called yesterday, I was told that they have all my paperwork and I should call mortgage outreach's underwriter's dept. at 866-413-4560 and see if I have a negotiator assigned. I just want to be prepared for all the questions negotiator asks, also I am afraid what if they deny, what should I say then

Did you start paying on the trial period without receiving the documents for it?

[mom_of_two]

Hi Evan

I was pre-qualified over the phone in June (after only faxing my budget and paystubs, and reason for the hardship, its called "Customer Hardship Assistance Package" which is on Citi's website) and was told that I qualify for HAMP and to make $1814 monthly payment from July 1. In September I received the UPS pacakge, in which they requested all the documents and trial payment period was Oct, Nov and Dec. As such, Oct. 1 is technically my first trial payment.

[Evan Bedard]

I was pre-qualified over the phone in June (after only faxing my budget and paystubs, and reason for the hardship, its called "Customer Hardship Assistance Package" which is on Citi's website) and was told that I qualify for HAMP and to make $1814 monthly payment from July 1. In September I received the UPS pacakge, in which they requested all the documents and trial payment period was Oct, Nov and Dec. As such, Oct. 1 is technically my first trial payment.

Oh ok, so on the paperwork you received it explained what and when the payments were due correct?

The only reason I ask is because I have seen many people make a huge mistake by starting to pay on the trial without even receiving it in writing first..

[mom_of_two]

But, I did make trial payments for July, Aug and Sept. without having anything in writing (I thought that Citi just want to speed up the process as being presurred by Obama Admn, and payment was $1,000 less than my orignal payment was, I got too excited and thought its done deal and now reading all the FORUMS I am realizing my mistake....what this mistake is going to cost me?

[Evan Bedard]

But, I did make trial payments for July, Aug and Sept. without having anything in writing (I thought that Citi just want to speed up the process as being presurred by Obama Admn, and payment was $1,000 less than my orignal payment was, I got too excited and thought its done deal and now reading all the FORUMS I am realizing my mistake....what this mistake is going to cost me?

I think you will be ok. It seems a lot of reps are prequalifying people just to squeeze money out of them without even sending the official agreement. No agreement is valid until it is received, signed, and you return it to the bank.

[mom_of_two]

Hi Evan
Thanks a lot for your help/advice and quick response.
Do you think I will be approved for permanent mod? I know its silly thing to ask...do I still have any card in my hand that I can use to increase my chances?
Thanks again
Best regards

[Evan Bedard]

Do you think I will be approved for permanent mod? I know its silly thing to ask...do I still have any card in my hand that I can use to increase my chances?

Once the trial is complete you will have to resubmit updated financial information. They will then continue to review your case for a permanent mod..

[Needanewjob]

Hello Mary,

Mortgage Outreach Service won't make any decisions on your loan.. They are a 3rd party hired to simply do the document collection.. They will make sure all of your docs have been received and let you know if anything else is needed. Like people will forget to fill out the 4506t form in it's entirety... When you call MOS department simply ask them if they have everything they need. Once they have everything they will transfer your file back to citi mortgage for final approval.. The whole process will take some time, I just made my 5th trial payment with Saxon. We are just starting to see these trial periods get fully approved.. Hang in there and be patient.

[hope67]

Gross income: 5864 (31% PITI is 1814, that is possible only with 2% and 50,000 baloon and 40 years term, this is what my trial payment is now)

As far as I know, according to HAMP guidelines, there is no balloon option, instead they are supposed to do a principal forbearance, so in your case it should be a 50,000 principal forbearance.

This is how they are supposed to do the waterfall calculation:

For example your gross income is $1000, 31% is $310.00, this should include tax, insurance and HOA fee.

Let's say that your balance is $95,000, the arrears are $5,000

step 1:Capitalize arrears: The new balance is $95,000 + $5000= $100,000

Step 2:Reduce interest rate: the question is, can they reduce the interest rate without going below 2% to arrive at $310 payment. If yes, they don't need to go to step 3, if no, they will have to go to step3. In this example, they can't achieve a $310 payment with 2% interest, using a 2% on a 100,000 balance for 30 years will yield a payment of $369.62 which would be higher. They must go to step 3

Step3: Extend loan term: the maximum term is 40 years. So if they can reach the $310 payment by extending the loan to a term that would not exceed 40 years, they would not need to go to step 4, in this example, they can extend it to 39 years, the payment will be very close to $310, it will be $307.90 which is fine, so there is no need to go step 4

Let's say in another example, they couldn't reach the payment calculated based on the 31% of the gross income, for example the balance + arrears = $120,000 then they would need to go to step 4:

Step4:Forbear principal: they would need to reduce the balance you owe by about $18,000..why?

120,000 - 18,000 = $102,000

Balance financed = $102,000
Interest rate = 2% (which is the minimum allowed)
Term: 40 years (which is the maximum allowed)
Payment: $308.88 (this is the closest to the $310.00 goal)

Note: (keep in mind that I didn't provide for tax, insurance and HOA in my example, this is just to give you an idea about waterfall calculation)

[3boys'mom]

Sorry..but have to say it..HOPE67...you are f*&^% good at explaining..Congrats professor..
Loved it.

[3boys'mom]

I found a good calculator
http://www.realestateabc.com/calculators/PITI.htm

just needed to add my HOA to it but now I know that my underwater mortgage would only work if they give me the 2% and the 40 yrs term and if the last resource is the forbearance then HomeQ wouldn't need to do it.

[davephx]

But, I did make trial payments for July, Aug and Sept. without having anything in writing (I thought that Citi just want to speed up the process as being presurred by Obama Admn, and payment was $1,000 less than my orignal payment was, I got too excited and thought its done deal and now reading all the FORUMS I am realizing my mistake....what this mistake is going to cost me?

The trial payment agreement that I also never got, is no longer required. Only the final docs which they are very behind on. And then wait who knows how long for approval or denial at final stage.

[davephx]

hope67- but the step 4 forbearance is OPTIONAL, not required that little word "may".

From reports here forbearance is very rare they seem to decline most folks if can't get to piti = 31% after step 3 sadly.

[undecided]

Thank you for this simple explanation, now I understand LOL

[hope67]

hope67- but the step 4 forbearance is OPTIONAL, not required that little word "may".

From reports here forbearance is very rare they seem to decline most folks if can't get to piti = 31% after step 3 sadly.

davephx, according to the guidelines, I don't think it is optional. They should do a principal forbearance agreement setting it up as a balloon payment at the end of the term of the loan. I thought they cannot set it up as a balloon payment, so I was wrong in that sense. Of course the final step is passing the NPV test.

From HAMP guidelines:

1. Capitalize accrued interest and other eligible expenses to determine the modified loan amount.
2. Reduce the interest rate to reach the 31% target housing debt-to-income ratio in increments of 0.125% subject to an interest rate floor of 2%.
3. If the 31% target housing ratio has not been reached, extend the term of the loan up to a maximum of 40 years.
4. If the 31% target housing ratio has not been reached, then reduce the principal through an agreement between the borrower and the servicer. This agreement (forbearance agreement) would require that the amount of principal reduction be set as a balloon payment at the end of the loan term or when the loan is otherwise paid off

HAMP & Non-GSE-Insured Loans

[hope67]

davephx, I researched it further, it is not really clear to me whether or not step 4 (forbear principal) is optional:

from the treasury site:

Step 6: If the Front-End DTI Target has not been reached, forbear principal. If there is a principal forbearance amount, a balloon payment of that forbearance amount is due on the maturity date, upon sale of the property, or upon payoff of the interest bearing balance. If the modification does not pass the NPV Test and the servicer chooses to modify the loan, the modified balance must be no lower than the current property value.

Then this:

There is no requirement to use principal reduction under the Home Affordable Modification program; however, servicers may forgive principal to achieve the Front-End DTI Target.

According to the waterfall explanation, they should set up principal forbearance as a balloon payment, so it is not principal forgiveness. So what I'm thinking, that it's the principal FORGIVENESS that is optional.

What do you think?

[hope67]

hope67- but the step 4 forbearance is OPTIONAL, not required that little word "may".

From reports here forbearance is very rare they seem to decline most folks if can't get to piti = 31% after step 3 sadly.

To add to my previous post:

I'm really thinking that principal forbearance set up as a balloon payment is mandatory if need be, I think there is a distinction between principal forgiveness (optional) VS principal forbearance agreement set up as a balloon payment (mandatory).

Here are the guidelines from :
https://www.hmpadmin.com/portal/docs...cer/sd0901.pdf

Step 4: If necessary, the servicer must provide for principal forbearance to achieve the target monthly mortgage payment ratio. The principal forbearance amount is non-interest bearing and non-amortizing. The amount of principal forbearance will result in a balloon payment fully due and payable upon the earliest of the borrower’s transfer of the property, payoff of the interest bearing unpaid principal balance, or maturity of the mortgage loan. The modified interest bearing balance (i.e., the unpaid principal balance excluding the deferred principal balloon amount) must create a current mark-to-market LTV (current LTV based upon the new valuation) greater than or equal to 100 percent if the result of the NPV test is negative and the servicer elects to perform the modification.
There is no requirement to forgive principal under the HAMP. However, servicers may forgive principal to achieve the target monthly mortgage payment ratio on a standalone basis or before any step in the standard waterfall process set forth above. If principal is forgiven, subsequent steps in the standard waterfall may not be skipped. If principal is forgiven and the interest rate is not reduced, the existing rate will be fixed and treated as the modified rate for the purposes of the Interest Rate Cap.

[davephx]

Hope67

Hmmmm....
On the MGIC site, shows its required but than refers back to LTV limits agency requirements but doesn't explain.

Your link and quote from hmpadmin is the oldest Directive 09-01 of April 6, 2009. Later directives from MHA and financial stabilty say "may"

I agree we are talking about forbearance where the amount results in a back end balloon payment vs forgiveness which is never required under HAMP.

I do see where there is a glimmer of hope on the forbearance but seems limited to Fannie?

10/14/09 Fannie Mae Checklist for HAMP on page 4 of 17 does not have "may" but seems to require forbearance if the NPV test is positive. If negative only if loan-to-value under 100% which not likely to happen much.

But the latest July 16, 2009 MHA stuff has "may". For example The Borrower FAQ at
Making Home Affordable - FAQs says:

10 What happens if that is not enough to get to an affordable payment?

If a 2 percent interest rate does not result in a payment that is affordable (no more than 31 percent of your gross monthly income), your servicer may:

* First try to extend your payment term. At the servicer's option the term of the loan could be extended up to 40 years.

* If that is still not sufficient, your servicer may defer a portion of the principal amount you owe until the maturity of the loan. This is called a principal forbearance. However please note that with a forbearance, you will still owe the principal; but repayment is deferred until a later date.

* A portion of the principal could be also be forgiven. This is optional on the part of the servicer. However there is no requirement for principal forgiveness and there is no guarantee that your servicer will offer principal forgiveness.

Same thing at www.financialstability.gov/docs/borrower_qa.pdf

NO wonder servicers are confused They may be using the "may" versions but obviously Treasury needs to clarify, although Fannie/Fredeie/other investors can it seems to either since only Fannie seems to have it required vs latest guidelines of the overall program as quoted above.

Geeeze, it should not be so confusing on such an important issue as forbearace which could get a lot more folks qualified under HAMP.

[hope67]

Geeeze, it should not be so confusing on such an important issue as forbearace which could get a lot more folks qualified under HAMP.

I totally agree with you davephx, they should be very precise on this issue! Step 4 "Forbear principal" could really get more homeowners qualified for HAMP!

[Needanewjob]

Both the negotiators and the call center loss mitigators call in and we imput the information into the software tool. If a two percent interest rate cannot get you to the target number of 31 percent then you will fail 99 percent of the time.. When we input the income and expenses we submit the application and it comes back eligible or not eligible. If its eligible then we can see the terms. Every now and then i'll see a principal forbearance offered to get client on trial.. Only when the client has had very negative equity have I seen principal forbearance being offered..

[davephx]

< Only when the client has had very negative equity have I seen principal forbearance being offered..

That makes sense from the NPV test basis, and indicates the word "may" forbear is still what at least Citi is following and from reports here from other servicers it is also rare.

[hope67]

< Only when the client has had very negative equity have I seen principal forbearance being offered..

That makes sense from the NPV test basis, and indicates the word "may" forbear is still what at least Citi is following and from reports here from other servicers it is also rare.

I don't believe that step 4 which states that the servicer "MUST" forbear principal by setting up a balloon payment has been revised to "may" forbear balance. I think the banks are not following the guidelines. They can only deny the modification if principal forbearance is needed AND the NPV test is negative. I think that is the reason they used the word "may", "may" doesn't mean it is optional, that term "may" is used because there is one situation where principal forbearance could not be used---> NPV test is negative.

Here are the guidelines dated 8/28/09

Step 5. Regardless of whether a modification is pursued, you must
maintain detailed documentation of the base NPV model used,
including all NPV inputs and assumptions, as well as the NPV
results. You must save the results file to your computer.
Following is a brief explanation of each field of the NPV test
results:
HAMP Servicer ID
A unique identifier assigned to each servicer that is
participating in HAMP. This identifier will match the
information provided on the input file.
Servicer Loan Number
A unique identifier assigned by the servicer that is
associated with a loan secured by a property. This identifier
will match the information provided on the input file.
Waterfall Test
Indicates whether the modification submitted appears to follow

the HAMP waterfall guidelines, outlined in

Supplemental

Directive 09-01

available on www.HMPadmin.com.

De Minimis Test
Indicates whether the proposed modification meets the “de
minimis” test — that is, it would result in at least a 6 percent
reduction in the borrower’s monthly payment.
Forbearance Flag
Flags cases where the loan, after modification, is NPV
negative and the amount forborne makes the interest-bearing
unpaid principal balance less than the market value of the
property.
Value No Mod
The net present value of the loan without a modification.
Value Mod
The net present value of the loan with a modification.
NPV Test
The result of the NPV test, either

Positive or Negative.

NPV Run Successful
Indicates whether the loan was able to run through the base
NPV model, including whether problems with the
data submitted prevent a full NPV calculation.

If the response is Y, then the loan was run through
the base NPV model successfully.

If the loan does not run through the base NPV model

successfully due to a data error or some other issue,
the field will be populated with an N, followed by a
code(s) indicating the error. For example: N: 1; 5; d.
The list of error codes and error descriptions is
provided in the Base NPV Model User Guide and
FAQs documentation that is located in the secure
servicer area of the HAMP Web site

www.HMPadmin.com

. You must correct the data

field(s) and resubmit the loan(s) to the NPV test.

Run Date
The date on which the NPV test was run.
Code Version
The version of the base NPV model software tool that was
used in the assessment.
Freddie PMMS Rate

The Freddie PMMS Rate that was used in the assessment.

https://www.hmpadmin.com/portal/docs...estresults.pdf

[davephx]

So we have a July supplement from HAMP that says "may"

Than the August 28th supplement refers back to the original April guidelines for the water fall which ignores the July supplement that says "may"

Sigh....

[hope67]

So we have a July supplement from HAMP that says "may"

Than the August 28th supplement refers back to the original April guidelines for the water fall which ignores the July supplement that says "may"

Sigh....

As I mentioned, IMO, the term "may" is used because there is one situation "Negative NPV test" where principal forbearance cannot be used. "may" doesn't mean it is optional, it simply means that it cannot be used in all situations.

[davephx]

That actually would be a good interpretation of the "may"

But per our insider from Citi, even with a positive NPV test as I understand him they are very rare unless very underwater. Of course if very underwater likely to have a positive NPV....

If they "have to" forbear it doesn't seem to be followed since so rare.

[hope67]

That actually would be a good interpretation of the "may"

But per our insider from Citi, even with a positive NPV test as I understand him they are very rare unless very underwater. Of course if very underwater likely to have a positive NPV....

If they "have to" forbear it doesn't seem to be followed since so rare.

Unfortunately, servicers are not following HAMP guidelines in many areas, principal forbearance is one of those areas.

[hope67]

We are all wondering why servicers are not modifying loans? We are also wondering why servicers are not following the guidelines as it relates to principal forbearance which is required if need be!

This article explains it all .. (read the entire article, I think you will find the answers to most of your questions, I posted the link below)

Quote from the article:

"Servicers have four main sources of income, listed in descending order of importance:
The monthly servicing fee, a fixed percentage of the unpaid principal balance of the loans in the pool;

Fees charged borrowers in default, including late fees and “process management fees”;

Float income, or interest income from the time between when the servicer collects the payment from the borrower and when it turns the payment over to the mortgage owner; and

Income from investment interests in the pool of mortgage loans that the servicer is servicing.

Overall, these sources of income give servicers little incentive to offer sustainable loan modifications, and some incentive to push loans into foreclosure. The monthly fee that the servicer receives based on a percentage of the outstanding principal of the loans in the pool provides some incentive to servicers to keep loans in the pool rather than foreclosing on them, but also provides a significant disincentive to offer principal reductions or other loan modifications that are sustainable on the long term. In fact, this fee gives servicers an incentive to increase the loan principal by adding delinquent amounts and junk fees. Then the servicer receives a higher monthly fee for a while, until the loan finally fails. Fees that servicers charge borrowers in default reward servicers for getting and keeping a borrower in default. As they grow, these fees make a modification less and less feasible. The servicer may have to waive them to make a loan modification feasible but is almost always assured of collecting them if a foreclosure goes through. The other two sources of servicer income are less significant."

Why Mortgages Aren?t Modified and What a Ruling Stopping Foreclosures Means -- Seeking Alpha

[hope67]

Banks are not following the guidelines as to principal forbearance, according to HAMP guidelines, servicer should forbear principal no more than 30% of the principal if it is needed to reach the 31% payment target, IT IS NOT OPTIONAL (it's the last step in the waterfall calculation)

From HAMP guidelines dated October 28 2009:

Are there limits to how much forbearance is required in the standard modification waterfall?
Servicers are not required to forbear more than the greater of (i) 30 percent of the unpaid principal balance of the mortgage loan or (ii) an amount resulting in a modified interest bearing balance that would create a current mark-to-market loan-to-value ratio of less than 100 percent. If the borrower’s monthly mortgage payment cannot be reduced to the target monthly mortgage payment ratio of 31 percent unless the servicer forbears more than the amounts described above, the servicer may consider the borrower ineligible for a HAMP modification. However, servicers are permitted, at their discretion, to forbear principal in excess of the amounts described above in order to achieve the target monthly mortgage payment ratio of 31 percent.

Is a borrower with a mortgage loan that has a current remaining term (prior to modification) that is greater than 480 months eligible for a HAMP modification?

Yes. The fact that the loan’s current remaining term is greater than 480 months does not disqualify the borrower from HAMP eligibility. If the borrower is otherwise eligible under HAMP and reduction of the borrower’s current interest rate to two percent would not be sufficient to reach the target monthly mortgage payment ratio of 31 percent, the servicer should skip the term extension step of the standard modification waterfall and proceed to the principal forbearance step of the waterfall to attempt to achieve the target monthly mortgage payment ratio of 31 percent. The servicer should enter the remaining term in the NPV input field labeled "Amortization Term after Modification" so that the number in this field and the "Remaining Term" NPV input field are identical.

https://www.hmpadmin.com/portal/docs...r/hampfaqs.pdf

[Needanewjob]

We are all wondering why servicers are not modifying loans? We are also wondering why servicers are not following the guidelines as it relates to principal forbearance which is required if need be!

This article explains it all .. (read the entire article, I think you will find the answers to most of your questions, I posted the link below)


Why Mortgages Aren?t Modified and What a Ruling Stopping Foreclosures Means -- Seeking Alpha

Hi Hope,

My guess is as good as yours but I don't think that servicers are "required" to do anything. That is the problem, there are no set rules... Gvmt suggests the guidelines but they aren't enforced. It should be very clear...

[SillyWorld]

Yep all this Mumbo Jumbo is only a Guideline, and not enforced in any way, and you can be assured the bank if the work a deal out it will be in there best interest, whichever way they can make most profit...IE...They may choose to deny you any MOD because if you are in an area where they can foreclose and make a profit better than a MOD for you they will do so