approved modification but need help understanding deferred principal and equity share arrangement, can anyone help

[hearthockey]

Hi, I am so happy to have found this site. I received my approval docs 8/26 and they are due back by 8/31 and I can't understand one section in the doc. I have a call into GMAC but they say it will take 48 hours for someone to get back to me. I'm attaching the section I need help with. Can anyone explain what this means.
gmac section c.JPG

[Cat Damiano]

hearthockey,


Welcome to the forum and thank you for joining........


I do hope that you were able to speak with GMAC in regards to the explanation of what you received as you had posted this just yesterday and the docs are due back by tomorrow.

It is the terminology for the PRA (Principal Reduction Alternative) without getting into specifics, for that you would need to speak with GMAC,

According to the HAMP guidelines:

If the loan is modified pursuant to PRA, the principal reduction amount should be initially treated
as non-interest bearing principal forbearance (PRA Forbearance Amount). The PRA Forbearance
Amount is separate and exclusive of any other forbearance that may be offered in conjunction
with a permanent modification.

If the borrower is in good standing on the first, second and third anniversaries of the TPP
Effective Date, the servicer must reduce the UPB of the loan on each anniversary date in
installments equal to one-third of the initial PRA Forbearance Amount.

If a borrower is in good standing and pays the loan in full (i) at any time more than 30 calendar
days after the Modification Effective Date; (ii) after the PRA reporting and payment processes are
made available; and (iii) prior to application of the entire PRA Forbearance Amount, the borrower
shall immediately be fully vested in and entitled to the unapplied PRA Forbearance Amount as a
curtailment. When the servicer receives a payoff request on behalf of a borrower that meets these
requirements, the unapplied PRA Forbearance Amount must be deducted from the payoff
balance.

Equity Share Arrangements

Investors that enter into equity share arrangements with borrowers in conjunction with a PRA
modification will be eligible to receive the PRA investor incentive if the equity share arrangement
includes the following borrower protections:

The borrower is not required to make any equity share payments until the loan is fully
satisfied and may not be assessed a pre-payment penalty;
The agreement includes a reasonable method to credit the borrower for the cost of
capital improvements;
The borrower is entitled to at least 50 percent of any increase in property value, after
credit for the capital improvements, between the date of the permanent modification and
the date the loan is fully satisfied;
The investor is only entitled to recover the amount of principal reduction actually applied
to the loan balance less the PRA investor incentive; and
A method for independently assessing the value of the property at time of loan
satisfaction that is acceptable to both the investor and the borrower. The assessment of
the property value at the date of the permanent modification must be the property value
obtained by the servicer in accordance with Section 6.8 as part of the evaluation of the
borrower for a HAMP modification.

[hearthockey]

Cat, thank you so much for response. I was finally able to speak to GMAC after doing a google search for a phone number that would get me through to someone at there offices in the US. You are amazing and your explanation was very similar to how they explained it to me. it is still hard to understand the whole thing, but i felt better about signing and sending the paperwork off. i will continue to read your explanation over and over until it sinks in. Thanks again.

[RyanJP]

Cat, thank you so much for response. I was finally able to speak to GMAC after doing a google search for a phone number that would get me through to someone at there offices in the US. You are amazing and your explanation was very similar to how they explained it to me. it is still hard to understand the whole thing, but i felt better about signing and sending the paperwork off. i will continue to read your explanation over and over until it sinks in. Thanks again.

Congratulations on being one of the rare people to actually be offered a principal reduction. It does NOT happen very often, and I can't even remember seeing anybody on these forums get a loan modification with a PRA.

Make darn sure that those documents are in somebody's hands today. Heck, if you have to special currier it to their offices so you get a real signature of receipt, I'd do that!

[Cat Damiano]

Since the forums inception in 2007, there have been several principal reductions before HAMP and before the PRA went into effect October 1, 2010. GMAC had been one of the original servicers to offer that and also back then, offer short refinance.