Loss Mitigation Training
Investors
Fannie Mae - FNMA
Fannie Mae (formerly known as the Federal National Mortgage Association) is a corporation that specializes in buying mortgage loans from mortgage bankers. FNMA adds liquidity to the mortgage market.
Foreclosure Workout Options offered by Fannie Mae
- Repayment Arrangement
- Forbearance
- Loan Modification
- Short Sale Pre-Qualification
- Short Sale
- Deed in Lieu
Freddie Mac, FHLMC
Freddie Mac (also known as FHLMC, Federal Home Loan Mortgage Corporation) is a stockholder-owned corporation chartered by Congress to purchase loans to mortgage lenders (mostly savings and loan associations).
Foreclosure Workout Options offered by Freddie Mac
- Repayment Arrangement
- Forbearance
- Loan Modification
- Short Sale Pre-Qualification
- Short Sale
FHA
The Federal Housing Administration (FHA “HUD”) is an agency with the US Department of Housing Urban Development, which administers loan programs, loan guarantee insurance programs to support affordable housing initiatives.
The Foreclosure workout options offered by FHA
- Special Forbearance Type 1 & Type 2
- Loan Modification
- Pre-Foreclosure Sale
- Deed-in-Lieu
GNMA
Ginnie Mae – A government-owned agency which buys mortgages from lending institutions, securitizes them, and then sell them to investors. Follow the Fannie Mae guidelines for Ginnie Mae loans
VA
Veterans Administration is an agency of the federal government providing services for eligible veterans to obtain a home loan with no down payment.
The Foreclosure Workout Options
- Repayment Arrangement
- Forbearance
- Loan Modification
- VA Refund
- Compromise Sale
- Deed in Lieu of Foreclosure
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Types of Workouts
There are several types of workouts available to homeowners depending on investors/insurers guidelines. These include:
- Repayment Arrangement
- Forbearance/Special Forbearance
- Loan Modification
- HUD Partial Claim Advance
- Pre-Qualification
- Short Sale/Pre-Sale, VA Compromise Sale
- VA Refunding
- Deed-in-Lieu
Repayment Arrangement
A repayment arrangement is a written agreement, acknowledged by a homeowner and lender, providing a defined period of time to reinstate a delinquent mortgage based on a homeowner’s financial ability to pay.
The homeowner agrees to make an additional payment with their normal monthly payment.
Forbearance/Special Forbearance
Forbearance is a written agreement to accept a temporary suspension or reduction of payments until customers can make regular payments again and enter into a repayment plan or modification
For FHA insured loans, the workout is called a “Special forbearance. There are two types – Special forbearance 1 and Special forbearance 2.
Special forbearance type 1 is written agreement, acknowledged by a homeowner and the servicer, which contains a plan to forbear or curtail monthly mortgage payments due to unemployment.
Special forbearance type 2 provides the homeowner time to stabilize their income. During the special forbearance type 2 period, a repayment plan is structured to bring mortgage payments current within 12 to 18 months. A special forbearance type 2 plan may also be structured to assist the homeowner to pay corporate advances for legal fees, costs, escrow shortage, accrued late charges, administrative expenses if within a 3 month plan prior to a final workout type.
Loan Modification
A loan modification is a written agreement that permanently changes one or more of the original loan terms of the Note. Modifications may include:
- Change of interest rate
- Extension of loan term
- Capitalization of delinquent interest, escrow, fee and cost
A loan modification is used when the customer has a temporary financial hardship but is now able to meet their mortgage payments and do not have the ability to enter into a repayment plan.
Partial Claim
Under the HUD Partial Claim Advance option, HUD advances funds on behalf of a homeowner in an amount necessary to reinstate a delinquent loan, up to 12 months PITI, The borrower will execute a promissory note and subordinate mortgage payable to Department of Housing and Urban Development (HUD).
· HUD Partial Claim Advances are available on all FHA insured loans, regardless of the investor
· The promissory note, or HUD Partial Claim Advance note, carries no interest and is not due and payable until the homeowner either pays off the first mortgage or no longer owns the property.
FHA Short Sale Pre-Qualification
A request for a short sale is received from the homeowner but there is not a pending offer in place. An appraisal is ordered and a homeowner is sent a letter with all appropriate HUD attachments to be signed and returned, advising of the minimal expected net proceeds (FHA guidelines require the minimal acceptable net proceeds be at 82% of the appraised value no less). The homeowner is advised that they have 90-120 days in which to obtain an offer on the property.
FHA loans in foreclosure are placed on hold during the approved listing period.
At the end of 90-120 days, if an offer has not been received they can be considered for a possible Deed in Lieu.
FNMA/FHLMC Short Sale Pre-Qualification
The procedure is the same as for a FHA Short Sale Pre-Qualification except the homeowner is sent a letter advising them of the amount that the property should be listed at for 90 days. (Conventional loans do not provide an acceptable net proceeds amount).
On conventional loans, if the loan is in foreclosure, the foreclosure is NOT placed on hold during the listing period. A pre-qualification should only be considered if there is sufficient time to market the property prior to the scheduled foreclosure sale date. If the sale is 120-180 days in the future can be issued a pre-qualification letter. For states with short timelines a forbearance may be considered.
At the end of the 90-120 day listing, if an offer is not received, a Deed-in-Lieu can be considered.
Short Sale
Also known as Pre-Foreclosure Sale and VA Compromise sale. This option allows written consent for the sale of a homeowner’s property where the net proceeds from sale are less than total indebtedness. There must be a written offer on the property at the current Fair Market Value (FMV).
Depending on financial circumstances, it may require the homeowners to make a financial contribution and will, upon receipt of the sale proceeds, waive deficiency judgment against the borrower and amend the current derogatory credit reporting to reflect an ‘agreed settlement’.
VA Refunding
The VA Refunding is a workout offered and negotiated by the VA where the VA refinances the debt and takes on the servicing of the loan.
The VA assigns an appraiser through the VA TAS system. The appraisal is
forwarded to the VA and the mortgage company. Once the appraisal is received a
VA 26-567 form is submitted with other documents from the mortgage company to the
VA. The VA purchases the loan from the mortgage company.
Deed in Lieu
A deed-in-lieu allows a homeowner to voluntarily convey the property in order to avoid foreclosure and be released from all obligations under the mortgage. The property must be listed for sale 90-120 consecutive days, at the current Fair Market Value (FMV). | 
