Coming Soon!

Changes Coming to WaterfallCalc.com in October:

  • Rural Housing Service Calculations
  • VA Calculations
  • Fannie Mae Flex Mod Calculations

Other convenient options for our WaterfallCalc.com users include:

  • Setting up a client relationship with one of our two integrated title services for easy title ordering.
  • Printing Modification Documents that are fully compliant and recordable in all jurisdictions nationwide.

 

If you would like a demo of WaterfallCalc.com, or to discuss our other consulting services, please contact Brandi Tankersley at btankersley@assistanceoptions.com, or call 616.406.4310.

Advice for Dealing with Disaster Related Defaults

By Donna Schmidt, Managing Director – DLS Servicing Consultants, LLC

 

With Hurricane Harvey, wildfires in Montana, flooding in West Virginia, and severe weather in other parts of the country, it is essential that Mortgage Servicers are prepared and poised to assist your neighbors/mortgagors through the crises.

 

The rules vary based on the Investor/Holder of the loan or the insurer/guarantor.  Below is a brief summary of what you can and cannot do.

 

In general, the best practice is:

 

  • Validate that the disaster either damaged the property or impaired the mortgagor’s income potential.
  • Only those mortgagors who have submitted a loss mitigation application (borrower response package) should be considered for a special disaster forbearance plan, if the loan is current. A small percentage of mortgagors will not be able to qualify for a permanent home retention option at the end of a forbearance plan.  If the mortgagor can maintain the monthly payments, they should be encouraged to do so.
  • Once a loan does become delinquent and the delinquency is in direct result of the disaster, most insurers/guarantors will offer a 90 day special forbearance to give the mortgagor time to recover, file insurance claims or FEMA applications or find new employment. For some mortgagors they have lost everything and they need time to reconstruct essential documentation to apply for assistance.
  • In addition, most entities will also afford a 90 day moratorium on initiating foreclosures, foreclosure sales and evictions.

 

We are recommending the following:

 

  • When a mortgagor calls to report their property is damaged or that they are now temporarily unemployed due to a disaster – issue a loss mitigation application package and encourage them to submit as much documentation as they can pull together. The most essential items are evidence such as an insurance claim or letter from employer, etc.  The loss mitigation application will be processed in accordance with the insurer/guarantor or investor’s guidelines.
  • If there is no contact with the mortgagor, the property falls within the FEMA map of individual assistance areas (or HUD’s affected county list) and the loan is 30+ days delinquent one month after the disaster, issue a special forbearance plan that provides for a monthly payment of $10 per month for three months (when not restricted by the insurer/guarantor or investor). This will encourage the borrower to make contact, and remain in contact, during the 90 day moratorium period.
  • For properties that are located in the FEMA individual assistance counties or the counties identified by HUD, the servicer should refrain from reporting a delinquent loan to the credit repositories for the 90 day moratorium period.
  • Please remember that, as the servicer, you still have an obligation to have abandoned properties secured. It is critical to attempt contact with the mortgagor and to schedule inspections as soon as possible for any property that falls within the disaster mapping areas.  This inspection will also determine if the property was indeed damaged by the disaster and help the servicer understand if additional relief options are necessary.

 

Below is a brief summary of the various guidelines – please see the individual entity announcements, handbooks, circulars and guides for more detailed guidance.

 

GSE Loans (Fannie Mae or Freddie Mac)

 

Both GSE’s offer a moratorium for 90days for the initiation of new foreclosure and the continuance of any existing foreclosure, until it can be determine whether the property was affected by the disaster.  Under no circumstances should a foreclosure be allowed to consummate until It is determined that a foreclosure is feasible.

 

The GSE’s allow for a 3 month forbearance, and up to a 6 month plan if there is contact with the mortgagor.

 

FHA

FHA has issued a 90 day moratorium on foreclosures and forbearance on payments. This became effective 8/28/2017, and will expire on 11/26/2017.

VA

VA has issued a circular dated 8/29/2017 that states that they encourage a 90 day moratorium on the referral to foreclosure and foreclosure sales.  They also encourage forbearance for those mortgagors directly affected by the disaster, but servicers should use sound judgement to determine if the default may have been caused by another reason.

VA further allows the servicer to reverse previous prepayment (principal curtailments) and reapply as contractual payments, as an effort to keep the loan current.

VA further reminds servicers that the National Guard has been called to assist in numerous instances and the Soldiers and Sailors Relief Act protections would apply to those mortgagors asked to assist.

Rural Housing

Section 4 of the Rural Housing Guide provides detailed instructions on how to handle a disaster.  RHS authorizes a 90 day moratorium for new foreclosure referrals and foreclosure sales – however, they clearly state that there must be evidence that the property or the mortgagor’s employer was directly affected by the disaster.

Rural Housing allows for a forbearance period, but does not specify the parameters, and therefore should be evaluated on a case by case basis – making it necessary for the borrower to submit a loss mitigation package.  At no time can the loan be more than 12 months delinquent during the forbearance period.

Privately Held Loans

We strongly recommend that all foreclosures be placed on a 90 day moratorium, until the property condition can be evaluated, as well as the occupancy status of the property.  Sound judgement should be used in determining whether the foreclosure can be commenced.

An automatic 3 month forbearance of $10 per month can be issued to all properties located in the disaster zone for all loans that are 30+ days delinquent.  This should only be granted if the servicer has determined that prior to the disaster the property had not been abandoned.

Additional Assistance

DLS Servicing Consultants, LLC is a loss mitigation outsourcing consulting firm.  Our experienced staff stands ready to assist and ensure that the mortgage servicer meets the needs of their portfolio and community.  Please visit our website at www.dls-servicing.com for more information.

Responding to Multiple Loss Mitigation Applications under RESPA

Sixth Circuit Holds That Servicer Does Not Have Duty To Respond To Multiple Modification Applications Under RESPA

Borrowed from: Riker Danzig Banking, Title Insurance, and Real Estate Litigation Blog

The United States Court of Appeals for the Sixth Circuit recently upheld the dismissal of a borrower’s Real Estate Settlement Procedures Act (“RESPA”) complaint, holding that a loan servicer was not required to respond to the borrower’s repeated modification requests.  See Brimm v. Wells Fargo Bank, N.A., 2017 WL 1628996 (6th Cir. May 2, 2017).  In the case, the borrower executed a mortgage in 2006 and defaulted on the loan in 2008.  He modified the loan twice, in 2009 and 2010, but continued to default and a foreclosure action was commenced in 2012.  Although the borrower made several more modifications requests between 2012 and July 2014, they were all rejected for various reasons.  The property was sold at a foreclosure sale in January 2015.  The borrower then brought an action against the servicer in which he alleged, among other things, that the servicer had violated 12 CFR 1024.41 and the implied covenant of good faith and fair dealing.  Specifically, he argued that the servicer did not adequately respond to his final July 2014 modification request.  Under 12 CFR 1024.41, if a servicer receives a loss mitigation application from a mortgagor more than 37 days prior to a foreclosure sale, it must evaluate all loss mitigation options and inform the borrower in writing of its determination regarding the same.  12 CFR 1024.41(c).  A servicer may not conduct a foreclosure sale while a timely and properly-filed application is pending.  Nonetheless, the district court rejected the borrower’s claim and dismissed the action.

On appeal, the Sixth Circuit affirmed the lower court’s decision.  First, it held that the servicer did respond to the July 2014 modification response by informing the borrower that the application was incomplete.  Although the borrower disputed this claim, he was unable to submit proof to the court that his application was complete.  More importantly, the court held that 12 CFR 1024.41(i) states, “[a] servicer is only required to comply with the requirements of this section for a single complete loss mitigation application for a borrower’s mortgage loan account.” (emphasis added).  Thus, even if the servicer had not responded to the final modification request, it was not required to do so because it had responded to previous requests.  Finally, the court held that the servicer did not breach the implied covenant of good faith and fair dealing because nothing in the mortgage documents required it to address modification requests.

New + Improved WaterfallCalc.com

WaterfallCalc.com has a few new features that we’d like for you to take a moment to look over. We are always working to improve your experience with us. The new features are as follows:

  • INTEGRATED ESCROW ANALYSIS FEATURE – By selecting yes, you are opting to enter escrow line items and the system will automatically calculate both escrow analysis options (assuming a loan mod and then assuming the loan is brought current with a HAMP partial claim).  If you opt to use this option, you will be charged a small fee.
  • TITLE SEARCH ORDER OPTION – We have gained relationships with two title search companies, Indeed Abstract, and First American Mortgage Solutions.  So that you can contact them directly to set up your initial account with the title search provider of your choice, we have added a “Partners” tab on the main WaterfallCalc.com website. Let us know which provider you have selected, and we will mark your file. Once a loan is approved for a HAMP, you will have the option to click on the “Order Title” button, review the information that will be sent, and submit. The title search provider will get an email order within minutes, and a copy will be sent to you. There is no additional charge for this service.

Also, don’t forget about our option to print recordable modification and subordinate mortgage documents for your HAMP files!

For more information on WaterfallCalc.com or DLS Servicing Consultants, LLC, please contact Brandi Tankersley by email at btankersley@assistanceoptions.com or call 616.406.4310.