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MHA by Mind Map: MHA

1. Resources




1.4. For questions regarding: * Supplemental Directives, policy clarifications, and loan-level questions for Non-GSE Mortgages * All reporting to Treasury for Non-GSE Mortgages

1.4.1. HAMP Solution Center: [email protected] (866) 939-4469 9:00am to 9:00pm ET, M-F

2. Chapter 1: Making Home Affordable Program (MHA)

2.1. 1. Servicer Participation in MHA

2.1.1. 1.1 Servicer Participation Agreement (SPA) To participate in MHA for Non-GSE Mortgages, the servicer must register and execute a Servicer Participation Agreement, related documents, and, if applicable, on eof more Service Schedules (SPA) with the Program Administrator on or before October 3, 2010. The SPA governs servicer participation in MHA for all Non-GSE Mortgages. The entity that has the direct contractual obligation to the investor to perform the servicing functions is the entity that will formally elect to participate in MHA by signing the SPA (not subservicers or master servicers that are not contracually obligated to the investor to perform the servicing functions.) MHA reflects usual and customary industry standards for mortgage loan modifications, short sales and DILs contained in typical servicing agreements, including pooling and servicing agreements (PSAs) governing private label securitizations. Participating servicers are required to consider all eligible mortgage loans for Services (as defined in the SPA) unless prohibited by the rules of the applicable PSA and/or other investor servicing agreements. Participating servicers are erquired to use reasonable efforts to remove any prohibitions and obtain waivers or approvals from all necessary parties in order to carry out the requirements of the SPA.

2.1.2. 1.2 Servicer Safe Harbor As part of Helping Families Save Their Homes Act of 2009 (HFSTHA), Congress established the Servicer Safe Harbor by amending the Truth in Lending Act for the purpose of providing a safe harbor to enable such servicers to modify and refinance mortgage loans under a "qualified loss mitigation plan." Treasury has determined that each residential loan modification under HAMP (including Principal Reduction Alternative modifications) and 2MP, as well as each short sale and deed-in-lieu of foreclosure under HAFA, is a "qualified loss mitigation plan" as defined in the Servicer Safe Harbor. In addition, Treasury anticipates that the "FHA Program Adjustments to Support Refinancings for Underwater Homeowners," which were previously announced by Treasury on March 26, 2010, will also constitute a "qualified los mitigation plan" as defined in the Servicer Safe Harbor.

2.1.3. 1.3 Investor Solicitation Within 90 days of executing a SPA, the servicer must review all servicing agreements to determine investor participation in HAMP. Within 30 days of identifying an investor as a non-participant, the servicer must contact the investor in writing at least once, encouraging the investor to permit modifications under HAMP. Servicers that executed a SPA prior to March 24, 2010 must, by July 30, 2010, have provided to the Program Administrator an Investor Participation List containing the following information: (1) the number of investors for whom it services loans; (2) a list of those investors who do not participate in HAMP; and (3) the number of loans serviced for each investor that does not participate in HAMP. Participating servicers that execute a SPA after March 24, 2010 must provide the Investor Participation List to the Program Administrator within 120 days of SPA execution. Servicers are required to notify the Program Administrator of changes to the Investor Participation List within 30 calendar days of any change.

2.1.4. 1.4 Transfers of Servicing When a participating servicer transfers or assigns mortgage loans, or servicing rights relating to mortgage loans, that constitute Eligible Loans pursuant to the SPA, the transferee servicer must assume the transferor's obligations under the SPA with respect to the transferred Eligible Loans. A transferring servicer may not use a transfer to circumvent its existing obligtations under the SPA. If the transferee servicer has signed its own SPA, the Eligible Loans involved in the transfer become subject to the transferree servicer's SPA. If a transferee servicer has not signed its own SPA, it will be required to execute an assignment and assumption agreement, the form of which is attached as an exhibit to the SPA. A servicer may transfer an Eligible Loan free and clear of all SPA obligations only if one of the five circumstances set forth in Section 3.1 of Chapter II exists with respect to such loan, and any applicable response period has elapsed, unless a borrower with continued eligibility requests consideration prior to the effective date of the servicing transfer. The transferee servicer is not required to execute an assignment and assumption agreement in order to transfer such loans. All incentive payments made after successful completion of the trial period will be made to the servicer of record, as indicated on the records of the Program Administrator for Treasury. When negotiating a servicing transfer, the transferor servicer and the transferee servicer should make arrangements as appropriate to account for incentive payments accordingly.

2.1.5. 1.5 Program Participation Caps The amount of funds available to pay servicer, borrower and investor compensation in connection with each servicer's Services are capped pursuant to each servicer's SPA (Program Participation Cap). Treasury establishes each servicer's initial Program Participation Cap using an allocation methodology by estimating the number of Services expected to be performed by each servicer during the term of the SPA. The Program Participation Cap can be adjusted based on Treasury's full book analysis of the servicer's loans. The funds remaining available for Services under a servicer's Program Participation Cap are reduced by the maximum amount of projected compensation payments potentially payable with respect to each Service. In the event the compensation actually paid with respect to a Sergice is less than the maximum amount of compensation payments potentially payable, the funds remaining available for a servicer's Services under the SPA are increased by the difference between such amounts. Treasury may, from time to time and in its sole discretion, revise a servicer's Program Participation Cap. The Program Administrator provides written notification to a servicer of all changes made to the servicer's Program Participation Cap. Once a servicer's Program Participation Cap is reached, a servicer must not enter into any agreements with borrowers intended to result in new Services, and no payments will be made with respect to any new Services.

2.1.6. 1.6 Compliance with Applicable Laws Each servicer and any sub-servicer that the servicer uses will be subject to and must fully comply with all federal, state, and local laws, including statutes, regulations, ordinances, administrative rules and orders that have the effect of law, and judicial rulings and opinions including, but not limited to, the following laws that apply to any of its practices related to HAMP. Law/Description Section 5 of the Federal Trade Commission Act The Equal Credit Opportunity Act (ECOA) and the Fair Housing Act The Real Estate Settlement Procedures Act (RESPA) The Fair Debt Collection Practices Act Fair Lending Laws Fair Credit Reporting Act

2.2. 2. Compliance

2.2.1. Treasury has engaged Freddie Mac as the Compliance Agent fo the elements of MHA taht are addressed in this Handbook. Freddie Mac has created an independent division, Making Home Affordable-Compliance (MHA-C) for this purpose. MHA-C conducts independent compliance assessments and servicer reviews to evaluate servicer compliance with the requriements of MHA.

2.2.2. 2.1 Compliance Assessments MHA-C conducts the following types of assessments: On-site Readiness, Governance, and Implementation reviews Remote and On-Site Loan File Reviews NPV Reviews Program Disbursement Reviews Targeted and Follow-Up Reviews The scope of the compliance assessments includes but is not limited to the following: Consideration of Borrower and Property Eligibility Underwriting Guidelines NPV/Waterfall processes Borrower Incentive Payments Investor Subsidy Calculations Data Integrity and Accuracy of Servicer Reporting Content and Distribution of Borrower Notices Complaint and Escalation Management Servicer Quality Assurance processes Internal control design, effectiveness, and assessments For on-site reviews, MHA-C will strive to provide the sergicer with 30 days' advance notice, but reserves the right to arrive unannounced. During the course of conducting compliance assessments, MHA-C will request such documentation, policies, procedures, loan files, and other materials necessary to conduct the review. As specified in the SPA, servicers are required to provide MHA-C with the documentation requested. Upon completing an assessment, MHA-C will provide the servicer with preliminary results as soon as possible in order to ensure that all relevant information has been considered.

2.2.3. 2.2 Documentation Servicers are required to maintain appropriate documentary evidence of their MHA-related activities, and to provide that documentary evidence upon request to MHA-C. Servicers must maintain required documentation in well-documented servicer system notes or in loan files for all MHA activities, for a period of seven years from the date of the document collection. Required documentation includes but is not limited to: Any internal or external materials developed by the servicer such as training materials, reports, memoranda, or other documentation. All policies and procedures related to the servicer's customer service hotline and escalations process and where applicable, reference the servicer's associated policies and procedures for modifying loans held in their own portfolio. Evidence of assessment of investor willingness to participate in MHA programs and any specific outreach to investors or attempts to obtain waivers on either a portfolio or loan-by-loan basis, including copies of any contracts with investors relied upon in denying modifications. This should include, where applicable, documentation relating to specific parameters or limitations on participation required by investors for steps in the waterfall. The servicer's process for pre-screening non-performing loans against the basic program requirements prior to referring any loan to foreclosure or conducting scheduled foreclosure sales. Documentation of all communications, solicitations and Borrowers NOtices, whether verbal (e.g., phone contact) or written (e.g., email), with or to the borrower or trusted advisor. Appropriate documentation includes, but is not limited to, the dates of communications, names of contact person(s), and a summary of the conversation. Evidence of postponement of scheduled foreclosure sales in applicable scenarios as outlined in Section 3 of Chapter II. All documents and information received during the process of determining borrower eligibility, including: Substitution of income documents for borrowers in active Chapter 7 or Chapter 13 bankruptcy All policies and procedures related to the servicer's policies and procedures for modifying loans held in their own portfolio when relied upon in the decision-making process or when applying good business judgement. All documents and information related to the terms of the TPP Notice as well as the borrower's performance and monthly payments during the trial period. Waiver of the TPP for borrowers in active Chapter 13 bankruptcies. The outcome of each evaluation for modification in addition to the specific justification and the supporting details if the request for modification was denied. Records must be retained to document the reason(s) for a trial modification failure. All documents and information related to the terms of the permanent modification as well as the borrower's performance and monthly payments to retain good standing. Written policies and procedures relating to UP forbearance plans, including: All documents and information related to the servicer's consideration of the borrower for other loss mitigation alternatives. Certification prior to foreclosure sale as outlined in Section 3.4.3 of Chapter II All documents and information related to recept and distribution of the borrower, servicer and investor incentive payments.

2.2.4. 2.3 Communication of Findings and Results The targeted time frame for providing the servicer assessment report to the servicer is 30 days after the completion of the review. Treasury will receive a copy of the report five business days prior to the release of the report to the servicer. There will be an issue and resolution appeal process for servicer assessments. Servicers will be able to submit concerns or disputes to an independent quality assurance team within MHA-C.

2.2.5. 2.4 Treasury FHA-HAMP and RD-HAMP Compliance FHA, RHS and Treasury have agreed that each will perform certain compliance activities for loans modified under Treasury FHA-HAMP and RD-HAMP as described in Chapter VI. FHA and RHS, as applicable, will: Validate that each modified loan is an eligible mortgage loan under the eligibility criteria set forth in section 2.1 of Chapter VI and FHA-HAMP Mortgagee Letters or Section 2.2 of Chapter VI and the Final Rule; Establish a process to ensure that loans submitted to the HAMP Reporting Tool are properly modified under each of FHA's or RHS's own proprietary modification program requirements and under the requirements of Section 2.1 or Section 2.1 of Chapter VI; Notify the Program Administrator if any loans previously entered into the HAMP Reporting Tool are no longer valid under FHA-HAMP or Special Loan Servicing Validate the submission of each such loan to the FHA Single Family Default Monitoring System (SFDMS) or RHS Guaranteed Loan System (GLS) Assess each servicer's compliance with all FHA-HAMP or Special Loan Servicing requirements, as well as such servicer's internal control program under Treasury FHA-HAMP or RD-HAMP MHA-C will perform the following compliance activities with respect to Treasury FHA-HAMP and RD-HAMP loans, as applicable: Review servicers' cash records to determine if the related FHA-HAMP or Special Loan Servicing loan has been current for the appropriate period of time. Each servicer is required to develop, enforce and review on a quarterly basis for effectiveness an internal control program designed to: Ensure effective delivery of Services in connection with Treasury FHA-HAMP and/or RD-HAMP and compliance with applicable Treasury FHA-HAMP and/or RD-HAMP documentation, including the FHA-HAMP Mortgagee Letters and the Final Rule and existing or future regulation or guidance issued by FHA or RHS for requirements related to eligibility, underwriting and administration of FHA-HAMP or Special Loan Servicing Detect mortgage loan modification fraud Monitor compliance with applicable consumer protection and fair lending laws The internal control program must include documentation of the control objectives for Treasury FHA-HAMP and/or RD-HAMP activities, the associated control techniques, and mechanisms for testing and validating the controls. Each servicer is also required to provide FHA or RHS, as applicable, with access to all internal control reviews and repots that relate in whole or in part to modifications under FHA-HAMP or Special Loan Servicing performed by it and any external parties or consultants hired by such servicer to enable FHA or RHS to fulfill its compliance duties.

3. Chapter 2: Home Affordable Modification Program (HAMP)

3.1. 1. Eligibility

3.1.1. 1.1 HAMP Eligibility Criteria A loan is eligible for HAMP if the servicer verifies that all of the following criteria are met: First Lien Not previously HAMP modified Delinquent or in imminent default Owner-occupied single family property Not vacant or condemned Financial hardship Minimum monthly mortgage payment ratio Escrow account established Unpaid principal balance limits Program cut-off date

3.1.2. 1.2 Additional Factors Impacting HAMP Eligibility Certain factors impacting HAMP eligibility are described below: No waiver of legal rights No up-front contribution Active litigation Redemption rights following foreclosure Balloon loans Inter vivos Revocable Trust Subordinate Liens HUD Counseling Continued Eligibility Co-Borrower Non-Occupant Co-Borrower Unemployed Borrower Borrowers in Bankruptcy First Lien Home Equity Loans and Lines of Credit

3.2. 2. Communication and Borrower Notices

3.2.1. 2.1 Servicer Requirements All servicer communications must provide the borrower with clear written information designed to help the borrower understand the modification process in accordance with this Handbook. Toll Free Phone Number Servicers must provide a toll-free telephone number where the borrower can reach a representative of the servicer capable of providing specific details about the HAMP modification process. The hours of operation for the toll-free telephone number must be listed. Adequate Facilities Servicers must have adequate staffing, written procedures, resources and facilities for receipt, management, retention and retrieval of borrower documents to ensure that borrowers are not required to submit multiple copies of documents. Cooperation with Authorized Advisors Servicers must, subject to receipt of written authorization from the borrower, accept information and other required verification documents submitted by a trusted advisor (e.g., HUD-approved housing counseling agencies, non-profit consumer advocacy organizations, legal guardians, powers of attorney or legal counsel) on behalf of a borrower and should use that information to determine HAMP eligibility. Servicers may use written authorization previously received from the borrower or written authorization provided contemporaneously with the submission of the RMA. The borrower is also considered to have provided written authorization if a copy of a power of attorney, order of guardianship, or other legal papers authorizing a thrid party to act on behalf of the borrower and provided. Written authorization may be supplanted by the legal documents authorizing a third party to act more generally on behalf of the borrower in cases of disability or borrowers unavailable due to active duty military service. At their discretion, servicers may pledge any portion of the upfront servicer incentive that is earned in conjunction with a completed HAMP modification to compensate trusted advisors acting on behalf of a borrower, provided that there is no fee charged to the borrower. Response to Borrower Inquiries Servicers must have written procedures and personnel in place to provide timely and appropriate responses to borrower inquiries and complaints in connection with HAMP within the timelines specified in this Handbook. These procedures must include a process through which borrowers may escalate disagreements to a supervisory level, where a separate review of the borrower's eligibility or qualification can be performed. Electronic Mail Electronic mail may only be sent to an email address provided by the borrower when the borrower has agreed to receive communications electronically. Such email address must be documented in the servicing system and/or mortgage file.

3.2.2. 2.2 Borrower Solicitation Each servicer must have clear and comprehensive internal written policies for identification and solicitation of borrowers who are potentially eligibile for HAMP based on information in the servicer's possession. These procedures should follow investor guidelines and comply with all contractual restrictions. Servicers must pre-screen all first lien mortgage loans where two or more payments are due and unpaid to determine if they meet the following basic criteria for consideration under HAMP: One-to-four unit residential property Occupied by the borrower as his or her principal residence Not vacant or condemned Loan originated on or before January 1, 2009 UPB does not exceed HAMP limits Not previously modified under HAMP Servicers must proactively solicit for HAMP any borrower whose loan passes this pre-screen, unless the servicer has documented that the investor is not willing to participate in HAMP pursuant to the requirements outlined in Section 1.3 of Chapter 1. Solicitation must include written communication clearly describing HAMP. Use of the form of solicitation letter available on shall satisfy this requirement. The servicer's HAMP solicitation may also identify other optios potentially available to help the borrower cure the delinquency and retain homeownership. 2.2.1 Reasonable Effort A servicer is deemed to have made a "Reasonable Effort" to solicit a borrower if over a period of at least 30 calendar days: Any contact with eligible borrowers, whether by telephone, mail or otherwise, must: All contact attempts must be documented in the servicing file. If the servicer has documentation evidencing that it satisified the Reasonable Effort standard for HAMP prior to June 1, 2010, re-solicitation of the borrower is not required. 2.2.2 Right Party Contact Successful efforts by a servicer to communicate with the borrower or co-borrower about resolution of the delinquency are termed "Right Party Contact" for purposes of this Handbook. If Right Party Contact is established and the borrower expresses an interest in HAMP, the servicer must send a written communication to the borrower via regular or electronic mail that clearly describes the Initial Package, which is required to be submitted by the borrower to request a HAMP modification. The communication should: The communication should also include clear language stating that during the HAMP evaluation the home will not: (i) be referred to foreclosure; or (ii) be sold at a foreclosure sale if the foreclosure process has already been initiated. In the communication, the servicer must include a specific date by which the Initial Package must be returned, which must be no less than 15 calendar days from the date of the communication. If Right Party Contact is established prior to satisfaction of the Reasonable Effort standard, the servicer must continue to take steps to satisfy the Reasonable Effort standard until the Initial Package is submitted by the borrower. If Right Party Contact is established, but the borrower does not submit an Initial Package, the servicer must resend the Initial Package communication. Again, the servicer must include a specific date by which the Initial Package must be returned, which must be no less than 15 calendar day sfrom the date of the second communication. If the borrower does not respond by providing an Initial Package within the required time period set forth in the second communication, the servicer may determine the borrower to be ineligible for HAMP. If Right Party Contact is established, but the borrower submits an incomplete Initial Package within the required period, the servicer must comply with the "Incomplete Information NOtice" requirements set forth below in Section 2.3.3. If the borrower does not respond to either the 30-day Incomplete Information Notice or the 15-day Incomplete Information Notice by providing an Initial Package within the required time period, the servicer may determine the borrower to be ineligible for HAMP. Servicers must acknowledge receipt of the Initial Package within 10 business days per the requirements in Section 4.5 and respond within 30 calendar days with either an Incomplete Information Notice (as outlined in Section 2.3.3), a TPP Notice (as outlined in Section 8.1) or a Non-approval Notice as outlined in Section 2.3.2). 2.2.3 Exception to Notice Requirement The servicer is not required to send an Initial Package if, as a result of discussions with the borrower or based on information in the servicer's posession, the servicer determines that the borrower does not meet the basic eligibility criteria for HAMP as described in Section 1.1 or the servicer determines that the borrower's monthly mortgage obligation (including principal, interest, taxes, insurance and, when applicable, =association fees) is substantially less than 31 percent of the borrower's gross monthly income. Such decision must be documented in the applicable servicing file.

3.2.3. 2.3 Borrower Notices A servicer must send a Borrower Notice to every borrower that has been evaluated for HAMP, but is not offered a TPP, is not offered a permanent modification or is at risk of losing eligibility for HAMP because they have failed to provide reuqired financial documentation. A borrower has been "evaluated" for HAMP using verified information on or after June 1, 2010 if the borrower has submitted an Initial Package to the servicer. A borrower has been "evaluated" for HAMP using stated information prior to June 1, 2010 if: A written request is submitted (either hardcopy or electronic submission) for consideration for a modification that includes, at a minimum, current borrower income and a reson for default or explanation or hardship, as applicable; or A verbal request provided sufficient financial and other data to allow the servicer to complete an NPV analysis; or A TPP has been offered. 2.3.1 Content of Borrower Notices The content of the Borrower NOtices will vary dependingo n the information intended to be conveyed or the determination made by the servicer. All borrower Notices must be written in clear, non-technical language, with acronyms and industry terms such as NPV explained in a manner that is easily understandable. The model clauses for borrower notices that are set forth in Exhibit A provide sample language that may be used to communicate the status of a borrower's request for a HAMP modification. The model clauses relate to the Not Approved/Not Accepted reason codes set forth in the HAMP Additional Data Requirements Data Dictionary available on Use of the model clauses is optional; however, they illustrate a level of specificity that is deemd to be in compliance with language requirements of this Handbook. All Borrower Notices must include the following detail: 2.3.2 Non-Approval Notices For borrowers not approved for a TPP or permanent HAMP modification, the Non-Approval Notice provides the primary reason(s) for the non-approval. in addition to the information listed in Section 2.3.1, any Non-Approval Notice must also: The servicer may not conduct a foreclosure sale within the 30 calendar days after the date of a Non-Approval Notice or any longer period required to review supplemental material provided by the borrower in response to a Non-Approval Notice unless teh reason for non-approval is (1) ineligible mortgage, (2) ineligible property, (3) offer not accepted by borrower / request withdrawn, or (4) the loan was previously modified under HAMP. A model clause describing these rights is provided in Exhibit A. Use of the model clause is optional; however, it illustrates the level of specificity that is deemed to be in compliance with the language requirements of this Handbook. Non-Approval Notice - Negative NPV Result Non-Approval Notice - Payment Default During the Trial Period Non-Approval Notice - Loan Paid Off or Reinstated Non-Approval Notice - Withdrawal of Request or Non-Acceptance of Offer 2.3.3 Incomplete Information Notice If the servicer receives an incomplete Initial Package or needs additional documentation to verify the borrower's eligibility and income, the servicer must send the borrower an Incomplete Information Notice that lists the additional documentation that the servicer requires to verify the borrower's eligibility. The Incomplete Information Notice must include a specific date by which the documentation must be received, which must be no less than 30 calendar days from the date of notice. If the documents are not received by the date specified in the notice, the servicer must make one additional attempt to contact the borrower in writing regarding the incomplete documents. This additional notice must include the specific date by which the documentation must be received, which must be no less than 15 calendar days from the date of the second notice. If a borrower is unresponsive to these requests for documentation the servicer may discontinue document collection efforts and determine the borrower to be ineligible for HAMP. In such an instance, the servicer must send the borrower a Non-Approval Notice. Notwithstanding the foregoing, if a borrower submits an incomplete Initial Package and the servicer can, based on the information and documentation submitted, determine that the borrower is not eligible for HAMP, then the servicer may issue a Non-Approval Notice to the borrower reflecting the reasons for non-approval, without requesting documents to complete the Initial Package.

3.3. 3. Protections Against Unnecessary Foreclosure

3.3.1. 3.1 Suspension of a Referral to Foreclosure A servicer may not refer any loan to foreclosure or conduct a scheduled foreclosure sale unless and until at least one of the following circumstances exists: The borrower is evaluated for HAMP and is determined to be ineligible for the program; or The borrower is offered a TPP, but fails to make current trial period payments as set forth in Section 8.3; or The servicer has established Right Party Contact, has sent at least two written requests asking the borrower to supply required information in accordance with Section 2.2.2, and has otherwise satisfied the Reasonable Effort solicitation standard, and the borrower failed to respond by the dates indicated in those requests; or The servicer has satisfied the Reasonable Effort solicitation standard without establishing Right Party Contact; or The borrower or co-borrwer states he or she is not interested in pursuing a HAMP modification and such statement is reflected by the servicer in its servicing system and/or mortgage file.

3.3.2. 3.2 Suspension of Foreclosure proceedings in Process With respect to a borrower who submits a request for HAMP consideration after a loan has been referred to foreclosure, the servicer must, immediately upon the borrower's acceptance of a TTP based on verified income, and for the duration of the trial period, take those actions within its authority that are necessary to halt further activity and events in the foreclosure process, whether judicial or non-judicial, including but not limited to refraining from scheduling a sale or causing a judgement to be entered. The servicer will not be in violation of this section to the extent that: (a) a court with jurisdiction over the foreclosure proceeding (if any), or the bankruptcy court in a bankruptcy case, or the public official charged with carrying out the activity or event, fails or refuses to halt some or all activities or events in the matter after the servicer has made reasonable efforts to move the court or request the public official for a cessation of the activity or event; (b) the servicer must take some action to protect the interests of the owner, investor, guarantor or servicer of the loan in response to action taken by the borrower or other parties in the foreclosure process; or (c) there is not sufficient time following the borrower's acceptance of the TPP for the servicer to halt the activity or event, provided that in no event shall the servicer permit a sale to go forward. The servicer must document in the servicing file if any of the foregoing exceptions to the requirement to halt an existing foreclosure sale is applicable.

3.3.3. 3.3 Suspension of Scheduled Foreclosure Sale When a borrower submits a request for HAMP consideration after a foreclosure sale date has been scheduled and the request is received no later than midnight of the seventh business day prior to the foreclosure sale date (Deadline), the servicer must suspend the sale as necessary to evaluate the borrower for HAMP. Servicers are not required to suspend foreclosure sale when: (1) a request for HAMP consideration is received after the Deadline; (2) a borrower received a permanent modification and lost good standing (as described in Section 9.4); (3) a borrower received a TPP offer and failed to make one or more payments under the TPP by the last day of the month in which it was due; or (4) a borrower was evaluated based upon an Initial Package and determined to be ineligible under HAMP requirements The servicer will not be in violation of this section to the extent that a court with jurisdiction over the foreclosure proceeding (if any), or the bankruptcy court in a bankruptcy case, or the public official charged with carrying out the activity or event, fails or refuses to halt the sale after the servicer has made reasonable efforts to move the court or request the public official for a cessation of the sale. The servicer must document in the servicing system and/or mortgage file if the foregoing exception to the requirement to suspend an existing foreclosure sale is applicable. A borrower is deemed to have requested consideration for HAMP when an Initial Package is received by the servicer or its foreclosure attorney/trustee prior to the Deadline. However, the servicer may establish additional requirements for requests received later than 30 calendar days prior to a scheduled foreclosure sale date, including, for example, a requirement that the Initial Package be delivered through certified/express delivery mail with return receipt/deliver confirmation to eitehr the servicer or the foreclosure attorney/foreclosure trustee. These requirements must be posted on the servicer's Website and communicated to the borrower in writing in accordance with Section 2.2 or through other written communication. If the borrower contacts the servicer prior to the Deadline, the servicer must inform the borrower of the Deadline and any document submission requirements.

3.3.4. 3.4 Mitigating Foreclosure Impact The servicer must take the following actions to mitigate foreclosure impact: 3.4.1 Simultaneous Trial Period Plan and Foreclosure Explanation 3.4.2 Foreclosure Attorney/Trustee Communication 3.4.3 Certification Prior to Foreclosure Sale

3.4. 4. Request for Modification

3.4.1. For all TPPs with effective dates on or after June 1, 2010, a servicer may evaluate a borrower for HAMP only after the servicer receives the following documents, subsequently referred to as the "Initial Package". Throughout this Handbook, unless otherwise indicated, all references to the "borrower" include any and all co-borrwers. The Initial Package includes: Request for Modification and Affidavit Form IRS Form 4506-T or 4506T-EZ, and Evidence of income

3.4.2. For all documents required by Treasury (other than for IRS Form 4506-T/4506T-EZ), electronic submission and signatures are acceptable.

3.4.3. 4.1 Request for Modification and Affidavit (RMA) Form The RMA provides the servicer with borrower financial information, including the cause of the borrower's hardship. The financial information and hardship sections of teh RMA must be completed and executed by the borrower and, if applicable, any co-borrower. The RMA is available on Servicers may require use of the RMA by all borrowers requesting consideration for HAMP or may use other proprietary financial information forms that are substantially similar in content to the RMA. When provided by or on behalf of the borrower, the RMA form must be accepted by servicers in lieu of any servicer-specific form(s). When the RMA is not used, servicers must obtain an executed MHA Hardship Affidavit, which is available on Servicers may also incorporate all of the information on this standalone affidavit into their proprietary form. Throughout this Handbook, the term RMA is used to indicate both the HAMP RMA form and servicer proprietary forms substituted for the RMA. 4.1.1 Hardhip Affidavit Included in the RMA is a Hardship Affidavit. Every borrower seeking a modification, regardless of delinquency status must sign a Hardship Affidavit that attests that the borrower is unablet o continue making full mortgage payments and describes one or more of the following types of hardship: The borrower is not required to have the Hardship Affidavit notarized. HAMP does not distinguish between short-term and long-term hardships for eligibility purposes. 4.1.2 Government Monitoring Data (GMD) In addition to financial information, the RMA (or Hardship Affidavit if the RMA form is not used) solicits data related to the race, ethnicity and sex of the borrower and co-borrwer, referred to as Government Monitoring Data (GMD). Treasury has directed the Program Administrator to enter into agreements on behalf of the Department of Housing and Urban Development (HUD) with loan servicers participating in HAMP for the purpose of directing servicers to request GMD in order to monitor compliance with the Fiar Housing Act, 42 U.S.C. 3601 et seq., and other applicable fiar lending and consumer protection laws. HUD has informed Treasury that it is requesting the monitoring information pursuant to this authority and its general regulatory authority under the Fiar Housing Act. HUD and Treasury consider any agreements entered into between servicers and the Program Administrator on behalf of the HUD to be agreements entered into with an enforcement agency to monitor or enforce compliance with federal law, within the meaning of 12 C.F.R. 202.5(a)(2). Federal Reserve Board regulations interpreting ECOA permit creditors to collect information on the race, ethnicity and sex of borrowers if the information is "required by a regulation, order, or agreement issued by, or entered into with a court or an enforcement agency (including the Attorney General of the United States or a similar state official) to monitor or enforce compliace with [ECOA], this regulation, or other federal or state statues or regulations." 12 C.F.R.202.5(a)(2). This Handbook (a) constitutes an agreement entered into between the Program Administrator, on behalf of HUD, and servicers participating in HAMP with respect to Non-GSE Mortagges; and (b) is an agreement entered into by participating servicers with an enforcement agency (HUD) to permit the enforcement agency to monitor or enforce compliance with federal law, within the meaning of 12 C.F.R. 201.5(a)(2). Treasury has specified that GMD shall be collected on the RMA or Hardship Affidavit. Servicers shall request, but not require, that each borrower who completes the RMA or Hardship Affidavit in connection with HAMP furnish GMD. Servicers are required to report GMD to the Program Administrator as part of the additional data reporting requirements set forth in Section 11.4 Collection of GMD

3.4.4. 4.2 IRS Form 4506-T or 4506T-EZ All borrowers must provide a signed and completed IRS Form 4506-T or 4506T-EZ (Request for Transcript of Tax Return) with the Initial Package. Although either form is acceptable, use of the IRS Form 4506T-EZ is encouraged because of its relative simplicity. Both forms are posted on Borrowers can locate and complete a version of IRS Form 4506T-EZ in either English or Spanish on The servicer must submit the borrower's Form to the IRS for processing unless the borrower provides a signed copy of his or her most recent federal income tax retun, including all schedules and forms.

3.4.5. 4.3 Evidence of Income The Initial Package must also include documentation to verify the borrower's income as described in Section 5.1. The income documentation may not be more than 90 days old as of the date the documentation is received by the servicer. There is no requirement to refresh the income documentation during the TPP.

3.4.6. 4.4 Reasonably Foreseeable or Imminent Default A borrower that is current or has only one payment due and unpaid by the end of the month in which it is due and who contacts the servicer to request HAMP consideration must be evaluated to determine if he or she is at risk of imminent default. Each servicer must have written standards for determining imminent default that are consistent with applicable contractual agreements and accounting standards and must apply the standards equally to all borrowers. When making an imminent default determination, the servicer must evaluate the borrower's hardship as well as the condition of and circumstances affecting the property securing the mortgage loan. The servicer must consider the borrower's financial condition, liquid assets, liabilities, combined monthly income from wages and all other identified sources of income, monthly obligations (including personal debts, revolving accounts, and installment loans), and a reasonable allowance for living expenses such as food, utilities, etc. The hardship and financial condition of the borrower must be verified through documentation. A servicer must document in its servicing system and/or mortgage file the basis for its determination that a payment default is imminent and retain all documentation used to reach this conclusion.

3.4.7. 4.5 Acknowledgement of Initial Package Within 10 business days of following receipt of an Initial Package, the servicer must acknowledge in writing the borrower's request for HAMP participation by sending the borrower confirmation that the Initial Package was received and a description of the servicer's evaluation process and timeline. If the Initial Package is received from the borrower via email, the servicer may email the acknowledgement. Servicers must maintain evidence of the date of receipt of the borrower's Initial Package in its records. A single written communication sent within 10 business days of receipt of a borrower's request for HAMP participation may also include, at the servicer's discretion, the results of its review of the Initial Package.

3.4.8. 4.6 Review of Initial Package Within 30 calendar days from the date an Initial Package is received, the servicer must review the documentation provided by the borrower for completeness. If the documentation is incomplete or insufficient for use in underwriting, the servicer must send the borrower an Incomplete Information Notice in accordance with the guidance set forth in Section 2.3.3. If the borrower's documentation is complete, the servicer must evaluate the borrower's eligibility for HAMP and either: Send the borrower a TPP Notice (see Section 8.1); or Make a determination that the borrower is not eligible for HAMP and communicate this determination to the borrower in accordance with the guidance in Section 2.3.2.

3.5. 5. Verification

3.5.1. Servicers must verify a borrower's eligibility for HAMP using the documentation provided by the borrower in the Initial Package prior to offering the borrower a TPP.

3.5.2. 5.1 Evidence of Income Servicers should request that the borrower provide the income verification documentation listed below but may, if consistent with contractual requirements, substitute other reliable forms of verification when appropriate. However, servicers may not require verification documentation in addition to the documentation listed below unless the servicer determines that additional documentation is necessary to resolve discrepancies between the RMA, tax documents and income documentation. Servicers are responsible for determining that any information provided by the borrower that is needed to evaluate the borrower's qualification for HAMP is complete and accurate. When verifying a borrower's income and evaluating a borrower's eligibility for HAMP, servicers should use good business judgment consistent with the judgment employed when modifying mortgage loans held in their own portfolio. For example, servicers may use the: current income documentation when there is a discrepancy between tax returns and current income documentation if the borrower has changed jobs or has had a substantial pay cut; or information from the tax transcript obtained via form 4506T-EZ when differences exist between the transcript and the tax return provided by the borrower. 5.1.1 Wage or Salary Income Each wage earning borrower must provide copies of two recent pay stubs, not more than 90 days old at time of submission, indicating year-to-date earnings. Servicers may accept pay stubs that are not consecutive if, in the business judment of the servicer, it is evident that the borrower's income has been accurately established. When two pay stubs indicate different periodic income, servicers may use year-to-date earnings to determine the average periodic income, and account for any non-periodic income reflected in either of the pay stubs. When verifying annualized income based on the year-to-date earnings reflected on pay stubs, servicers may, in their business judgment, make adjustments when it is likely that sources of additional income (bonus, commissions, etc.) are not likely to continue. 5.1.2 Self-Employment Income Each self-employed borrower must provide his or her most recent quarterly or year-to-date profit and loss statement. Audited financial statements are not required. When calculating gross income for self-employed borrowers, a servicer should include the borrower's net profit plus any salary or draw amounts that were paid to the borrower in addition to adding any of the allowable adjustments used in analyzing the tax returns for the business, such as nonrecurring income and expenses, depreciation and depletion (if applicable). 5.1.3 Other Earned Income Other earned income includes, but is not limited to, bonus, commission, fee, housing allowance, tips and overtime. Borrowers with other earned income must provide reliable third party documentation describing the nature of the income (e.g., an employment contract or printouts documenting tip income). Educational grant funds that are intended for a specific learning purpose are not a source of income for the purposes of HAMP. 5.1.4 Benefit Income Benefit income includes, but is not limited to, social security, disability, death benefits, pension, public assistance and adoption assistance. Government benefits granted under the Supplementatl Nutrition Assistance Program (i.e. food stamps) are considered to be a source of income for the purposes of HAMP because, like other income, they are used by the borrower to cover reasonable monthly living expenses. Borrowers who receive benefit income must provide evidence of (i) the amount and frequency of the benefits such as letters, exhibits, a disability policy or benefits statement from the provider, and (ii) receipt of payment, such as copies of the two most recent bank statements or deposit advices showing deposit amounts. If a benefits statement is not available, servicers may rely only on receipt of payment evidence, if it is clear that the borrower's entitelment is ongoing. 5.1.5 Unemployment Benefits Borrowers who receive unemployment benefits and request assistance under HAMP must be evaluated for and, if eligible, offered an UP forbearance plan before the borrower may be considered for HAMP. See Chapter II, Home Affordable Unemployment Program. 5.1.6 Rental Income Borrowers who receive rental income must provide evidence of that income, which is generally documented on IRS Schedule E (Supplemental Income and Loss) of the borrower's tax return for the most recent tax year. When Schedule E is not avialable to document rental income because the property was not previously rented, servicers may accept a current lease agreement and bank statements or cancelled rent checks. If the borrower is using income from the rental of a portion of the borrower's principal residence, the income may be calculated at 75 percent of the monthly gross rental income, with the remaining 25 percent considered vacancy loss and maintenance expense. If the borrower is using rental income from peroperties other than the borrower's principal residence, the income to be calculated for HAMP pruposes should be 75 percent of the monthly gross rental income, reduced by the monthly debt service on the property (i.e., principal, interest, taxes, insurance, including mortgage insurance, and association fees), if applicable. Rental income should not be included in a borrower's monthly gross income if there is currently no income due to vacancy (even if rental income was identified in their tax return or tax transcript). The servicer must reconcile any differences between what the borrower communicates and the borrower's information. For example, the servicer might choose to perform a property inspection of the rental property. 5.1.7 Alimony, Separation Maintenance, and Child Support Income Borrowers are not required to use alimony, separation maintenance or child support income to qualify for HAMP. However, if the borrower chooses to provide this income, it should be documented with (i) copies of the divorce decree, separation agreement or other legal written agreement filed with ac ourt, or a court decree that provides for the payment of alimony or child support and states the amount of the award and the period of time over which it will be received, and (ii) evidence of receipt of payment, such as copies of the two most recent bank statements or deposit advices showing deposit amounts. If the borrower voluntarily provides such income, and that income renders the brorrower ineligible for a HAMP offer, the servicer is allowed to remove that income from consideration and re-evaluate the borrower for HAMP eligibility. 5.1.8 Threshold for Documenting Passive and Non-Wage Income Notwithstanding the other provisions of this Section 5.1, passive and non-wage income (including rental, part-time employment, bonus/tip, investment and benefit income) does not have to be documented if it constitutes less than 20 percent of the borrower's total income. 5.1.9 Non-Borrower Household Income A non-borrower is someone who is not on the original note (and may or may not be on the original security instrument), but whose income has been relied upon to support the mortgage payment. Non-borrower household income that may be considered for HAMP qualification must come from someone who resides in the residence. Examples include a non-borrower spouse, parent, child or a non-relative, but in each case, a person who shares in the occupancy of the home and provides some support for the household expenses. Servicers should include non-borrower household income in monthly gross income if it is voluntarily provided by the borrower and if, in the servicer's business judgment, that the income reasonably can continue to be relied upon to support the mortgage payment. Non-borrower household income included in the monthly gross income must be documented and verified by the servicer using the same standards for verifying a borrower's income. If income is being used for a non-borrower, the servicer should use only the income that the non-borrower will contribute to the mortgage.

3.5.3. 5.2 Borrowers in Active Bankruptcy-Substitution of Evaluation Documents When a borrower is in an active Chapter 7 or Chapter 13 bankruptcy, the servicer may accept copies of the bankruptcy schedules and tax returns (if returns are required to be filed0 in lieu of the RMA and Form 4506T-EZ, and may use this information to determine borrower eligibility (with the income documentation). Servicers should request the schedules and tax returns from the borrower, borrower's counsel or bankruptcy court. If the bankruptcy schedules are greater than 90 days old as of the date that such schedules are received by the servicer, the borrower must provide updated evidence of income to determine HAMP eligibility. Additionally, either directly or through counsel, borrowers must provide a completed and executed Hardship Affidavit (or RMA).

3.5.4. 5.3 Occupancy Verification The servicer must obtain a credit report for each borrower or a joint report for a married couple who are co-borrowers to confirm that the property securing the mortgage loan is the borrower's principal residence. If the credit report is inconsistent with other information provided by the borrower, the servicer mus use good business judgment in reconciling the inconsistency. A servicer can consider a mortgage loan for HAMP that, while originally secured by non-owner occupied property, has become the borrower's principal residence as long as such occupancy can be verified.

3.5.5. 5.4 Verifying Monthly Gross Expenses Servicers must verify the borrower's monthly gross expenses as reported by the borrower on the RMA using the credit report, tax returns or transcripts and other verification documentation provide by the borrower. Monthly gross expenses include the monthly charges described in the following list: The monthly mortgage payment, taxes, property insurance, homeowner's or condominium association fee payments and assessments related to the property whether or not they are included in the morgage payment. Any mortgage insurance premiums. Monthly payments on all closed-end subordinate mortgages. Alimony, child support and separate maintenance payments with more than ten months of payments remaining, if supplied by the borrower. Car lease payments, regardless of the number of payments remaining. Monthly payments on revolving or open-end accounts, regardless of the balance. In the absence of a stated payment, the payment will be calcualted by multiplying the outstanding balance by three-percent. Aggregate negative net rental income from all investment properties owned, if supplied by the borrower. Monthly mortgage payment for second home including principal, interest, taxes and insurance and, when applicable, leasehold payments, homeowner association dues, condominium unit or cooperative unit maintenance fees, but excluding unit utility charges. Payments on all installment debts with more than ten months of payments remaining, including debts that are in a period of either deferment or forbearance. When payments on an installment debt are not on the credit report or are listed as deferred, the servicer must obtain documentation to support the payment amount include din the monthly debt payment. If no monthly payment is reported on a student loan that is deffered or is in forbearance, the servicer will obtain documentation verifying the proposed monthly payment amount, or use a minimum of 1.5 percent of the balance. Monthly payment on a HELOC will be included in the payment ratio using the minimum monthly payment reported on the credit report. If the HELOC has a balance, but no monthly payment is reported, the servicer will obtain documentation verifying the payment amount, or use a minimum of one percent of the balance. A servicer should not consider expenses of non-borrower household members when calculating monthly gross expenses.

3.5.6. 5.5 Fraud Servicers should not modify a mortgage loan if tehre is reasonable evidence indicating the borrower submitted income information that is false or misleading or if the borrower otherwise engaged in fraud in connection with the modification.

3.5.7. 5.6 Document Perfection Servicers must use good business judgment when determining the level of perfection of the verification documents. Servicers may elect to accept documents with imperfections (blank fields, erasures, use of correction tape, inaccurate dates, etc.) if the servicer determines that the imperfections are immaterial to teh business decision, are not indicative of fraud and do not impact the servicer's ability to verify the completeness and accuracy of the borrower's financial representations.

3.5.8. 5.7 Borrower Signatures Unless a borrower is deceased or divorced, all parties who signed the original loan documents or their duly authorized representative(s) should sign HAMP documents. However, servicers may encouter circumstances where a co-borrower signature is not obtainable, for reasons such as mental incapacity, military deployment or contested divorce. Servicers should use good business judgment, in accordance with existing servicing agreements and investor guidelines, when determining whether to accept a document without a co-borrower's signature.

3.6. 6 Underwriting

3.6.1. Servicers must determine the borrower's eligibility for a modification using information obtained in the Initial Package and subsequently verified. Servicers are required to complete their assessment of borrower eligibility and notify the borrwer of the eligibility determination within 30 calendar days of receiving all required borrower documenation.

3.6.2. 6.1 Monthly Mortgage Payment Ratio To qualify for HAMP, verified income documentation must confirm that the borrower's monthly mortgage payment ratio prior to the modification is greater than 31 percent. The monthly mortgage payment ratio is the ratio of the borrower's current monthly mortgage payment to the monthly gross income of all borrowers on the mortgage note, whether or not those borrowers reside in the property. If the borrower's monthly mortgage payment ratio is less than 31 percent, the borrower is not eligible for HAMP and the servicer must send the borrower a Non-Approval Notice (see Section 2.3.2) and consider the borrower for alternative loss mitigation options in accordance with Section 8.7. 6.1.1 Monthly Gross Income Monthly gross income is the borrower's income amount before any payroll deductions and includes: 6.1.2 Monthly Mortgage Payment The monthly mortgage payment used to determine borrower eligibility includes the monthly payment of principal, interest, property taxes, hazard insurance, flood insurance, condominium association fees and homeowner's association fees, as applicable, regardless of whether these expenses are included in teh borrower's current mortgage payment. It also includes any escrow payment shortage amounts that are subject to a repayment plan. The monthly mortgage payment does not include mortgage insurance premium payments or payments ude to holders of subordinate liens. Pending ARM Resets Reasonable Efforts to Obtain Association Fee Information Loan Secured by Property in a Leasehold Jurisdiction

3.6.3. 6.2 Coordination with Hope for Homeowners Servicers are erquired to consider a borrower for a refinance through the Federal Housing Administration's HOPE for Homeowners (H4H) program when feasible. COnsideration for an H4H refinance should not delay eligible borrowers from receiving a TPP Notice. The servicer's obligation as it relates to the H4H requirement is that while the servicer is gathering information to determine if a borrower meets the minimum eligibility criteria for HAMP, it should also be assessing whether the borrower may be eligible to refinance through H4H. This assessment would involve asking the following set of questions: Will the loan amount exceed $550,440? Has the borrower made less than six (6) full payments during the life of the first lien loan? Does the borrower have an ownership interest in other residential real estate, including any second homes or rental properties? Was the mortgage to be refinanced originated after January 1, 2008? Does the property contain more than one (1) unit? If the answer to all of these questions is "NO", the borrower may be eligible for H4H. In this case, the servicer should counsel the borrower to seek a refinance with an H4H lender. Servicers are not under any circumstances required to take an H4H loan application from the borrower. If the servicer participating in HAMP is not a mortgage loan originator and does not have the capability to appropriately evaluate or consider borrowers for refinancing into H4H, the servicer may counsel a borrower to seek a refinance with an H4H lender. If the servicer knows that the related owner or third party investor does not permit principal forgiveness, which is required under H4H, no servicer action is required with respect to that loan. However, the servicer may not refuse to consider a borrower for HAMP or refuse to initiate a TPP for an otherwise qualified borrower subject to that borrower applying for and being denied a loan under H4H. However, the servicer may not refuse to consider a borrower for HAMP or refuse to initiate a TPP for an otherwise qualified borrower subject to that borrower applying for, and being denied a loan under, H4H.

3.6.4. 6.3 Standard Modification Waterfall Servicers must apply the modification steps enumerated below in the stated order of succession until the borrower's monthly mortgage payment ratio is reduced to 31 percent (target monthly mortgage payment ratio). A borrower will qualify for HAMP only if the interest rate on the mortgage loan can be reduced by at least 0.125 percent without the modified monthly mortgage payment ratio going below 31 percent. If the servicer cannot reduce the borrower's monthly mortgage payment ratio to the target of 31 percent, the modification will not satisfy HAMP requirements and no incentives will be payable in connection with the modification. 6.3.1 Step 1-Capitalization In the first step, the servicer capitalizes accrued interest, out-of-pocket escrow advances to third parties, and any required escrow advances that will be paid to third parties by the servicer during the TPP. In addition, the servicer capitalizes servicing advances that are made for costs and expenses incurred in performing servicing obligations, such as those related to preservation and protection of the security property and the enforcement of the mortgage, provided such costs and expenses are (i) consistent with the security instrument; (ii) allowable under GSE guidelines; and (iii) not prohibited by applicable law. For example, foreclosure fees and costs paid to a third party in the ordinary course of business are considered servicing advances and may be capitalized unless the borrower agrees to pay the fees and costs upfront. However, fees associated with modification of the morgage, such as modification agreement recording fees and title fees generally are not covered by the security instrument and may not be capitalized. Recording fees and title fees generally are considered administrative costs and may be reimbursable by the investor through the ordinary course of business, subject to applicable investor contracts. Any prior forbearance amount may be capitalized to the extent that such forbearance is permitted under, and any required disclosures comply with, all applicable laws, rules and regulations. The servicer should capitalize only those third party delinquency fees that are reasonable and necessary. FEes permitted by Fannie Mae and Freddie Mac for GSE loans shall be considered evidence of fees that would be reasonable for Non-GSE Mortgages. Late fees may not be capitalized and must be waived if the borrower satisfies all conditions of the TPP. The servicer may not capitalize junior lien holder subordination fees. Servicers are not required, but may choose to pay those fees out of pocket and offset costs out of their incentive payments. In addition, lender paid mortgage insurance premium costs should not be capitalized. Lender paid mortgage insurance premiums are a lender obligation and not an obligation of the borrower. 6.3.2 Step 2-Interest Rate Reduction In the second step, the servicer reduces the starting interest rate in increments of 0.125 percent to get as close as possible to the target monthly mortgage payment ratio. The interest rate floor is 2.0 percent. If a borrower has an ARM or interest-only mortgage, the existing interest rate will convert to a fixed interest rate, fully amortizing loan. If the loan is a fixed rate mortgage or an adjustable-rate mortgage, the starting interest rate is the current interest rate. If the loan is a Reset ARM, the starting interest rate is the Reset Interest Rate if it is within 120 days of reset. If the current mortgage rate (or the ARM reset rate, if applicable) is not at a 0.125 percentage point increment, servicers should not round the interest rate first. Begin with the un-rounded rate and reduce it in 0.125 percentage-point increment will reduce the reate below 2.0 percent, set the rate to exactly 2.0 percent with no term extension and determine if the target monthly mortgage payment ratio is achieved. If it is not, move to the next step of the waterfall (term extension). The interest rate must be fully reduced to 2.0 percent prior to any term extension. For example, test for the target monthly mortgage payment ratio at 2.180 percent; if it is not achieved, reduce the rate to 2.055 percent and test again; if it is not achieved, reduce the rate to 2.000 percent and test again; if it is not achieved, fix teh rate at 2.000 percent and move to the term extension step of the waterfall. If the resulting rate is below the Interest Rate Cap (as defined in Section 9.3.6), this reduced rate will be in effect for the first five years. This is followed by annual increases of one percent per year (or such lesser amount as may be needed) until the interest rate reaches the Interest Rate Cap, at which time the rate will be fixed for the remaining loan term. If the resulting rate exceeds the Interest Rate Cap, then that rate is the permanent rate. 6.3.3 Step 3-Term Extension If necessary, in the third step the servicer extends the term and re-amortizes the mortgage loan by up to 480 months from the Modification Effective Date to achieve the target monthly mortgage payment ratio. The Modification Effective Date is the due date for the first payment under the permanent modification. The term extensions steps must be made in one-month increments. If a term extension is not permitted under the applicable servicing agreement or applicable law, reamortize the mortgage loan based upon an amortization schedule of up to 480 months with a balloon payment due at maturity. Negative amortization after the effective date of the modification is prohibited. The servicer will document the prohibition on the term extension, if applicable. If the loan's current remaining term is greater than 480 months, it does not disqualify the borrower from HAMP eligibility. If the borrower is eligible under HAMP and the reduction of their current interest rate to 2.0 percent is not sufficient to reach the target monthly mortgage payment ratio of 31 percent, the servicer will skip the term extension step of the standard modification waterfall. The servicer will proceed to the principal forbearance step of the waterfall to attempt to achieve the target monthly mortgage payment ratio of 31 percent. The servicer will 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. 6.3.4 Step 4-Principal Forbearance If necessary, the servicer will 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 UPB, or at maturity of the mortgage loan. 6.3.5 Principal Forgiveness There is no requirement to forgive principal under 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. 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. 6.3.6 Variation from Standard Modification Waterfall Servicers, in accordance with investor guidelines, are not precluded from providing borrowers with a more favorable modification than that required by HAMP. Instances where the servicer deviates from the standard modification waterfall must be noted in the servicing system or mortgage file. In addition, the borrower, servicer and investor incentive payments will be paid based on modification terms that reflect the monthly mortgage payment ratio and standard modification waterfall terms. Examples of acceptable deviations are provided below.

3.6.5. 6.4 [Intentionally Left Blank]

3.6.6. 6.5 Prohibitions on Modification Waterfall Steps If a servicing agreement, investor guidelines or applicable law restricts or prohibits a modification step in the modification waterfall and the servicer partially performs it or skips it, the modification still qualifies for HAMP. Servicers must maintain evidence in the loan file documenting the nature of any deviation from taking any sequential modification step in the modification waterfall. The evidence must demonstrate that the applicable servicing agreement or applicable law restricted or prohibited the servicer from fully performing or taking the modification step. If a servicer was restricted or prohibited from fully performing or taking the modification step, the documentation must show that the servicer made reasonable efforts to seek a waiver from the applicable investor and whether the requested waiver was approved or denied. The servicer must adhere as closely as possible to the modification waterfall for each loan. The servicer may not, for example, solely for the purpose of reducing operational complexity, apply a modified waterfall to all loans if only a portion of the servicer's book is affected by a restriction.

3.6.7. 6.6 Principal Forbearance 6.6.1 Principal Forbearance Limits With respect to both "positive" and "negative" NPV results, servicers are not required to forbear more than the greater of (i) 30 percent of the UPB of the mortgage loan (after any capitalization under Step 1 of the standard modification waterfall) or (ii) an amount resulting in a modified interest-bearing balance that would create a current mark-to-market loan-to-value ratio equal to 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 amount described above, the servicer may consider the borrower ineligible for a HAMP modification. However, servicers are permitted, in accordance with existing servicing agreements and investor guidelines, to forbear the principal in excess of the amounts described above in order to achieve the target monthly mortage payment of 31 percent for both NPV-positive and NPV-negative loans. In the event a servicer elects to forbear principal in an amount resulting in a modified interest-bearing balance that would create a current mark-to-market loan-to-value ratio less than 100 percent in negative NPV situations, the servicer should ignore the error code and the flag for excessive forbearance that is returned by version 3.0 of the Base NPV Model. Updates will be made to the NPV model in the future to eliminate this error code. 6.6.2 Accounting Treatment of Principal Forbearance Except under circumstances described in the next paragraph, when a mortgage loan within a securitization vehicle is modified under HAMP, the following parties will take the respective actions: The direction to the servicer and the trustee or securities administrator to take the actions described in clauses (i) through (iii) above shall apply to any mortgage loan within a securitization vehicle unless the applicable securitization pooling or trust agreement: (A) explicitly provides for or allows repayment of principal to be postponed or forborne for a long period of time; (B) explicitly provides for or allows interest on such principal amount to be permanently forgiven; and (C) explicitly and affirmatively directs that such forborne principal not be treated as a realized loss. Although securitization pooling or trust agreements often use the term "principal forbearance" in addressing the postponement for short periods of the dates on which certain payments of principal are due, the exception set forth in this paragraph will only apply if the relevant agreement specifically addresses principal forbearance in the manner set forth in (A) through (C) in the immediately preceding sentence. HFSTHA also states that qualified los mitigation plan guidelines issued by treasury under the Emergency Economic Stabilization Act of 2008 (EESA) shall constitute standard industry practice for purposes of all Federal and State laws. The qualified loss mitigation plan guildelines issued by Treasury under EESA include this Handbook. Accordingly, actions described in clauses (i) through (iii) above, when taken by a servicer pursuant to this Handbook, shall constitute "standard industry practice" within the meaning of the Servicer Safe Harbor, and, when taken by any other person pursuant to this Handbook, including a trustee or securities administrator under a securitization pooling or trust agreement, shall constitute "cooperation of such person with a servicer when such cooperation is necessary for the servicer to implement a qualified loss mitigation plan" within the meaning of the Servicer Safe Harbor. 6.6.3 Reporting of Principal Forbearance to IRS Servicers can use either IRS Form 1098 or an IRS-compliant Annual Borrower Statement to report principal forbearance to the IRS. The IRS Form 1098 does not contain the UPB for the applicable loan; therefore, for a loan with a principal forbearance, a notation is not necessary on the Form 1098 to remind the borrower of the principal forbearance. However, if servicers substitute an IRS-compliant annual Borrower Statement that includes the UPB of the modified loan, then the servicer must include the principal forbearance amount on the staement.

3.6.8. 6.7 Counseling Requirement Borrowers with back-end ratios of 55 percent or more must agree in writing to obtain HUD-approved counseling as a condition of receiving a HAMP modification, even if they recently completed counseling. Servicers use income and expense information from borrowers provided on the RMA and other sources to calculate the back-end ratio. The borrower's total monthly debt ratio (back-end ratio) of the borrower's monthly gross expenses divided by the borrower's monthly gross income. Servicers must send a HAMP Counseling Letter to borrowers with a post-HAMP modification back-end ratio equal to or greater than 55 percent. The HAMP Counseling Letter states that the borrower must work with a HUD-approved housing counselor on a plan to reduce their total indebtedness below 55 percent. The letter also describes the availability and advantages of counseling and provides a list of local HUD-approved housing counseling agencies and directs the borrower to the appropriate HUD Website where such information is located. The borrower must represent in writing in HAMP documents that he or she will obtain such counseling. Face-to-face counseling is encouraged. However, telephone counseling is also permitted from HUD-approved housing counselors provided it covers the samem topics as face-to-face sessions. Telephone counseling sessions provide flexibility to borrowers that are unable to attend face-to-face sessions or for those borrowers that do not have an eligible provider within their area. 6.7.1 Approved Counselors A list of approved housing counseling agencies is available at or by calling the toll-free housing counseling telephone referral service at 1-800-569-4287. Servicers must retain in the mortgage files evidence of the borrower notification. 6.7.2 Paying for Counseling There is no charge to either borrowers or servicers for HUD-approved counseling. Servicers may, at their discretion, use a portion of the servicer incentive compensation to compensate counselors for counseling services provided in conjunction with HAMP.

3.6.9. 6.8 Property Valuation Servicers must obtain an assessment of the current value of the property securing the mortgage loan being evaluated for HAMP. Servicers may use either an automated valuation model (AVM), provided that the AVM renders a reliable confidence score, a broker's price opinoin (BPO) or an appraisal. Confidence scores deemed reasonable by bank examiners are also considered reasonable for purposes of this program. A servicer may use an AVM provided by one of the GSEs. As an alternative, servicers may rely on their internal AVM provided that: The servicer is subject to supervision by a Federal regulatory agency The servicer's primary Federal regulatory agency has reviewed the model; and The AVM renders a reliable confidence score. If a GSE AVM or the servicer AVM is unable to render a value with a reliable confidence score, the servicer must obtain an assessment of the property value utilizing a BPO, an appraisal or a property valuation method acceptable to the servicer's Federal regulatory supervisor. Such assessment must be rendered in accordance with the Interagency Appraisal and Evaluation Guidelines (as if such guidelines apply to loan modifications). In all cases, the property valuation used cannot be more than 90 days old as of the date the servicer first evaluates the borrower for a TPP using the NPV model. The information will remain valid for the duration of the TPP and does not need to be updated for any subsequent NPV evaluation. Treasury does not provide any reimbursement for property valuations. Servicers should review investor guidelines to determine the applicable property valuation reimbursement policy.

3.7. 7. Net Present Value (NPV) Testing

3.7.1. All loans that meet HAMP eligibility criteria and are either deemed to be in imminent default or delinquent as to two or more payments must be evaluated using a standardized NPV test that compares the NPV result for a modification to the NPV result for no modification.

3.7.2. If the NPV result for the modification scenario is greater than the NPV result for no modification, the result is deemed "positive" and the servicer must offer the modification. If the NPV result for no modification is greater than NPV result for the modification scenario, the modification result is deemed "negative" and the servicer has the option of performing the modification in its discretion. For mortgages serviced on behalf of a third-party investor for which the modification result is deemed "negative," however, the servicer may not perform the modfiication without express permission of the investor. If a modification is not pursued when the NPV result is "negative," the servicer must send a Non-Approval Notice (see Section 2.3.2) and consider the borrower for other foreclosure prevention options, including alternative modification programs, deeds-in-lieu, and pre-foreclosure sale programs (see Section 8.7)

3.7.3. Whether or not a modification is pursued, the servicer must maintain detailed documentation of the NPV model used, all NPV inputs and assumptions and the NPV results.

3.7.4. 7.1 Base NPV Model Participating servicers can access the MHA Base NPV Model (Base NPV Model) software tool on The Base NPV Model Documentation and an NPV Model Overview document are also available on for further information and user guidance. The Base NPV Model may not be used by a servicer to evaluate a loan for non-HAMP modification cases. The Terms and Conditions for use of the NPV Model stipulate that (i) the NPV model documents may be used only by a servicer in connection with servicing responsibilities undertaken pursuant to: (a) the SPA, or (b) an agreement between the servicer and Fannie Mae or Freddie Mac in accordance with HAMP; (ii) any use of the NPV model documents for other purposes is a violation of the Terms and Conditions, and (iii) the NPV model documents are not for public circulation or reproduction, whether in whole or in part, and the servicer may not disclose the NPV model documents to any third party.

3.7.5. 7.2 NPV Model Updates From time to time Treasury releases updates to the Base NPV Model. All servicers are required to use the most recent version and loans being evaluated for HAMP for the first time will be tested using the latest available Base NPV MOdel version. Loans subject to a re-evaluation must be tested using the same NPV version and inputs used for the initial NPV test in accordance with Section 7.6.1. When a new version of the Base NPV Model is released, both new and participating servicers will have a grace period to implement the new model. The grace period for each new version will be set forth in the applicable NPV release documentation. In addition, the release documentation will provide guidance as to which Base NPV MOdel version servicers should use during the grace period. At the completion of the grace period, servicers must use either the most recent version of the Base NPV Model or a customized version that meets the requirements for customization outlined in the model documentation.

3.7.6. 7.3 Customization of Base NPV Model Servicers having at least a $40 billion servicing book have the option to create a version of the Base NPV Model that uses a set of cure rates and redefault rates estimated based on the experience of their own portfolios. The default model must take into consideration, if feasible, current LTV, current monthly mortgage payment, current credit score, delinquency status, and otehr loan or borrower attributes. Customized versions of the NPV model must utilize the Base NPV Model values for variables such as home price projections and foreclosure and REO timelines and costs. These values are posted on, and will be periodically updated. 7.3.1 Compliance for Customized NPV Models MHA-C will monitor implementation of customization of the NPV model. Servicers electing either to implement the NPV model on their own systems or create a customized version must successfully pas an NPV output test prior to using the model. This test ensures that the servicer's NPV model outputs are consistent with those of the Base NPV Model. MHA-C administers and evaluates the results of all servicer NPV output tests and provides the necessary clearance for servicers to begin using their own NPV models. The test will involve running a dataset of sample modifications against the servicer's NPV model. To pass the test, the servicer NPV model ersults for the entire dataset of sample modifications must be consistent with the corresponding Base NPV Model results, within a defined threshold of acceptable variance. Subsequent to the test, those servicers electing to use a customized version of the NPV model will be asked to provide documentation on methodology and key assumptions, as well as evidence that the servicer has instituted adequate controls and governance procedures with respect to the model. NPV compliance testingwill be conducted on an ongoing basis for the life of HAMP, and will be triggered both by changes to teh Base NPV Model and by servicer-driven changes, such as migration to new systems, subsequent decisions to use servicer-specific default rates (where permitted) or to change those rates, and other related factors.

3.7.7. 7.4 NPV Inputs for the Discount Rate Servicers have the option of using the same discount rate for all loans or choosing one discount rate for loans they service for themselves and a different discount rate for loans serviced for all third-party investors. The discount rate applied to loans serviced on behalf of third-party investors must be at least as high as the discount rate applied to a servicer's held portfolio, but in no event higher than the maximum rate permitted under the HAMP. HAMP guidelines establish a base discount rate equal to the PMMS Rate (as defined in Section 9.3.6). Servicers may add a premium of up to 250 basis points to this rate.

3.7.8. 7.5 NPV Inputs for Mortgage Insurance Mortgage Insurance (MI) payments reduce investor losses in the event of a default. MI is considered in calculating the NPV of both the modified and unmodified loan. In addition, partial MI claims can be entered into the Base NPV Model to increase the resulting value of the modification to the investor.

3.7.9. 7.6 NPV Requirements for Stated Income Trials The following guidance applies only to TPPs based on stated income with an effective date prior to June 1, 2010. Servicers must reevaluate a loan using the NPV model if the borrower’s MHA Handbook v2.0 47 documented income differs from the stated income used in the borrower’s initial qualifying NPV test. Servicers may elect, in accordance with existing servicing agreements and investor guidelines, to offer the borrower a permanent HAMP modification without performing an additional NPV evaluation based on the borrower’s verified income documentation. If the servicer elects not to perform an additional NPV evaluation in this situation, the servicer should enter the trial period values for NPV Date and NPV Value when reporting the official loan set up file to the Treasury system of record. 7.6.1 Borrower Retests Use the Same NPV Model Version as First NPV Assessment In situations where servicers reevaluate a loan using the NPV model based on the borrower’s verified income documentation, servicers should test a borrower using the same major version of the NPV model that was used to test the loan for trial modification eligibility. Detailed versioning requirements are included in the Base NPV Model Documentation, which is available on, and in other NPV Versioning Requirements documentation. All NPV inputs should remain constant when the borrower is retested, except those that were found to be incorrect at the time of the initial NPV evaluation; and inputs that have been updated based on the borrower's documentation. Inputs that may be updated based on the borrower's documentation are limited to the following: Inputs that may not change regardless of their evolution since the trial's initiation include: 7.6.2 Corrected Inputs Corrected material documentation provided by the borrower can be used to change the data inputs for the NPV retest. Material elements that can change are documents that are limited to borrower-reported information, such as income, homeowner association fees and monthly tax payments. Inputs that have changed in the interim, but were correct on the date of the initial NPV evaluation, are held constant. The terms of the modification, which include the interest rate MHA Handbook v2.0 48 reduction, term extension, and forbearance amount, may change as the borrower reported inputs are adjusted. In the portal version of the Base NPV Model located on, servicers do not change the “Data Collection Date” or the associated UPB and the remaining term information. This identical information is reported for the retest exactly as it was in the original NPV evaluation.

4. Glossary

4.1. MHA Glossary: GSE MHA - Making Homes Affordable SPA - Servicer Participation Agreement Short sales - DIL - Deed in Lieu Loan modification PSA - Pooling and Servicing Agreements HFSTHA - Helping Families Save Their Homes Act of 2009 Servicer Safe Harbor Truth in Lending Act Treasury HAMP 2MP HAFA FHA - Federal Housing Administration federal law, state law, statutes, regulations, ordinances, administrative rules and orders that have the effect of law, judicial rulings and opinions Federal Trade COmmission Act ECOA - The Equal Credit Opportunity Act Fair Housing Act RESPA - The Real Estate Settlement Procedures The Fair Debt Collection Practices Act Fair Lending Laws red-lining Fair Credit Reporting Act NPV Section 3 of Chapter II TPP - Trial period plan Chapter 7 Bankruptcy Chapter 13 Bankruptcy UP RHS SFDMS - FHA Single Family Default Monitoring System GLS - RHS Guaranteed Loan System Chapter Section Balloon loans redemption period Inter vivos revocable trust Subordinate LIens HUD quitclaim deed RMA - Request for Modification and Affidavit (available on HEL - Home equity loan HELOC - home equity line of credit Exhibit A HAMP Additional Data REquirements Data DIctionary (available on financial stability act of 2009 Exhibit B IRS Form 4506-T IRS Form 4506T-EZ GMD - Government MOnitoring Data