Making Home Affordable Program Handbook for Servicers of Non-GSE Mortgages Version 4.3 as of September 16, 2013

Version 4.3
As of September 16, 2013
MHA Handbook v4.3
2FOREWORD ................................................................................................................... 14
OVERVIEW ..................................................................................................................... 15
CHAPTER I: MAKING HOME AFFORDABLE .............................................................. 23
1 SERVICER PARTICIPATION IN MHA ........................................................................ 23
1.1 Servicer Participation Agreement ........................................................................................ 23
1.2 Servicer Safe Harbor ........................................................................................................... 23
1.3 Investor Solicitation .............................................................................................................. 24
1.4 Transfers of Servicing .......................................................................................................... 24
1.4.1 Transfer of Eligible Loans ............................................................................................. 24
1.4.1.1 HAMP Eligible Loans .............................................................................................. 25
1.4.1.2 2MP Eligible Loans ................................................................................................. 25
1.4.1.3 Treasury FHA-HAMP and RD-HAMP Eligible Loans ............................................. 25
1.4.1.4 HAFA Eligible Loans ............................................................................................... 25
1.4.2 Relationship Manager ................................................................................................... 26
1.4.3 Obligations of Transferor Servicers ............................................................................... 26
1.4.4 Obligations of Transferee Servicers .............................................................................. 26
1.4.5 Involuntary Transfers of Servicing ................................................................................. 27
1.4.5.1 Borrower Notification .............................................................................................. 27
1.4.5.2 Impact on Incentives ............................................................................................... 28
1.5 Program Participation Caps ................................................................................................. 28
1.6 Compliance with Applicable Laws ....................................................................................... 32
1.7 Dodd-Frank Certification Requirement ................................................................................ 33
2 COMPLIANCE ............................................................................................................. 35
2.1 Compliance Assessments .................................................................................................... 35
2.2 Documentation ..................................................................................................................... 36
2.2.1 Documentation Requirements for PRA ......................................................................... 39
2.2.2 Documentation Requirements for UP ........................................................................... 39
2.2.3 Documentation Requirements for HAFA ....................................................................... 40
2.2.4 Documentation Requirements for 2MP ......................................................................... 41
2.2.5 Documentation Requirements for HHF ......................................................................... 41
2.3 Communication of Findings and Results ............................................................................. 42
2.4 Treasury FHA-HAMP and RD-HAMP Compliance .............................................................. 42
2.5 FHA2LP Compliance ........................................................................................................... 44
2.6 Annual Certification .............................................................................................................. 45
2.6.1 Initial Certification .......................................................................................................... 45
2.6.2 Subsequent Certifications ............................................................................................. 46
2.6.3 Subsequent Events ....................................................................................................... 47
2.6.4 Scope of the Certification .............................................................................................. 47
2.6.4.1 Scope of the Internal Controls Program ................................................................. 47
2.6.4.2 Internal Controls Documentation ............................................................................ 48
2.6.4.3 Quarterly Reviews .................................................................................................. 48
2.6.5 Reporting Noncompliance ............................................................................................. 48
2.6.6 Cover Letter to the Certification .................................................................................... 49
2.6.7 Termination of Obligation to Provide Certifications ....................................................... 49
2.7 Internal Quality Assurance ................................................................................................... 49
2.7.1 Establishment of a Quality Assurance Function ........................................................... 49
2.7.2 Scope of Quality Assurance Reviews ........................................................................... 50
2.7.3 Quality Assurance Review: Methodology, Timing and Reporting ................................ 51
2.7.4 Relationship Manager Assessment ............................................................................... 52
2.8 Dodd-Frank Certification, Borrower Identity and Owner Occupancy Compliance ............... 52
MHA Handbook v4.3
32.8.1 Borrower Eligibility & Compliance Portal ....................................................................... 53
2.8.2 Loan Selection ............................................................................................................... 53
2.8.3 Servicer Documentation ................................................................................................ 54
2.8.4 Hold on Program Participation for Trial Period Plans or Pending HAFA Transactions 54
2.8.5 Vendor Review and Alert Notification ............................................................................ 54
2.8.6 Alert Clearance Process ............................................................................................... 55
2.8.6.1 Servicer Responsibility for Assessing Information ................................................. 56
2.8.7 Reporting Clearance Status .......................................................................................... 56
2.8.7.1 Identity/Occupancy Verification Alert Status .......................................................... 56
2.8.7.2 Dodd-Frank Certification Compliance Alert Status ................................................. 57
2.8.8 Not Cleared Borrower Notices ...................................................................................... 57
2.8.9 Treasury System Reporting and Incentives .................................................................. 58
2.8.10 Interaction with Other EESA Programs ....................................................................... 58
2.8.10.1 Borrowers In Multiple MHA Programs .................................................................. 58
2.8.10.2 Borrowers In MHA and HHF Programs ................................................................ 59
3 ESCALATION OF BORROWER INQUIRIES .............................................................. 59
3.1 Treasury’s Borrower Support Centers ................................................................................. 59
3.2 Servicer Escalated Case Management ............................................................................... 59
3.2.1 Staffing Requirements ................................................................................................... 60
3.2.2 Accessibility ................................................................................................................... 60
3.2.3 Single Point of Contact .................................................................................................. 60
3.3 Escalation Resolution Process ............................................................................................ 60
3.3.1 Timing ............................................................................................................................ 61
3.3.2 Authorization ................................................................................................................. 61
3.3.3 Case Resolution ............................................................................................................ 61
3.3.4 Substantially Similar Cases ........................................................................................... 62
3.3.5 Ongoing Litigation ......................................................................................................... 62
3.4 Protections Against Unnecessary Foreclosure .................................................................... 62
3.4.1 Suspension of Referral to Foreclosure .......................................................................... 62
3.4.2 Suspension of Scheduled Foreclosure Sale ................................................................. 62
4 SINGLE POINT OF CONTACT ................................................................................... 63
4.1 Relationship Manager Responsibilities ................................................................................ 64
4.2 Staffing and Caseload Management ................................................................................... 65
5 FEDERALLY DECLARED DISASTERS ..................................................................... 65
5.1 Flexibility with Borrowers in FEMA Designated FDD Areas ................................................ 65
5.2 Forbearance until Servicer makes Contact with Borrower in an FDD Area ........................ 65
5.3 Forbearance Plans under HAMP and 2MP ......................................................................... 66
5.3.1 FDD Forbearance Plan during a HAMP Trial Period Plan or 2MP Trial Period ............ 66
5.3.1.1 Cancellation of HAMP Trial Period Plan or 2MP Trial Period ................................ 66
5.3.1.2 Exiting the Forbearance Plan after Cancellation of TPP or 2MP Trial Period ........ 66
5.3.2 FDD Forbearance Plan Following Modification ............................................................. 68
5.4 Foreclosure and a FDD Forbearance Plan .......................................................................... 68
5.5 Late Fees ............................................................................................................................. 68
CHAPTER II: HOME AFFORDABLE MODIFICATION PROGRAM .............................. 69
1 ELIGIBILITY ................................................................................................................ 70
1.1 HAMP Eligibility Criteria ....................................................................................................... 70
1.1.1 Basic HAMP Eligibility Criteria ...................................................................................... 70
1.1.2 HAMP Tier 1 Eligibility Criteria ...................................................................................... 71
1.1.3 HAMP Tier 2 Eligibility ................................................................................................... 71
1.2 Additional Factors Impacting HAMP Eligibility ..................................................................... 72
MHA Handbook v4.3
42 COMMUNICATION AND BORROWER NOTICES ..................................................... 77
2.1 Servicer Requirements ........................................................................................................ 77
2.2 Borrower Solicitation ............................................................................................................ 78
2.2.1 Reasonable Effort .......................................................................................................... 80
2.2.2 Right Party Contact ....................................................................................................... 81
2.2.3 Exception to Notice Requirement .................................................................................. 82
2.3 Borrower Notices ................................................................................................................. 82
2.3.1 Content of Borrower Notices ......................................................................................... 82
2.3.2 Non-Approval Notices ................................................................................................... 83
2.3.2.1 Non-Approval Notice-Negative NPV Result ........................................................... 84
2.3.2.1.1 Dispute of Multiple NPV Data Inputs including the Property Value Input ........ 84
2.3.2.1.2 Insufficient Evidence ........................................................................................ 85
2.3.2.1.3 NPV Evaluation Assistance from MHA Help.................................................... 85
2.3.2.1.4 Servicer Not Required to Perform NPV Re-Evaluation ................................... 85
2.3.2.2 Non-Approval Notice—Payment Default During the Trial Period ........................... 85
2.3.2.3 Non-Approval Notice—Loan Paid Off or Reinstated .............................................. 86
2.3.2.4 Non-Approval Notice—Withdrawal of Request or Non-Acceptance of Offer ......... 86
2.3.2.5 Non-Approval Notice Not Cleared Alerts ................................................................ 86
2.3.3 Incomplete Information Notice ...................................................................................... 86
2.3.4 Disputed Property Value Input ...................................................................................... 87
2.3.5 Borrower NPV Calculator .............................................................................................. 88
3 PROTECTIONS AGAINST UNNECESSARY FORECLOSURE ................................. 88
3.1 Suspension of a Referral to Foreclosure ............................................................................. 88
3.1.1 Certain Circumstances .................................................................................................. 88
3.2 Suspension of Foreclosure Proceedings in Process ........................................................... 89
3.3 Suspension of Scheduled Foreclosure Sale ........................................................................ 89
3.4 Mitigating Foreclosure Impact .............................................................................................. 90
3.4.1 Simultaneous Trial Period Plan and Foreclosure Explanation ...................................... 90
3.4.2 Foreclosure Attorney/Trustee Communication ............................................................. 90
3.4.3 Certification Prior to Foreclosure Sale .......................................................................... 90
4 REQUEST FOR MORTGAGE ASSISTANCE ............................................................. 91
4.1 Request for Mortgage Assistance (RMA) Form ................................................................... 91
4.1.1 Hardship Affidavit and Rental Property Certification ..................................................... 91
4.1.1.1 Hardship Affidavit ................................................................................................... 91
4.1.1.2 Rental Property Certification ................................................................................... 92
4.1.2 Government Monitoring Data (GMD) ............................................................................ 92
4.1.2.1 Collection of GMD .................................................................................................. 93
4.1.2.2 Borrower Declines to Provide GMD ....................................................................... 94
4.1.2.3 GMD from Observation or Origination .................................................................... 94
4.2 IRS Form 4506-T or 4506T-EZ or Tax Return ..................................................................... 94
4.3 Evidence of Income ............................................................................................................. 95
4.4 Reasonably Foreseeable or Imminent Default for Owner-Occupied Property .................... 95
4.5 Acknowledgment of Initial Package ..................................................................................... 95
4.6 Review of Initial Package ..................................................................................................... 95
4.7 Making Home Affordable Outreach and Borrower Intake Project ....................................... 96
4.7.1 Initial Package Acceptance ........................................................................................... 96
4.7.2 Ineligible Package ......................................................................................................... 97
4.7.3 Ineligible Borrower ......................................................................................................... 97
4.7.4 Incomplete Package ...................................................................................................... 97
5 VERIFICATION ............................................................................................................ 98
5.1 Evidence of Income ............................................................................................................. 99
5.1.1 Wage or Salary Income ............................................................................................... 100
MHA Handbook v4.3
55.1.2 Self-Employment Income ............................................................................................ 100
5.1.3 Other Earned Income .................................................................................................. 100
5.1.4 Benefit Income ............................................................................................................ 100
5.1.5 Unemployment Benefits .............................................................................................. 101
5.1.6 Rental Income ............................................................................................................. 101
5.1.6.1 Modification of Loan Secured by Principal Residence ......................................... 101
5.1.6.2 Modification of Loan Secured by Rental Property ................................................ 101
5.1.7 Alimony, Separation Maintenance, and Child Support Income .................................. 102
5.1.8 Threshold for Documenting Passive and Non-Wage Income ..................................... 102
5.1.9 Non-Borrower Household Income ............................................................................... 102
5.1.10 Excluded Income ....................................................................................................... 103
5.1.11 Verification Policy Documentation ............................................................................. 103
5.2 Borrowers in Active Bankruptcy-Substitution of Evaluation Documents ........................... 104
5.3 Occupancy Verification ...................................................................................................... 104
5.4 Verifying Monthly Gross Expenses .................................................................................... 104
5.5 Fraud .................................................................................................................................. 104
5.6 Document Perfection ......................................................................................................... 104
5.7 Borrower Signatures .......................................................................................................... 104
6 UNDERWRITING ....................................................................................................... 105
6.1 Monthly Mortgage Payment Ratio ..................................................................................... 105
6.1.1 Monthly Gross Income ................................................................................................ 106
6.1.2 Monthly Mortgage Payment ........................................................................................ 106
6.1.2.1 Pending ARM Resets ........................................................................................... 106
6.1.2.2 Reasonable Efforts to Obtain Association Fee Information ................................. 107
6.1.2.3 Loan Secured by Property in a Leasehold Jurisdiction ........................................ 107
6.2 Calculation of Monthly Gross Income and Total Housing Expenses for Rental Properties107
6.3 Standard Modification Waterfalls ....................................................................................... 108
6.3.1 HAMP Tier 1 Standard Modification Waterfall ............................................................ 108
6.3.1.1 Step 1—Capitalization .......................................................................................... 109
6.3.1.2 Step 2—Interest Rate Reduction .......................................................................... 109
6.3.1.3 Step 3—Term Extension ...................................................................................... 110
6.3.1.4 Step 4—Principal Forbearance ............................................................................ 110
6.3.2 HAMP Tier 2 Standard Modification Waterfall .......................................................... 110
6.3.2.1 Step 1—Capitalization .......................................................................................... 110
6.3.2.2 Step 2—Interest Rate Adjustment ........................................................................ 111
6.3.2.3 Step 3—Term Extension ...................................................................................... 111
6.3.2.4 Step 4—Principal Forbearance ............................................................................ 111
6.3.3 HAMP Tier 2 Minimum Reduction in P&I Payment ..................................................... 111
6.3.4 HAMP Tier 2 Post-Modification DTI ............................................................................ 111
6.3.5 Principal Forgiveness .................................................................................................. 112
6.3.6 Variation from Standard Modification Waterfall under HAMP Tier 1 ........................... 112
6.4 Principal Reduction Alternative .......................................................................................... 112
6.4.1 Reserved ..................................................................................................................... 113
6.4.2 Reserved ..................................................................................................................... 113
6.4.3 Alternative Modification Waterfalls .............................................................................. 113
6.4.3.1 HAMP Tier 1 Alternative Modification Waterfall ................................................... 113
6.4.3.2 HAMP Tier 2 Alternative Modification Waterfall ................................................... 113
6.4.4 Variation from the HAMP Tier 1 Alternative Modification Waterfall Steps .................. 113
6.4.5 Application of Deferred Principal Reduction ............................................................... 114
6.4.6 Equity Share Arrangements ........................................................................................ 114
6.5 Prohibitions on Modification Waterfall Steps ..................................................................... 114
6.6 Principal Forbearance ........................................................................................................ 116
6.6.1 Principal Forbearance Limits under HAMP Tier 1 ....................................................... 116
6.6.2 Accounting Treatment of Principal Forbearance ......................................................... 116
6.6.3 Reporting of Principal Forbearance to IRS ................................................................. 117
MHA Handbook v4.3
66.7 Counseling Requirement ................................................................................................... 117
6.7.1 Approved Counselors .................................................................................................. 117
6.7.2 Paying for Counseling ................................................................................................. 117
6.8 Property Valuation ............................................................................................................. 117
7 NET PRESENT VALUE (NPV) TESTING ................................................................. 118
7.1 Base NPV Model ................................................................................................................ 119
7.2 NPV Model Updates .......................................................................................................... 119
7.3 Re-coding of Base NPV Model .......................................................................................... 120
7.3.1 Compliance for Re-coded NPV Models ...................................................................... 120
7.4 NPV Inputs for the Discount Rate ...................................................................................... 120
7.5 NPV Inputs for Mortgage Insurance .................................................................................. 120
7.6 NPV Requirements for Stated Income Trials ..................................................................... 120
7.6.1 Borrower Retests Use the Same NPV Model Version as First NPV Assessment ...... 121
7.6.2 Corrected Inputs .......................................................................................................... 121
7.7 NPV Requirements for Disputed Inputs ............................................................................. 122
7.8 NPV Inputs for Unavailable or Low Credit Scores ............................................................. 122
8 TRIAL PERIOD PLANS ............................................................................................. 122
8.1 Trial Period Plan Notice ..................................................................................................... 122
8.2 Effective Date ..................................................................................................................... 122
8.3 Trial Period Payments ........................................................................................................ 123
8.4 Application of Trial Period Payments ................................................................................. 123
8.5 Borrower in Bankruptcy ...................................................................................................... 124
8.6 Borrower in Bankruptcy—Waiver of Trial Period Plan ....................................................... 124
8.7 Alternative Loss Mitigation Options ................................................................................... 125
8.8 Consideration of Non-Borrowers Following Death and Divorce ........................................ 125
8.9 Remaining Co-Borrowers and Remaining Non-Borrowers Following Death and Divorce
during TPP ............................................................................................................................... 125
8.9.1 Remaining Co-Borrowers ............................................................................................ 125
8.9.2 Remaining Non-Borrowers .......................................................................................... 126
8.9.3 Reporting and Continued Eligibility ............................................................................. 126
9 PERMANENT MODIFICATION ................................................................................. 126
9.1 Modification Agreement ..................................................................................................... 126
9.2 Effective Date Option—Interim Month ............................................................................... 127
9.3 Conditions of Modification .................................................................................................. 128
9.3.1 First Lien Position ........................................................................................................ 128
9.3.2 Late Fees .................................................................................................................... 128
9.3.3 Administrative Costs.................................................................................................... 128
9.3.4 Interest Paid in Arrears ............................................................................................... 128
9.3.5 Monthly Statements..................................................................................................... 128
9.3.6 Interest Rate Cap and Interest Rate Lock Date for HAMP Tier 1 Modifications ......... 128
9.3.7 Escrow Accounts ......................................................................................................... 129
9.3.7.1 Escrow Analysis ................................................................................................... 129
9.3.7.2 Escrow Advances ................................................................................................. 129
9.3.7.3 Escrow Shortages ................................................................................................ 129
9.3.7.4 Non-Escrowed Loans ........................................................................................... 129
9.3.7.5 Standard Escrow Provisions ................................................................................. 129
9.3.7.6 Escrow Changes .................................................................................................. 130
9.3.7.7 Prohibitions on Modifications that Increase Principal and Interest under HAMP
Tier 1 ................................................................................................................................. 130
9.3.8 Mortgages with No Due-on-Sale Provision ................................................................. 130
9.3.9 Reserved ..................................................................................................................... 130
9.3.10 Mortgage Insurer Approval ........................................................................................ 130
MHA Handbook v4.3
79.4 Re-default and Loss of Good Standing .............................................................................. 130
9.5 Re-Consideration of Borrowers ......................................................................................... 131
9.5.1 Delayed Conversion .................................................................................................... 131
9.5.2 Incorrect Denial of TPP ............................................................................................... 132
9.6 Principal Curtailments Following Modification ................................................................... 132
9.7 Borrower Notice of Interest Rate Step-Ups ....................................................................... 132
10 HAMP DOCUMENTS .............................................................................................. 133
10.1 Amending HAMP Documents .......................................................................................... 133
10.2 Principal Reduction Alternative Documents..................................................................... 134
11 TREASURY REPORTING REQUIREMENTS ......................................................... 135
11.1 Trial Period Reporting Requirements .............................................................................. 135
11.2 Loan Setup Reporting Requirements .............................................................................. 135
11.3 Official Monthly Reporting ................................................................................................ 135
11.4 Additional Data Requirements Reporting ........................................................................ 136
11.4.1 Reason Codes ........................................................................................................... 136
11.4.2 Coding Property Condition for the HAMP Reporting Tool ........................................ 136
11.5 Principal Reduction Alternative Reporting ....................................................................... 136
11.5.1 Interim Period Reporting ........................................................................................... 137
11.5.2 Reserved ................................................................................................................... 137
11.6 Escalated Cases Reporting ............................................................................................. 137
11.6.1 Summary Reporting .................................................................................................. 137
11.6.2 Reporting During Borrower Dispute Period ............................................................... 137
11.7 Reporting Requirements for HAMP Modified Loans Repurchased from GSEs .............. 137
12 EXTERNAL REPORTING REQUIREMENTS ......................................................... 138
12.1 Reporting to Mortgage Insurers ....................................................................................... 138
12.2 Credit Bureau Reporting .................................................................................................. 138
12.2.1 Trial Period Reporting ............................................................................................... 138
12.2.2 Post Modification Reporting ...................................................................................... 139
12.2.3 Principal Reduction Alternative Reporting ................................................................ 139
13 INCENTIVE COMPENSATION ................................................................................ 139
13.1 Servicer Incentive Compensation .................................................................................... 140
13.1.1 Completed Modification Incentive ............................................................................. 140
13.1.2 Prohibition on Special Collection Measures .............................................................. 140
13.1.3 “Pay for Success” Incentive under HAMP Tier 1 ...................................................... 140
13.2 Borrower Incentive Compensation under HAMP Tier 1 ................................................... 141
13.3 Investor Incentive Compensation .................................................................................... 142
13.3.1 Payment Reduction Cost Share ................................................................................ 142
13.3.2 Current Borrower Incentive ....................................................................................... 142
13.3.3 Home Price Decline Protection (HPDP) Incentives .................................................. 142
13.3.3.1 HPDP Calculation ............................................................................................... 143
13.3.3.2 HPDP Accrual and Payments............................................................................. 143
13.3.4 Principal Reduction Alternative Investor Incentive Payments ................................... 143
13.3.4.1 Principal Reduction Incentive Schedule ............................................................. 144
13.3.4.2 Interim Period Incentive Compensation ............................................................. 144
13.4 Incentives Impact on HAMP Modified Loans Repurchased from GSEs .......................... 145
13.4.1 Loans in a Trial Period Plan as of the Effective Date of the Repurchase ................. 145
13.4.2 Loans Permanently Modified as of the Effective Date of the Repurchase................ 145
13.4.3 Loans Permanently Modified but are No Longer in Good Standing ......................... 146
CHAPTER III: HOME AFFORDABLE UNEMPLOYMENT PROGRAM ....................... 147
1 INTRODUCTION ........................................................................................................ 148
MHA Handbook v4.3
82 ELIGIBILITY .............................................................................................................. 148
2.1 UP Eligibility Requirements ................................................................................................ 148
2.2 Additional Factors Impacting UP Eligibility ........................................................................ 149
2.3 Eligibility of HAMP Borrowers ............................................................................................ 150
2.4 Borrower Not Eligible for UP .............................................................................................. 150
2.5 Borrower Declines UP ........................................................................................................ 151
3 PROTECTIONS AGAINST UNNECESSARY FORECLOSURE ............................... 151
3.1 Suspension of a Referral to Foreclosure or Foreclosure Sale ........................................... 151
3.2 Deadline for UP Consideration .......................................................................................... 151
3.3 Simultaneous Forbearance Plan and Foreclosure Explanation ........................................ 151
4 UP FORBEARANCE PLANS .................................................................................... 152
4.1 Request for UP Forbearance ............................................................................................. 152
4.2 UP Forbearance Plan Terms ............................................................................................. 152
4.2.1 Duration ....................................................................................................................... 152
4.2.2 Extension ..................................................................................................................... 152
4.2.3 Monthly Payments ....................................................................................................... 152
4.2.4 Late Fees .................................................................................................................... 153
4.2.5 Termination of UP Forbearance .................................................................................. 153
4.3 Forbearance Plan Notice (FPN) ........................................................................................ 153
4.4 Commencement and Timing of Payments ......................................................................... 154
4.5 Transition from HAMP to UP Forbearance ........................................................................ 154
4.5.1 Transition from TPP to UP Forbearance ..................................................................... 154
4.5.2 Transition from Permanent HAMP Modification to UP Forbearance .......................... 154
4.6 Interaction of FDD Forbearance Plans with UP ................................................................. 155
4.7 Application of UP Payments .............................................................................................. 155
4.8 Treatment of Accrued Principal, Interest and Fees for HAMP Ineligible Borrowers .......... 155
5 TRANSITION FROM FORBEARANCE TO HAMP ................................................... 156
5.1 HAMP Eligibility after UP Forbearance .............................................................................. 156
5.2 Consideration of HAMP Eligible Borrowers after Forbearance ......................................... 156
6 REPORTING REQUIREMENTS ................................................................................ 157
6.1 Treasury Reporting ............................................................................................................ 157
6.1.1 Summary Reporting .................................................................................................... 157
6.1.2 System Reporting ........................................................................................................ 157
6.2 Credit Bureau Reporting .................................................................................................... 157
CHAPTER IV: HOME AFFORDABLE FORECLOSURE ALTERNATIVES PROGRAM
...................................................................................................................................... 158
1 INTRODUCTION ........................................................................................................ 159
2 ELIGIBILITY .............................................................................................................. 159
3 HAFA CONSIDERATION .......................................................................................... 160
3.1 HAFA Policy ....................................................................................................................... 160
3.2 HAFA Matrix ....................................................................................................................... 161
3.3 Consideration of Borrowers for HAFA ............................................................................... 161
4 COMMUNICATION AND BORROWER NOTICES ................................................... 162
4.1 Consideration of Borrowers without a Hardship Affidavit or Pre-Determined Hardship .... 163
4.2 Notice for Borrowers not Eligible for HAFA ........................................................................ 163
5 PROTECTIONS AGAINST UNNECESSARY FORECLOSURE ............................... 163
MHA Handbook v4.3
96 HAFA EVALUATION AND CONDITIONS ................................................................ 164
6.1 HAFA Evaluation ................................................................................................................ 164
6.1.1 Documentation Requirements and Borrower Financial Information ........................... 164
6.1.2 Property Valuation ....................................................................................................... 165
6.1.3 Expected Recovery Analysis ....................................................................................... 165
6.1.4 Title Review ................................................................................................................. 165
6.2 HAFA Conditions ............................................................................................................... 165
6.2.1 Mortgage Insurer Approval .......................................................................................... 165
6.2.2 Payment Forbearance ................................................................................................. 165
6.2.3 Borrower Fees ............................................................................................................. 165
6.2.4 Release of Liens .......................................................................................................... 166
6.2.4.1 First Mortgage Lien ............................................................................................... 166
6.2.4.2 Subordinate Liens ................................................................................................. 166
6.2.4.2.1 Written Commitment from Subordinate Lien Holders .................................... 166
6.2.4.2.2 Prohibition on Contributions ........................................................................... 166
6.2.5 Relocation Assistance ................................................................................................. 167
7 SHORT SALE PROCESS ......................................................................................... 167
7.1 Minimum Acceptable Net Proceeds ................................................................................... 167
7.2 Allowable Transaction Costs.............................................................................................. 168
7.3 Arm’s Length Transaction .................................................................................................. 168
7.4 Short Sale Notice ............................................................................................................... 168
7.5 Reserved ............................................................................................................................ 170
7.6 Reasons for Termination .................................................................................................... 170
7.7 Offer Receipt and Response ............................................................................................. 170
7.8 Approval or Disapproval of Sale ........................................................................................ 170
8 REQUEST FOR APPROVAL OF SHORT SALE PRIOR TO ISSUANCE OF AN SSN
...................................................................................................................................... 171
9 DEED-IN-LIEU PROCESS ........................................................................................ 172
9.1 DIL Language in the SSN .................................................................................................. 172
9.2 DIL Terms .......................................................................................................................... 172
10 HAFA DOCUMENTS ............................................................................................... 173
11 REPORTING REQUIREMENTS .............................................................................. 174
11.1 Treasury Reporting .......................................................................................................... 174
11.2 Credit Bureau Reporting .................................................................................................. 174
12 INCENTIVE COMPENSATION ................................................................................ 175
12.1 Relocation Assistance ...................................................................................................... 175
12.2 Servicer Incentive ............................................................................................................ 176
12.3 Investor Reimbursement for Subordinate Lien Releases ................................................ 176
CHAPTER V: SECOND LIEN MODIFICATION PROGRAM ....................................... 177
1 INTRODUCTION ........................................................................................................ 178
2 PARTICIPATION ....................................................................................................... 178
3 ELIGIBILITY .............................................................................................................. 178
3.1 2MP Modification and Extinguishment Eligibility Criteria ................................................... 178
3.2 Additional Factors Impacting 2MP and Extinguishment Eligibility ..................................... 179
3.3 Borrower Notice for 2MP .................................................................................................... 179
MHA Handbook v4.3
104 2MP PROCESS ......................................................................................................... 180
4.1 Matching Second Liens to HAMP First Liens .................................................................... 180
4.1.1 LPS Matching .............................................................................................................. 180
4.1.2 Enhanced Matching Capabilities ................................................................................. 181
4.2 2MP Timing ........................................................................................................................ 182
4.2.1 LPS Matches ............................................................................................................... 182
4.2.2 Matches Outside of the LPS Process ......................................................................... 182
4.3 Reliance on First Lien Data................................................................................................ 183
4.4 Fraud .................................................................................................................................. 183
5 MODIFICATION AND EXTINGUISHMENT ............................................................... 184
5.1 2MP Modification Steps ..................................................................................................... 184
5.1.1 Step 1 – Capitalization ................................................................................................ 184
5.1.2 Step 2 – Reduce Interest Rate .................................................................................... 184
5.1.2.1 Step 2.A – For amortizing second liens (payment of both principal and interest) 184
5.1.2.2 Step 2.B – For second liens with interest-only payments .................................... 184
5.1.2.3 Step 2.C – For partially amortizing second liens (such as convertible HELOCs) 185
5.1.3 Step 3 – Extend Term ................................................................................................. 185
5.1.3.1 Step 3.A – For amortizing second liens (payment of both principal and interest) 185
5.1.3.2 Step 3.B – For second liens with interest-only payments .................................... 185
5.1.3.3 Step 3.C – For partially amortizing second liens (such as convertible HELOCs) 185
5.1.4 Step 4 – Principal Forbearance / Principal Forgiveness ............................................. 186
5.2 Partial Extinguishment Option ........................................................................................... 186
5.3 Full Extinguishment Option ................................................................................................ 186
5.3.1 Extinguishment Timing ................................................................................................ 186
5.4 Investor and Other Prohibitions ......................................................................................... 187
5.5 Re-modification Under HAMP Tier 2 or the GSE Standard Modification .......................... 187
6 2MP TRIAL PERIOD REQUIREMENTS ................................................................... 187
6.1 Duration of 2MP Trial Period ............................................................................................. 187
6.2 2MP Trial Period Payments ............................................................................................... 188
6.3 Application of 2MP Trial Period Payments ........................................................................ 188
6.4 Borrowers in Active Bankruptcy ......................................................................................... 189
6.5 Reserved ............................................................................................................................ 189
7 PERMANENT MODIFICATION ................................................................................. 189
7.1 2MP Modification Agreement ............................................................................................. 189
7.2 Effective Date ..................................................................................................................... 189
7.3 Conditions of Modification .................................................................................................. 189
7.3.1 Re-Subordinate Junior Liens ....................................................................................... 189
7.3.2 Lien Release ............................................................................................................... 189
7.3.3 Closed-end Second Liens ........................................................................................... 190
7.3.4 Mortgage and Other Insurer Approval......................................................................... 190
7.3.5 Assignment to MERS .................................................................................................. 190
7.3.6 Monthly Statements..................................................................................................... 191
7.4 Re-default and Loss of Good Standing .............................................................................. 191
7.5 Principal Curtailments Following 2MP Modification ........................................................... 191
7.6 Reserved ............................................................................................................................ 192
8 2MP DOCUMENTS .................................................................................................... 192
9 2MP REPORTING REQUIREMENTS ....................................................................... 193
9.1 2MP Trial Period Reporting................................................................................................ 193
9.2 2MP Modification Reporting ............................................................................................... 193
9.2.1 2MP Modification and Extinguishment Set Up ............................................................ 193
MHA Handbook v4.3
119.2.2 2MP Official Monthly Reporting ................................................................................... 193
10 EXTERNAL REPORTING REQUIREMENTS ......................................................... 193
10.1 Credit Bureau Reporting .................................................................................................. 193
10.1.1 Trial Period Reporting ............................................................................................... 194
10.1.2 Post Modification Reporting ...................................................................................... 194
10.1.3 Extinguishment Reporting ......................................................................................... 194
11 INCENTIVE COMPENSATION ................................................................................ 195
11.1 Servicer Incentive Compensation .................................................................................... 196
11.1.1 Completed Modification Incentive ............................................................................. 196
11.1.2 Pay-for-Success Incentive ........................................................................................ 196
11.1.3 Extinguishment Incentive .......................................................................................... 196
11.2 Borrower Incentive Compensation ................................................................................... 196
11.3 Investor Incentive Compensation .................................................................................... 197
11.3.1 Payment Reduction Cost Share Incentive ................................................................ 197
11.3.2 Extinguishment Incentive .......................................................................................... 197
11.4 Impact on 2MP Incentives of HAMP Modified First Liens Repurchased from GSEs ...... 198
CHAPTER VI: GOVERNMENT LOANS ....................................................................... 200
1 INTRODUCTION ........................................................................................................ 200
2 ELIGIBILITY AND UNDERWRITING ........................................................................ 200
2.1 Treasury FHA-HAMP ......................................................................................................... 200
2.2 RD-HAMP .......................................................................................................................... 200
3 PARTICIPATION, INCENTIVE COMPENSATION, TREASURY REPORTING
REQUIREMENTS, COMPLIANCE ............................................................................... 201
3.1 Participation ....................................................................................................................... 201
3.2 Incentive Compensation .................................................................................................... 201
3.2.1 Servicer Incentive Compensation ............................................................................... 202
3.2.2 Borrower Incentive Compensation .............................................................................. 202
3.2.3 Re-default and Loss of Good Standing ....................................................................... 202
3.3 Treasury Reporting Requirements ..................................................................................... 203
3.4 Compliance ........................................................................................................................ 203
CHAPTER VII: TREASURY/FHA SECOND LIEN PROGRAM .................................... 200
1 INTRODUCTION ........................................................................................................ 205
2 PARTICIPATION ....................................................................................................... 205
3 ELIGIBILITY .............................................................................................................. 205
4 EXTINGUISHMENT ................................................................................................... 205
4.1 Partial Extinguishment ....................................................................................................... 205
4.2 Conditions of Partial or Full Extinguishment ...................................................................... 206
4.2.1 Lien Release ............................................................................................................... 206
4.2.2 Re-Subordinate Junior Liens ....................................................................................... 206
4.2.3 Closed-end Second Liens ........................................................................................... 206
4.2.4 Mortgage Insurer Approval .......................................................................................... 206
5 REPORTING REQUIREMENTS ................................................................................ 206
5.1 Treasury Reporting ............................................................................................................ 206
5.2 Reporting Conversion of HAMP or 2MP Loans to FHA Refinance ................................... 207
5.3 Credit Bureau Reporting .................................................................................................... 207
MHA Handbook v4.3
125.3.1 Reporting Full Extinguishments .................................................................................. 207
5.3.2 Reporting Partial Extinguishment ................................................................................ 208
6 INCENTIVE COMPENSATION .................................................................................. 208
6.1 Servicer Incentive Compensation ...................................................................................... 209
6.2 Investor Incentive Compensation ...................................................................................... 209
CHAPTER VIII: INTERACTIONS WITH HFA HARDEST HIT FUND PROGRAMS .... 210
1 INTRODUCTION ........................................................................................................ 211
2 COMMUNICATION .................................................................................................... 211
2.1 Communication between Servicers and HFAs .................................................................. 211
2.2 Communication between Servicers and Borrowers ........................................................... 211
3 INTERACTIONS WITH HAMP .................................................................................. 211
3.1 Interactions with PRA ......................................................................................................... 213
3.2 Trial Period Plans ............................................................................................................... 213
4 INTERACTIONS WITH UP ........................................................................................ 213
5 INTERACTIONS WITH HAFA ................................................................................... 214
6 INTERACTIONS WITH 2MP ...................................................................................... 214
7 GOVERNMENT INSURED OR GUARANTEED LOANS .......................................... 215
8 INTERACTIONS WITH FHA2LP ............................................................................... 215
9 TREASURY REPORTING REQUIREMENTS ........................................................... 215
EXHIBIT A: MODEL CLAUSES FOR BORROWER NOTICES .................................. 217
EXHIBIT B: MODEL LETTER FOR SIMULTANEOUS TRIAL PLAN –
FORECLOSURE PROCESS EXPLANATION ............................................................. 228
EXHIBIT C: CHARACTERISTICS OF THE HPDP INCENTIVE CALCULATION....... 229
EXHIBIT D: EXAMPLE HPDP CALCULATION .......................................................... 230
MHA Handbook v4.3
13Foreword
In February 2009, the Obama Administration introduced the Making Home Affordable Program, a
plan to stabilize the housing market and help struggling homeowners get relief and avoid
foreclosure. In March 2009, the Treasury Department (Treasury) issued uniform guidance for loan
modifications across the mortgage industry and subsequently updated and expanded that
guidance in a series of policy announcements.
The Making Home Affordable Program Handbook for Servicers of Non-GSE Mortgages
(Handbook) is intended to provide a consolidated resource for programmatic guidance related to
the MHA Program for mortgage loans that are not owned or guaranteed by Fannie Mae or
Freddie Mac (Non-GSE Mortgages). Servicers of mortgage loans that are owned or guaranteed
by Fannie Mae or Freddie Mac should refer to any relevant guidance issued by the applicable
GSE. In addition to the applicable guidance in this Handbook, servicers of mortgage loans
insured or guaranteed by a federal agency, such as the Federal Housing Administration or Rural
Housing Service, should refer to any relevant guidance issued by the applicable agency
This Handbook incorporates and supersedes in their entirety the following Supplemental
Directives (SDs), as well as related frequently asked questions (FAQs) and waivers: SD 09-01,
09-02, 09-03, 09-04, 09-05 Revised, 09-06, 09-07, 09-08, 09-09 Revised, 09-10, 10-01, 10-02,
10-03, 10-04, 10-05, 10-06, 10-07, 10-08, 10-09, 10-10, 10-11, 10-12, 10-13, 10-14, 10-15, 10-
16, 10-17, 10-18, 11-01, 11-02, 11-03, 11-04, 11-05, 11-06, 11-07, 11-08, 11-09, 11-10, 11-11,
11-12, 12-01, 12-02 12-03, 12-04, 12-05, 12-07, 12-08, 12-09, 12-10, 13-01, 13-02, 13-03, 13-04,
13-05 and 13-06. Should a servicer identify a discrepancy between this Handbook and a
previously issued SD, FAQ or waiver, the servicer should rely on the guidance in this Handbook.
Unless otherwise noted, each reference to a “Section” in a Chapter of this Handbook is a
reference to the applicable Section of that Chapter. This Handbook constitutes Program
Documentation under the Servicer Participation Agreement and is incorporated by reference into
the Servicer Participation Agreement.
To the extent that any SD, FAQ or waiver has not been incorporated into and superseded by this
Handbook, it continues to apply, and any references in such documents to guidance that has
been incorporated into this Handbook are deemed to refer to the applicable Chapter and Section
of this Handbook containing such guidance.
This Handbook will be updated periodically with new policy or procedural changes as they are
announced. Questions about the Handbook or compliance with Handbook guidance should be
referred to the Program Administrator and the Compliance Agent, respectively. Fannie Mae
serves as the Program Administrator and Freddie Mac serves as the Compliance Agent, each in
its capacity as financial agent of the United States (as designated by Treasury).
MHA Handbook v4.3
14Overview
Chapter I: Making Home Affordable Program
General guidance regarding the Making Home Affordable (MHA) Program. The guidelines set
forth in this Handbook apply to all eligible Non-GSE Mortgages secured by one- to four-unit
owner-occupied single-family properties.
Chapter II: Home Affordable Modification Program
The Home Affordable Modification Program ® (HAMP), a national mortgage modification program,
provides eligible borrowers the opportunity to modify their first lien mortgage loans to make them
more affordable. Under HAMP ® , servicers apply a uniform loan modification process to provide
eligible borrowers with affordable and sustainable monthly payments for their first lien mortgage
loans. Affordability is achieved through the application of interest rate reduction, term extension,
principal forbearance and principal forgiveness.
Chapter III: Home Affordable Unemployment Program
The Home Affordable Unemployment Program (UP) provides assistance to borrowers who are
unable to make their mortgage payments as a result of unemployment. UP grants qualified
borrowers a forbearance period of at least twelve months, during which mortgage payments are
reduced or suspended, allowing borrowers to seek employment without the fear that they will lose
their homes to foreclosure.
Chapter IV: Home Affordable Foreclosure Alternatives Program
The Home Affordable Foreclosure Alternatives® (HAFA) Program provides opportunities for
borrowers to transition to more affordable housing through a short sale or deed-in-lieu (DIL) of
foreclosure when they can no longer afford to stay in their home but want to avoid foreclosure.
HAFA® provides financial incentives to servicers, investors, and borrowers that utilize a short
sale or a DIL to avoid a foreclosure on a HAMP-eligible loan.
Chapter V: Second Lien Modification Program
The Second Lien Modification Program (2MP) is designed to work in tandem with HAMP to offer
borrowers with second mortgage liens even greater affordability. Under 2MP, when a borrower’s
first lien is modified under HAMP and the servicer of the second lien is a 2MP participant, that
servicer must offer to modify the borrower’s second lien according to a defined protocol and/or to
accept a lump sum payment from Treasury in exchange for full or partial extinguishment of the
second lien. All servicers of eligible second lien Non-GSE Mortgages may participate in 2MP. A
servicer need not service the related first lien or participate in HAMP in order to participate in
2MP.
Chapter VI: Government Loans
Mortgage loans insured or guaranteed by a federal government agency, such as the Federal
Housing Administration (FHA), the Department of Veterans Affairs (VA) or the Department of
Agriculture’s Rural Housing Service (RHS), are eligible for modification under HAMP to the extent
the applicable agency has issued HAMP guidance.
FHA announced FHA-HAMP to provide assistance to borrowers with FHA-insured loans who are
unable to meet their mortgage payments. Treasury FHA-HAMP provides pay-for-performance
compensation for borrowers and pay-for-success compensation to servicers for FHA-insured first
lien Non-GSE Mortgages that are modified under FHA-HAMP on or after August 15, 2009. For
specific guidance related to eligibility, underwriting and administration of FHA-HAMP, servicers
should consult the guidance issued by FHA in Mortgagee Letter 2009-23 and other existing or
future guidance issued by FHA.
RHS announced Special Loan Servicing to provide assistance to borrowers with Single Family
Housing Guaranteed Loan Program loans who are unable to meet their mortgage payments. RD-
HAMP provides pay-for-performance compensation for borrowers and pay-for-success
Overview
MHA Handbook v4.3
15compensation for servicers for RHS-guaranteed first lien Non-GSE Mortgages that are modified
under Special Loan Servicing on or after September 24, 2010. For specific guidance related to
eligibility, underwriting and administration of Special Loan Servicing, servicers should consult the
final rule published by RHS (75 Fed. Reg. 52,429 (August 26, 2010)) (Final Rule) and other
existing or future guidance issued by RHS.
VA announced VA-HAMP to provide assistance to borrowers with VA guaranteed loans who are
unable to meet their mortgage payments. Treasury does not provide incentive compensation
related to VA-HAMP. For specific guidance related to eligibility, underwriting and administration
of VA-HAMP, servicers should consult the guidance issued by VA in Circular 26-10-6 and other
existing or future guidance issued by VA.
Chapter VII: Treasury/FHA Second Lien Program
The Treasury/FHA Second Lien Program (FHA2LP) is designed to work in tandem with the FHA
Refinance of Borrowers in Negative Equity Positions (FHA Refinance) Program announced by
FHA in Mortgagee Letter 2010-23. FHA Refinance provides greater affordability for borrowers
whose homes are worth less than the remaining amounts owed under their mortgage loans
(negative equity). FHA Refinance allows borrowers who are current and in a negative equity
mortgage to restructure their debt and refinance into an FHA-insured loan where the unpaid
principal balance (UPB) of the original first lien mortgage is written down by at least 10 percent
and the amount of all mortgage debt, after the FHA refinance, does not exceed 115 percent of the
current value of the property.
To facilitate this FHA refinance opportunity, Treasury provides incentives under FHA2LP to
servicers and investors when there is a partial or full extinguishment of second lien mortgage
loans as part of an FHA Refinance. All servicers of eligible second lien Non-GSE Mortgages may
participate in FHA2LP. A servicer need not service the related first lien or participate in HAMP in
order to participate in FHA2LP.
Chapter VIII: MHA Interactions with the Hardest Hit Fund
The Housing Finance Agency Innovation Fund for the Hardest-Hit Housing Markets (Hardest Hit
Fund® or HHF) provides federal funding for innovative measures to help families in states that
have been hit the hardest by the housing crisis and economic downturn. In these states, state
Housing Finance Agencies (HFAs) are implementing innovative programs to prevent foreclosures
and stabilize housing markets. HHF programs may target similar borrowers and have goals in
common with initiatives under MHA.
When submitting proposals for funding, HFAs were encouraged to design programs that target
borrowers who are not eligible for, or otherwise did not complete, a HAMP modification or other
MHA program. Nevertheless, the HHF programs may interact with aspects of MHA as HFAs try
to leverage the resources provided by the MHA programs to expand the pool of borrowers that
are eligible for HAMP or other MHA options. In some cases, the assistance the HFAs provide
under HHF can supplement and extend assistance provided through MHA. To maximize the
effectiveness of their foreclosure mitigation efforts, servicers should use reasonable efforts to
ensure that federal funds are used efficiently and that HHF programs complement MHA
programs.
Overview
MHA Handbook v4.3
16Supplemental Directives
For reference purposes, a list of the SDs incorporated in and superseded by the guidance in this
Handbook is provided in the following table.
SD Issue Date of SD Effective Date of SD Title of SD
09-01 April 6, 2009 April 6, 2009 Introduction to the Home
Affordable Modification
Program
09-02 April 21, 2009 April 21, 2009 Fair Housing Obligations
Under the Home Affordable
Modification Program
09-03 July 6, 2009 July 6, 2009 Trial Period Guidance
09-04 July 31, 2009 September 1, 2009 Home Price Decline
Protection Incentives
09-05
Revised March 26, 2010 March 26, 2010 Update to the Second Lien
Modification Program
09-06 September 11, 2009 December 1, 2009 Data Collection and
Reporting Requirements
Guidance
09-07 October 8, 2009 October 8, 2009/
March 1, 2010 Streamlined Borrower
Evaluation Process
09-08 November 3, 2009 January 1, 2010 Borrower Notices
09-09
Revised March 26, 2010 April 5, 2010 Home Affordable Foreclosure
Alternatives – Short Sale and
Deed-in-Lieu of Foreclosure
Update
09-10 December 23, 2009 December 23, 2009 Temporary Review Period for
Active Trial Modifications
Scheduled to Expire on or
before January 31, 2010
10-01 January 28, 2010 June 1, 2010 Program Update and
Resolution of Active Trial
Modifications
10-02 March 24, 2010 June 1, 2010 Borrower Outreach and
Communication
10-03 March 26, 2010 August 15, 2009 Modifications of Loans
Insured by the Federal
Housing Administration (FHA)
10-04 May 11, 2010 August 1, 2010 Home Affordable
Unemployment Program
Overview
MHA Handbook v4.3
17SD Issue Date of SD Effective Date of SD Title of SD
10-05 June 3, 2010 October 1, 2010 Modifications of Loans with
Principal Reduction
Alternative SM
10-06 June 29, 2010 June 29, 2010 Guidance on Annual Servicer
Certification Required by the
Servicer Participation
Agreement
10-07 August 2, 2010 August 2, 2010 Interactions with HFA
Hardest-Hit Fund Programs
10-08 August 6, 2010 September 27, 2010 Treasury/FHA Second Lien
Program (FHA2LP) to
Support FHA Refinance of
Borrowers in Negative Equity
Positions
10-09 August 19, 2010 August 19, 2010 Handbook for Servicers
10-10 September 17, 2010 September 24, 2010 Modifications of Loans
Guaranteed by the Rural
Housing Service
10-11 September 21, 2010 September 21, 2010 Dodd-Frank Certification
Requirement
10-12 September 24, 2010 September 27, 2010 Treasury/FHA Second Lien
Program (FHA2LP) Effective
Date
10-13 October 1, 2010 October 1, 2010 Program Participation Cap
Adjustments Pursuant to the
Servicer Cap Model
10-14 October 15, 2010 October 1, 2010 Principal Reduction
Alternative Update
10-15 November 3, 2010 February 1, 2011 Case Escalation
Process/Dodd-Frank Act NPV
Notices
10-16 November 23, 2010 November 23, 2010 Policy Update
10-17 December 2, 2010 December 2, 2010 Handbook for Servicers
Version 3.0
10-18 December 28, 2010 February 1, 2011 HAFA – Policy Update
11-01 February 17, 2011 May 1, 2011 Dodd-Frank Certification,
Internal Quality Assurance
and Verification of Income
Update
11-02 March 30, 2011 June 1, 2011 Administrative Clarifications
Overview
MHA Handbook v4.3
18SD Issue Date of SD Effective Date of SD Title of SD
11-03 May 2, 2011 May 2, 2011 Handbook for Servicers
Version 3.1
11-04 May 18, 2011 September 1, 2011 Single Point of Contact
11-05 June 1, 2011 June 1, 2011 Handbook for Servicers
Version 3.2
11-06 July 6, 2011 October 1, 2011 Updates to Servicer
Incentives
11-07 July 25, 2011 October 1, 2011 Expansion of Unemployment
Forbearance
11-08 August 9, 2011 October 15, 2011 HAFA Policy Update
11-09 September 1, 2011 September 1, 2011 Handbook for Servicers
Version 3.3
11-10 September 29, 2011 December 1, 2011 Administrative Clarifications
and Updates
11-11 December 15, 2011 December 15, 2011 Handbook for Servicers
Version 3.4 and
Administrative Clarifications
11-12 December 27, 2011 March 1, 2012 Servicing Transfers
12-01 February 16, 2012 March 1, 2012 (PRA) Principal Reduction
Alternative and Second Lien
Modification Program
Investor Incentives Update
June 1, 2012 (2MP)
12-02 March 3, 2012 June 1, 2012 MHA Extension and
Expansion
12-03 April 17, 2012 June 1, 2012 Handbook Mapping for MHA
Extension and Expansion and
Administrative Clarifications
on Tier 2
12-04 July 13, 2012 September 30, 2012 Dodd-Frank Certification,
Borrower Identity and Owner
Occupancy Verification
12-05 August 7, 2012 August 7, 2012 Administrative Clarifications
12-06 August 17, 2012 August 17, 2012 Handbook for Servicers
Version 4.0
12-07 November 1, 2012 February 1, 2013 Home Affordable Foreclosure
Alternatives – Policy Update
12-08 November 20, 2012 November 20, 2012 Federally Declared Disasters
Overview
MHA Handbook v4.3
19SD Issue Date of SD Effective Date of SD Title of SD
12-09 November 30, 2012 November 30, 2012
February 1, 2013 Administrative Clarifications
12-10 December 13, 2012 December 13, 2012 Handbook for Servicers
Version 4.1
13-01 March 1, 2013 May 1, 2013 MHA Outreach and Borrower
Intake Project
13-02 April 5, 2013 April 5, 2013 Administrative Clarifications
May 1, 2013
June 1, 2013
August 1, 2013
13-03 May 1, 2013 May 1, 2013 Handbook for Servicers
Version 4.2
13-04 June 13, 2013 June 13, 2013 MHA Program Extension and
Enhancements
September 1, 2013
13-05
13-06
July 30, 2013
August 30, 2013
July 30, 2013
September 16, 2013 Update to the Second Lien
Modification Program and
Interactions with Hardest Hit
Fund Programs
August 30, 2013 Administrative Clarifications
September 16, 2013
Website Resources
For Non-GSE Mortgages, key servicer documents and tools relating to the MHA Program are
housed and maintained on www.HMPadmin.com. The site provides general guidelines and
overview documents available to the public as well as secure access to core tools and documents
needed to implement the MHA Program.
For GSE-specific information, servicers should refer to the:


Overview
Fannie Mae Website (www.efanniemae.com) for Fannie Mae loans, or
Freddie Mac Website (www.freddiemac.com) for Freddie Mac loans.
MHA Handbook v4.3
20Servicer Support
For questions regarding: Contact:
 Supplemental Directives, policy clarifications, and
loan-level questions for Non-GSE Mortgages HAMP Solution Center:
support@hmpadmin.com
 All reporting to Treasury for Non-GSE Mortgages 1-866-939-4469
9:00 a.m. to 7:00 p.m. ET, Monday
through Friday
Overview
MHA Handbook v4.3
21Chapter I
Making Home Affordable
Program
(MHA)
Overview
MHA Handbook v4.3
221 Servicer Participation in MHA
1.1 Servicer Participation Agreement
To participate in MHA for Non-GSE Mortgages, the servicer must register and execute a Servicer
Participation Agreement, related documents, and, if applicable, one or 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. This entity
will sign the SPA regardless of whether (i) it has engaged one or more subservicers to perform
some or all of the servicing functions on its behalf or (ii) it is subject to oversight by a master
servicer that does not have a direct contractual obligation to the investor to perform the servicing
functions. If the entity that signed the SPA sub-contracts out any portion of its responsibilities as
a servicer to another party, the entity that signed the SPA will be liable for the acts and omissions
of the sub-contracted party under the SPA.
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. As further described in
Section 1.3, participating servicers are required 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.
Section 9 of the SPA identifies for each party one or more points of contact for receipt of legal
notices under the SPA. Section 9 also permits each party to designate a different point of contact
in writing. If the Program Administrator is informed by a representative of a servicer that the
individual identified in Section 9 of a SPA as the servicer’s point of contact is no longer available
to receive legal notices on behalf of that servicer (for example, because he or she has left the
servicer organization), then unless and until the servicer designates a different point of contact for
purposes of Section 9 to the Program Administrator in writing, legal notices under Section 9 from
the Program Administrator to the servicer may also be sent to the person(s) designated as the
“Primary Contact” and/or “Secondary Contact” in the then-current HAMP Registration Form on file
with the Program Administrator for such servicer.
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 and engage in other loss
mitigation activities under a “qualified loss mitigation plan.” Treasury has determined that each
residential loan modification under HAMP (Tier 1 and Tier 2) (including Principal Reduction
Alternative (PRA) modifications) and 2MP, each modification and refinance under FHA Refinance
and FHA2LP, as well as each short sale and deed-in-lieu of foreclosure under HAFA and each
forbearance plan under UP, is a “qualified loss mitigation plan” as defined in the Servicer Safe
Harbor. However, this guidance does not mean that each such qualified loss mitigation plan
automatically qualifies for safe harbor protection under HFSTHA. Servicers are reminded to refer
to Section 201 of HFSTHA, which sets forth the specific requirements that must be satisfied. For
example, these requirements include, among other items, that:

The servicer must implement the qualified loss mitigation plan prior to December 31,
2012;
Chapter I: MHA
MHA Handbook v4.3
23 Default on the payment of the related mortgage must have occurred, be imminent, or be
reasonably foreseeable;
 The mortgagor must occupy the property securing the mortgage as his or her principal
residence; and
 The servicer must reasonably determine that the qualified loss mitigation plan will likely
provide an anticipated recovery on the outstanding principal mortgage debt in excess of
the anticipated recovery through foreclosure.
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, or as unwilling to extend its participation in MHA to include any extension or
expansion of an MHA program, or identifying a servicing agreement that limits or prohibits a
servicer from offering any assistance available under MHA, including HAMP Tier 2 modifications
(i.e., prohibition against modification of non-owner occupied mortgages or limits on multiple
modification of the same mortgage), the servicer must contact the investor in writing at least
once, encouraging the investor to permit modifications and other assistance available under the
extended and expanded MHA programs.
Servicers, within 120 days of signing the SPA, must create and maintain in their records 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; (3) the
number of loans serviced for each investor that does not participate in HAMP; and (4) pool-level
identification data, such as pool name and pool number, for loans serviced for each investor that
does not participate in HAMP or whose participation is subject to any limitations or restrictions. In
addition, servicers must provide a copy of the servicing agreement or other pool documentation to
Treasury or its agents upon request.
All servicers must update their Investor Participation Lists within 30 days of any change and
maintain both the old and revised versions of the lists, which should clearly identify the time
period during which each list was applicable, on a system that MHA-C may access upon request.
1.4 Transfers of Servicing
1.4.1 Transfer of Eligible Loans
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 obligations under the
SPA. If the transferee servicer has signed its own SPA, the Eligible Loans involved in the transfer
become subject to the transferee 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 Exhibit D to the SPA (AAA).
The transferee servicer is not required to execute an assignment and assumption agreement for
the transfer of loans that are not or no longer Eligible Loans. The transferor servicer must
document the basis for this determination in the mortgage file and/or servicing system. Servicers
are reminded to take into consideration the expanded criteria of MHA when determining whether
a loan is an “Eligible Loan”.
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
Chapter I: MHA
MHA Handbook v4.3
24negotiating a servicing transfer, the transferor servicer and the transferee servicer should make
arrangements as appropriate to account for incentive payments accordingly.
1.4.1.1 HAMP Eligible Loans
With respect to HAMP, if one of the circumstances set forth in Section 3.1.1 of Chapter II exists
with respect to an Eligible Loan, and any applicable response period has elapsed, such loan will
no longer be considered an Eligible Loan unless a borrower with continued eligibility requests
consideration prior to the effective date of the servicing transfer (or such earlier date on which the
population of loans to be transferred is finalized).
1.4.1.2 2MP Eligible Loans
With respect to 2MP, a mortgage loan is considered an Eligible Loan for purposes of Section 8 of
the SPA if, at the time of transfer or assignment (or such earlier date on which the population of
loans to be transferred is finalized):
(i) the second lien has been entered into the HAMP Reporting Tool;
(ii) the second lien is in a 2MP trial period;
(iii) the servicer of the second lien also services a first mortgage lien on the same property
that is in a trial period or permanent HAMP modification; or
(iv) the transferor servicer has received notice of a “match” from LPS of the second lien with
a related permanent HAMP modification as set forth in Section 4.1 of Chapter V.
2MP Eligible Loans do not include probable lien matches where the transferor servicer has not
confirmed the probable lien match with LPS. With respect to conditions (ii), (iii), and (iv) above, if
subsequent to this action: (a) the transferor servicer determines that the borrower does not meet
the eligibility criteria for 2MP; (b) the borrower is offered a 2MP trial period, but fails to return the
Dodd-Frank Certification prior to the trial period effective date as set forth in Section 1.7, or to
make current trial period payments as set forth in Section 6.2 of Chapter V; or (c) the borrower
fails to accept the 2MP modification offer as set forth in Section 7.1 of Chapter V, the loan will no
longer be considered an Eligible Loan. Additionally, if in resolution of an Escalated Case related
to 2MP, in accordance with Section 3.3, the servicer determines that the loan is not eligible for
2MP, the loan will no longer be considered an Eligible Loan.
1.4.1.3 Treasury FHA-HAMP and RD-HAMP Eligible Loans
With respect to the Treasury FHA-HAMP and RD-HAMP programs, a Treasury FHA-HAMP or
RD-HAMP modified loan is considered an Eligible Loan when, at the time of transfer or
assignment (or such earlier date on which the population of loans to be transferred is finalized), it
has been entered into the HAMP Reporting Tool.
1.4.1.4 HAFA Eligible Loans
With respect to the HAFA Program, a loan is considered to be an Eligible Loan when at the time
of transfer or assignment (or such earlier date on which the population of loans to be transferred
is finalized):
(i) a HAFA transaction has been entered into the HAMP Reporting Tool;
(ii) the servicer has sent a Short Sale Notice (SSN), Deed-in-Lieu (DIL) Agreement, or an
executed Acknowledgment of Request for Short Sale Agreement (ARSS) to the borrower;
(iii) the servicer has sent a HAFA solicitation to the borrower in accordance with Section 4 of
Chapter IV and 14 days has not yet elapsed; or
(iv) the servicer has received a request for a short sale or deed-in-lieu from the borrower
whether in response to the servicer’s solicitation or initiated by the borrower.
Chapter I: MHA
MHA Handbook v4.3
25However, with respect to conditions (iii) and (iv) above, if subsequent to these actions the
transferor servicer determines that the borrower does not meet the eligibility criteria for HAFA, the
loan will no longer be considered an Eligible Loan.
1.4.2 Relationship Manager
When a servicer subject to Section 4 transfers or assigns mortgage loans, or servicing rights
relating to mortgage loans, the transferee servicer must assume the transferor’s obligations under
the SPA to provide a relationship manager only if the transferee servicer has executed a SPA and
is otherwise subject to that section. In addition, if the borrower of a transferred loan previously
had been assigned a relationship manager by the transferor servicer, the transferor servicer must
identify such loan for, and cooperate with, the transferee servicer to facilitate the transfer to a new
relationship manager. The transferee servicer must provide written notification of the change to
the borrower that includes a toll-free telephone number and at least one other method by which
the borrower may directly contact the relationship manager, as well as the preferred means by
which documents should be delivered by the borrower to the transferee servicer. Such notice
must be provided on or before the 30th calendar day following the date of transfer, as defined in
Regulation Z, 12 CFR 226.39(b)(2).
1.4.3 Obligations of Transferor Servicers
If a servicer transfers or assigns mortgage loans or servicing rights relating to mortgage loans to
another servicer, whether voluntarily or involuntarily, the transferor servicer and the transferee
servicer must cooperate with each other to cause as little disruption as possible to the borrower. It
is the responsibility of the transferor servicer to ensure that all information, documentation and
data regarding a transferred Eligible Loan described under Section 2.2 (MHA Data) is provided to
the transferee servicer in a timely manner, and that such MHA Data is accurate and complete.
The transferor servicer must adhere to all program guidance with respect to transferred Eligible
Loans until it is has completed the transfer of all MHA Data.
The transferor servicer must provide written notice to the Program Administrator of a transfer of
Eligible Loans, or servicing rights relating to Eligible Loans, in accordance with Section 8 of the
SPA. For transfers relating to mergers, acquisitions or other changes of control, notice must be
provided to the Program Administrator as soon as legally possible. The transfer process guidance
will be available on www.HMPadmin.com. The transferor servicer must provide an executed AAA
and submit a list of Eligible Loans no later than 5 business days after the effective date of the
transfer or assignment to the Program Administrator. The AAA should be executed prior to or
concurrently with the transfer or assignment, and the effective date of the AAA must be the same
as the effective date of the transfer or assignment. The transferor servicer must ensure that all
data on the transferred loans reflected in the HAMP Reporting Tool, including the Official Monthly
Report (OMR), is accurate, complete, and up-to-date before the loans are transferred.
1.4.4 Obligations of Transferee Servicers
Prior to the transfer date, the transferee servicer must confirm to the Program Administrator that
upon receipt of complete MHA Data from the transferor, it will be capable of complying with
program reporting requirements to the HAMP Reporting Tool, including OMR reporting, before
the loans are transferred.
The transfer agreement must require delivery of MHA Data as a condition of the transfer. The
transferee servicer must have an internal quality control process to review loans acquired through
a transfer and must validate receipt and completeness of MHA Data within 60 days of the
effective date of the transfer. A representation from the transferor servicer that it has fulfilled its
responsibilities under the SPA and related MHA guidance with respect to the transferred loans is
not sufficient and does not relieve the transferee of this responsibility or any SPA obligation.
If after the transfer the transferee servicer finds that the MHA Data is incomplete, it must contact
the transferor servicer immediately to obtain the missing MHA Data. In the event the transferee
Chapter I: MHA
MHA Handbook v4.3
26servicer is unable to obtain MHA Data necessary or required for reporting to the HAMP Reporting
Tool from the transferor servicer, the transferee servicer must not attempt to re-create data. The
transferee servicer must only use MHA Data that it has been provided by the transferor servicer.
If the transferee servicer is unable to obtain MHA Data from the transferor servicer, it should
contact the Program Administrator.
If the transferee discovers that the trial period payment was calculated incorrectly based on its
review of the MHA Data, the transferee servicer must not re-underwrite the borrower.
Specifically, if a borrower has made timely trial period payments and a transferee servicer
determines that, based on documentation provided by the transferor servicer and provided on the
TPP notice, the trial period payment was calculated incorrectly, the transferee servicer should not
request refreshed documentation from the borrower nor require that the borrower start a new trial.
The borrower must be allowed to complete the TPP pursuant to the terms of the TPP notice.
In the event the borrower defaults during a TPP, the transferee servicer must follow the
guidance in Section 5. In the event the borrower successfully completes the TPP, the transferee
servicer must offer to permanently modify the borrower’s loan. If the transferee servicer
determines that the transferor servicer incorrectly calculated the borrower’s income such that the
borrower’s trial period payment exceeded by 10 percent or more the correct trial period payment,
upon successful completion of the TPP, the transferee servicer must re-run the waterfall in order
to determine the final HAMP modification terms. If the transferee servicer determines that the
correct trial period payment exceeds the borrower’s trial period payment, no re-run of the waterfall
is required.
1.4.5 Involuntary Transfers of Servicing
Servicing transfers are considered to be involuntary when an investor with whom the servicer is
not affiliated, or a court or regulator with jurisdiction, requires that servicing be transferred to
another servicer.
When servicing of an Eligible Loan is transferred from a SPA servicer to a non-participating
servicer (Non-SPA servicer) as a result of an involuntary transfer the SPA servicer must notify the
Program Administrator at least 30 days in advance of the transfer pursuant to Section 1.4.3 and
indicate whether or not the Non-SPA servicer will execute a AAA.
If the Non-SPA servicer does not execute a AAA, (i) the Program Administrator will require
documentation supporting the involuntary nature of the transfer, and (ii) the loans involved in the
transfer will not be eligible for any MHA Program after the servicing transfer; however, the
investor and Non-SPA servicer will be expected to honor the terms of executed modification,
SSA, ARASS and DIL agreements.
In addition, if the Non-SPA servicer does not execute a AAA, the transferor servicer must contact
the investor in writing at least once, requesting that the investor permit the delay of transfer of any
loan in an active trial period until such time as the loan has been converted to a permanent
modification, or a Non-Approval Notice has been issued. If the investor agrees to the delay,
before transferring a delayed loan to the Non-SPA servicer the transferor servicer must report the
HAMP or 2MP modification or non-approval status in the HAMP Reporting Tool after which the
loan may be transferred to the Non-SPA servicer, subject to the executed modification
agreement, if applicable, and free and clear of all other obligations under MHA. If the investor
does not permit the delayed transfer of loans that are in active trial periods, the transferor servicer
must cancel the trial in the HAMP Reporting Tool using the trial fallout reason code of “Transfer to
a Non-Participating Entity” and send the borrower a notice in accordance with Section 1.4.5.1.
1.4.5.1 Borrower Notification
If the Non-SPA servicer does not execute a AAA, in addition to any borrower notifications relative
to servicing transfers that are required under the Real Estate Settlement Procedures Act
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MHA Handbook v4.3
27(RESPA) or other applicable laws, transferor servicers must, prior to the effective date of the
transfer, send written notice to borrowers of all Eligible Loans explaining the impact of the transfer
on their MHA program participation. This need not be a separate notice and may be included with
or incorporated into another notice sent to the borrower from the transferor servicer prior to the
transfer.
1.4.5.2 Impact on Incentives
If servicing of a permanently modified loan is involuntarily transferred to a Non-SPA servicer and
the Non-SPA servicer does not execute a AAA, no servicer or investor incentive payments for the
transferred loans are entitled to be paid after the effective date of the servicing transfer or
assignment. Any accrued and unpaid servicer or investor incentive payments will be forfeited.
With respect to loans that are eligible for borrower incentives 30 days before the time of transfer
or assignment (i.e., permanently modified loan and in good standing), all unpaid borrower
incentives for the full modification term of the HAMP, Treasury FHA-HAMP, RD-HAMP or 2MP
loan (regardless of whether those incentives have accrued to the borrower) will be paid by
Treasury to the servicer of record in the HAMP Reporting Tool for the account of the borrower in
a lump sum after the servicing transfer is reported to the Program Administrator. The transferor
servicer must apply this lump sum payment to the account of the borrower as a curtailment in
accordance with Section 9.6 of Chapter II before the loan is transferred, even though the funds
will be disbursed from Treasury after the transfer. The HAFA relocation incentive will not be paid
by Treasury for HAFA transactions that have not been reported in the HAMP Reporting Tool as
closed by the time of transfer or assignment. Updated HAMP payment processes implementing
the terms described in this section are currently under development by the Program
Administrator. Until such processes are in place, the current payment processes remain in effect
and servicers must credit for the account of the borrower all unpaid borrower incentives as
provided in this section. Servicers will be advised of how to obtain borrower incentive
compensation due under this section when the updated processes become available.
Subsequent guidance will be provided on www.HMPadmin.com.
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 and pursuant to this
Handbook (Program Participation Cap.). Treasury established each servicer’s Program
Participation Cap as of September 30, 2010 using an allocation methodology by estimating the
number of Services expected to be performed by each servicer during the term of the SPA.
Notwithstanding anything to the contrary in the SPA, the Program Participation Cap can be
adjusted (1) upwards or downwards, pursuant to a model (Servicer Cap Model) to be applied to
all servicers currently participating in MHA or (2) downwards, based on Treasury’s full book
analysis of the servicer’s loans.
The Servicer Cap Model is intended to adjust a servicer’s Program Participation Cap pursuant to
a non-discretionary model, which will, in general, re-allocate Program Participation Cap amounts
among servicers depending on their effectiveness at performing Services. The aggregate amount
of all Program Participation Caps will not increase at any time. The Servicer Cap Model is
described below. The Servicer Cap Model will initially be calculated (Cap Determination Date.) on
a quarterly basis; however, Treasury may increase the frequency of calculation at any time. Upon
each calculation of the Servicer Cap Model by Treasury, each participating servicer will promptly
be notified of its new Program Participation Cap.
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 Service is
less than the maximum amount of compensation payments potentially payable, the funds
Chapter I: MHA
MHA Handbook v4.3
28remaining available for a servicer’s Services under the SPA are increased by the difference
between such amounts.
In addition, Treasury may, from time to time and in its sole discretion, revise a servicer’s Program
Participation Cap downwards. 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 for the applicable period, 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.
The “Servicer Cap Model” shall be:
For each servicer participating in MHA and for each Cap Determination Date, the Program
Participation Cap shall be equal to:
 If the Fully Funded Cap is equal to 1, then the Program Participation Cap for such
servicer shall be equal to the Hard Cap Amount; or
 If (i) the Fully Funded Cap is equal to zero and (ii) the Current Cap Required for Available
Headroom is greater than zero, then the Program Participation Cap for such servicer
shall be equal to the Current Cap Required for Available Headroom; or
 If (i) the Fully Funded Cap is equal to zero, (ii) the Current Cap Required for Available
Headroom is equal to zero, (iii) the Hard Cap Amount is greater than $100,000 and (iv)
the Required Cap Reduction Amount is equal to zero, then the Program Participation Cap
for such servicer shall be equal to the Hard Cap Amount; or
 If (i) the Fully Funded Cap is equal to zero, (ii) the Current Cap Required for Available
Headroom is equal to zero, (iii) the Hard Cap Amount is greater than $100,000 and (iv)
the Required Cap Reduction Amount is greater than zero, then the Program Participation
Cap for such servicer shall be equal to the greater of (A) $100,000 or (B) the Hard Cap
Amount for such servicer minus the Required Cap Reduction Amount.
Defined Terms: The following are the defined terms for the Servicer Cap Model. Any amount or
percentage referenced therein shall be as of the applicable Cap Determination Date.
Term
Aggregate Adjusted Hard Cap Amount Utilized
Aggregate Current Unutilized Cap
Aggregate Hard Cap Amount
Adjusted Hard Cap Amount Utilized
Aggregate Max Current Cap
Chapter I: MHA
Definition
For any Cap Determination Date, the
aggregate of all Adjusted Hard Cap Amount
Utilized of all servicers participating in MHA.
For any Cap Determination Date, the
aggregate of all Current Unutilized Cap
amounts of all servicers participating in MHA
on such Cap Determination Date.
For any Cap Determination Date, the
aggregate of all Hard Cap Amounts of all
servicers participating in MHA.
For each servicer and for any Cap
Determination Date, the Current Cap Utilized,
provided, that such amount shall not be less
than $100,000.
For any Cap Determination Date, the
aggregate of all Max Current Cap Required for
Available Headroom amounts of all servicers
participating in MHA.
MHA Handbook v4.3
29Term
Aggregate Percentage of Adjusted Hard Cap
Amount Utilized
Current Cap Required for Available Headroom
Definition
For any Cap Determination Date, the
Aggregate Adjusted Hard Cap Amount Utilized
expressed as a percentage of the Aggregate
Hard Cap Amount.
For each servicer and for any Cap
Determination Date:
(a) if the Percentage of Hard Cap Amount
Utilized is less than or equal to the Target
Utilization Percentage of the Adjusted Hard
Cap Amount Utilized, then the Current Cap
Required for Available Headroom shall be
equal to zero; or
Current Cap Utilized
Current Unutilized Cap
(b) if the Percentage of Hard Cap Amount
Utilized is greater than the Target Utilization
Percentage of the Adjusted Hard Cap Amount
Utilized, the Current Cap Required for
Available Headroom shall be equal to such
servicer’s Current Cap Utilized expressed as a
percentage of the applicable Target Utilization
Percentage.
For each servicer and for any Cap
Determination Date, the amount of the Hard
Cap Amount for such servicer utilized, based
on the Treasury system of record data on the
number of modifications and other applicable
MHA transactions (e.g., short sales and DIL)
initiated on behalf of such servicer.
For each servicer and for any Cap
Determination Date:
(a) If such servicer’s Current Cap Required for
Available Headroom is greater than zero, then
the Current Unutilized Cap for such servicer
shall be equal to zero; or
(b) If (i) such servicer’s Current Cap Required
for Available Headroom is equal to zero and
the Hard Cap Amount is equal to $100,000,
then the Current Unutilized Cap for such
servicer shall be equal to zero; or
Excess Cap Allocation Amount
Chapter I: MHA
(c) If (i) such servicer’s Current Cap Required
for Available Headroom is equal to zero and
the Hard Cap Amount is greater than
$100,000, then the Current Unutilized Cap for
such servicer shall be equal to the product of
(i) such servicer’s Hard Cap Amount minus (ii)
the greater of (A) $100,000 or (B) such
servicer’s Current Cap Utilized expressed as a
percentage of the applicable Target Utilization
Percentage.
For any Cap Determination Date, shall be
equal to the Aggregate Max Current Cap minus
the Aggregate Hard Cap Amount.
MHA Handbook v4.3
30Term
Fully Funded Cap
Hard Cap Amount
Max Current Cap Required for Available
Headroom
Percentage of Hard Cap Amount Utilized
Remaining Funds Percentage
Definition
For any Cap Determination Date, if Treasury
has locked a servicer’s Program Participation
Cap at a fixed amount, and notified such
servicer in writing that such Program
Participation Cap is “fully funded”, then such
servicer’s Fully Funded Cap shall have a value
of 1 1 . If Treasury has not locked the applicable
servicer’s Program Participation Cap in the
preceding manner, then such servicer’s Fully
Funded Cap shall have a value of zero.
For each servicer, the Hard Cap Amount for
any Cap Determination Date (for purposes of
applying the Servicer Cap Model as of that Cap
Determination Date), is the amount that was
notified to each servicer in writing by the
Program Administrator, for the immediately
preceding Cap Determination Date, pursuant to
a periodic determination of Hard Cap Amounts
of all participating servicers. Once the Servicer
Cap Model is applied to all servicers on any
Cap Determination Date, the Hard Cap Amount
shall be the amount derived from the Servicer
Cap Model and provided to each servicer in
writing by the Program Administrator.
For each servicer and for any Cap
Determination Date, shall be equal to the
greater of (i) such servicer’s Hard Cap Amount
or (ii) such servicer’s Current Cap Required for
Available Headroom.
For each servicer and for any Cap
Determination Date, such servicer’s Adjusted
Hard Cap Amount Utilized expressed as a
percentage of such servicer’s Hard Cap
Amount.
For each servicer and for any Cap
Determination Date:
(a) If the Current Unutilized Cap of such
servicer is equal to zero, then the Remaining
Funds Percentage for such servicer shall be
equal to zero; or
(b) If the Current Unutilized Cap of such
servicer is greater than zero, then the
Remaining Funds Percentage for such servicer
shall be equal to such servicer’s Current
Unutilized Cap expressed as a percentage of
the Aggregate Current Unutilized Cap.
1
Such an event might occur because, for example, a servicer has no further loans eligible to be modified.
Such a determination is in Treasury’s sole discretion.
Chapter I: MHA
MHA Handbook v4.3
31Term
Required Cap Reduction Amount
Definition
For each servicer and for any Cap
Determination Date:
(a) If the Current Unutilized Cap of such
servicer is equal to zero, then the Required
Cap Reduction Amount for such servicer shall
be equal to zero; or
(b) If the Current Unutilized Cap of such
servicer is greater than zero, then the Required
Cap Reduction Amount for such servicer shall
be equal to the lesser of (i) the product of the
Remaining Funds Percentage and the Excess
Cap Allocation Amount or (ii) the product of the
Remaining Funds Percentage and the
Aggregate Current Unutilized Cap.
For any Cap Determination Date, the Target
Utilization Percentage shall be:
Target Utilization Percentage
(a) if the Aggregate Percentage of Adjusted
Hard Cap Amount Utilized is less than or equal
to 80%, then the Target Utilization Percentage
shall be 80%; or
(b) if the Aggregate Percentage of Adjusted
Hard Cap Amount Utilized is greater than 80%
but less than or equal to 85%, then the Target
Utilization Percentage shall be 85%; or
(c) if the Aggregate Percentage of Adjusted
Hard Cap Amount Utilized is greater than 85%
but less than or equal to 90%, then the Target
Utilization Percentage shall be 90%; or
(d) if the Aggregate Percentage of Adjusted
Hard Cap Amount Utilized is greater than 90%
but less than or equal to 95%, then the Target
Utilization Percentage shall be 95%; or
(e) if the Aggregate Percentage of Adjusted
Hard Cap Amount Utilized is greater than 95%,
then the Target Utilization Percentage shall be
100%.
On October 4, 2010, the Target Utilization
Percentage shall be 80%.
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 MHA.
Law
Section 5 of the Federal Trade
Commission Act
Chapter I: MHA
Description
Prohibits unfair or deceptive acts or practices
MHA Handbook v4.3
32Law
The Equal Credit Opportunity Act
(ECOA) and the Fair Housing Act Description
Prohibits discrimination on a prohibited basis in
connection with mortgage transactions
The Real Estate Settlement Procedures
Act (RESPA) Imposes certain disclosure requirements and
restrictions relating to transfers of the servicing of
certain loans and escrow accounts
The Fair Debt Collection Practices Act Restricts certain abusive debt collection practices by
collectors of debts, other than the creditor, owed or
due to another
Fair Lending Laws Ensure that servicers and lenders do not treat a
borrower less favorable on grounds, such as race,
religion, national origin, gender, marital or familial
status, age handicap, or receipt of public assistance
income in connection with any loan modification.
These laws also prohibit red-lining.
Fair Credit Reporting Act Regulates the collection, dissemination, and use of
consumer information, including consumer credit
information
1.7 Dodd-Frank Certification Requirement
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) provides
that no person is eligible to begin receiving assistance under the MHA Program if such person, in
connection with a mortgage or real estate transaction, has been convicted within the last 10 years
of any of the following:



Felony larceny, theft, fraud, or forgery;
Money laundering; or
Tax evasion.
The Dodd-Frank Certification requirement became effective September 21, 2010. All HAMP and
2MP, TPPs, permanent HAMP, 2MP, Treasury FHA HAMP and RD-HAMP modifications, offers
relating to such TPPs and permanent modifications, and HAFA short sale and DIL offers
outstanding as of the effective date of this requirement are not impacted by the Dodd-Frank
Certification requirement.
A servicer must obtain an executed Dodd-Frank Certification from each borrower (or other
recipient of MHA incentives) in accordance with the guidance set forth in the table below.
Servicers are required to date stamp the executed Dodd-Frank Certification upon receipt, whether
or not the borrower has dated it. The Interim Period described in the table below is the period
from September 22, 2010 through December 31, 2010. The Final Period is the period beginning
January 1, 2011. The form of the Dodd-Frank Certification is available on www.HMPadmin.com.
An amended form of the Dodd-Frank Certification was released on February 17, 2011 and can be
found on www.HMPadmin.com. Servicers must use the amended form beginning on and after
May 1, 2011. To the extent a borrower delivered the original form of the Dodd-Frank Certification,
regardless of whether such borrower checked the boxes therein or dated it, the borrower shall be
deemed to have complied with the Dodd-Frank Certification requirement.
Chapter I: MHA
MHA Handbook v4.3
33Program
HAMP
Interim Period Requirement
Obtain completed Dodd-Frank
Certification prior to permanent
HAMP modification
Final Period Requirement
Obtain completed Dodd-Frank
Certification as part of Initial
Package prior to offering TPP
to borrower
2MP If not obtained in connection
with related HAMP evaluation,
obtain completed Dodd-Frank
Certification prior to permanent
2MP modification or
extinguishment HAFA If not obtained in connection
with related HAMP evaluation,
obtain completed Dodd-Frank
Certification prior to closing
HAFA short sale or DIL For bankrupt borrowers where
trial period is waived, obtain
completed Dodd-Frank
Certification prior to permanent
HAMP modification
If the related first lien
modification is identified as a
HAMP GSE Modification or
GSE Standard Modification in
the LPS match file, obtain
completed Dodd-Frank
Certification prior to 2MP trial
period plan or prior to
permanent 2MP modification
or prior to extinguishment, as
applicable *
If not obtained in connection
with related HAMP evaluation,
obtain completed Dodd-Frank
Certification prior to closing
HAFA short sale or DIL
Obtain completed Dodd-Frank
Certification prior to reporting
Treasury FHA-HAMP
modification to Program
Administrator
Obtain completed Dodd-Frank
Certification prior to reporting
RD-HAMP modification to
Program Administrator
See applicable requirements
published by FHA In addition to borrower(s) a
completed Dodd-Frank
Certification must be obtained
prior to closing from any non-
borrower occupant who
receives relocation incentives
Obtain completed Dodd-Frank
Certification prior to reporting
Treasury FHA-HAMP
modification to Program
Administrator
Obtain completed Dodd-Frank
Certification prior to reporting
RD-HAMP modification to
Program Administrator
See applicable requirements
published by FHA
Treasury FHA-HAMP
RD-HAMP
FHA2LP
*When a matched first lien is identified as a HAMP Modification (rather than a HAMP GSE
Modification or a GSE Standard Modification) in the LPS match file, 2MP servicers may
reasonably conclude that the Dodd-Frank Certification was obtained in connection with that first
lien as required by this guidance, and is not required to verify that it has been obtained.
When the 2MP servicer sends a communication to the borrower including the Dodd-Frank-
Certification and, if required, the Occupancy Certification, and informs the borrower that its
execution and return is a prerequisite to obtaining a 2MP trial period, permanent modification or
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MHA Handbook v4.3
34extinguishment, the servicer must include a specific date by which the Certification(s) must be
received. This date shall be no less than 30 calendar days from the date of the communication in
which the servicer sends the Certification(s) and requests its execution. If the borrower has not
completed and returned the Certification(s) by the specified date, the servicer must make an
additional attempt in writing to contact the borrower and again provide a specific date by which
the completed Certification(s) must be received, which shall be no less than 15 calendar days
from the date of the second notice. If the completed Certification(s) are not received by the
specified date, the servicer is no longer required to offer the borrower a 2MP trial period,
permanent modification or extinguishment. Servicers should keep copies of the communications
with the borrowers regarding the Certification(s) in the servicing file. The 2MP servicer may send
the Certification(s) to the borrower concurrently with the 2MP trial period offer (or permanent
modification offer if no trial period is required) or, subject to applicable laws and regulations,
incorporate the Certification(s) into the 2MP permanent modification agreement, in each case, as
long as the servicer clearly informs the borrower in writing that the 2MP offer is contingent upon
the borrower returning the completed Certification(s).
In addition, tenants or other non-borrower occupants who are required to vacate a rental property
as a result of a HAFA short sale or DIL, may be eligible to receive the relocation incentive
available under HAFA as described in Section 12.1 of Chapter IV. In order to receive the
relocation incentive, the borrower must obtain and deliver to the servicer, a Non-Owner Occupant
Certification executed by the tenant(s) or other occupant(s) in advance of closing. Throughout this
Handbook, unless otherwise indicated, the Dodd-Frank Certification and Non-Owner Occupant
Certification shall be referred to as the “Dodd-Frank Certification”.
2 Compliance
Treasury has engaged Freddie Mac as the Compliance Agent for the elements of MHA that 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 requirements of
MHA.
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
Servicer Incentive Compensation
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
Chapter I: MHA
MHA Handbook v4.3
35

Retention of Appropriate Documentation
Adherence to Written Policies for Applicable Programs
For on-site reviews, MHA-C will strive to provide the servicer 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 in a timely manner. 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 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
general documentation applicable to all MHA Programs 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.
 For charged off mortgage loans not considered for HAMP, evidence that the servicer has
released the borrower from liability for the debt and provided a copy of the release to the
borrower.
 For loans not considered for HAMP or UP due to property condition, evidence that the
property securing the mortgage loan is in such poor physical condition that it is
uninhabitable or condemned.
 Written policies which define what the servicer considers a change in circumstance and
when a borrower will be re-evaluated for HAMP, and documentation of any
determinations regarding whether a change in circumstance has or has not occurred.
 Written policies to identify borrowers that exhibit a pattern of repetitive delinquency and
reinstatement.
 Documentation of all communications, solicitations and Borrower Notices, whether verbal
(e.g., phone contact) or written (e.g., e-mail), with or to the borrower or authorized
advisor. Appropriate documentation includes, but is not limited to, the dates of
communications, names of contact person(s), and a summary of the conversation.
Chapter I: MHA
MHA Handbook v4.3
36 Evidence of postponement of scheduled foreclosure sales in applicable scenarios as
outlined in Section 3 of Chapter II.
 All written policies and procedures that describe the basis on which the servicer will
determine a borrower’s monthly gross income (or, in the case of co-borrowers or non-
borrower occupants, the combined monthly gross income).
 Evidence that a credit score was unavailable for any borrower on the note and the proxy
credit score that was used when performing the NPV evaluation.
 All documents and information received during the process of determining borrower
eligibility, including:
o Evidence of receipt of the Initial Package;
o Evidence of servicer efforts to obtain additional documentation from borrower or third
parties if necessary;
o Borrower income verification;
o Total monthly mortgage payment calculations;
o Total monthly gross debt payment calculations;
o NPV calculations (assumptions, inputs and outputs);
o Evidence of application of each step of applicable standard modification waterfall(s),
including any variations;
o Evidence of application of each step of applicable alternative modification
waterfall(s), including any variations;
o Evidence that the borrower’s monthly P&I payment is reduced by at least 10 percent
under HAMP Tier 2 from the borrower’s monthly P&I payment in effect at the time of
consideration for HAMP Tier 2, or if applicable, from the P&I payment under the
HAMP Tier 1 TPP;
o Escrow analysis;
o Escrow advances;
o Escrow set-up: and
o Any evidence provided by the borrower related to the rental status or occupancy of
the subject property.
 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 judgment.
 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.
Chapter I: MHA
MHA Handbook v4.3
37 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 TPP failure.
 Evidence that each mortgage loan securing an owner-occupied property considered for
HAMP is first evaluated for HAMP Tier 1 and that an offer for a HAMP Tier 2 TPP is only
made subsequent to a determination that such loan is ineligible for HAMP Tier 1.
 As outlined in Section 7 of Chapter II, written policies identifying the circumstances under
which the servicer would offer a modification and the conditions under which
modifications of each tier would be offered for cases where NPV results are negative for
both HAMP Tier 1 and HAMP Tier 2 and the servicer elects, based on investor guidance,
to offer a TPP under either HAMP Tier 1 or Tier 2 (provided other eligibility requirements
are met).
 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.
 All documents and information related to the servicer’s consideration of the borrower for
other loss mitigation alternatives.
 Written policies and procedures related to notification to the servicer’s foreclosure
attorney/trustee regarding a borrower’s status under an MHA program.
 Certification prior to foreclosure sale as outlined in Section 3.4.3 of Chapter II.
 All documents and information related to receipt and distribution of the borrower, servicer
and investor incentive payments.
 Servicers must also retain documentation of their analysis of the materiality of all
instances of noncompliance or where controls are found to be ineffective.
 All policies and procedures related to the implementation, processes, controls (including
design and effectiveness) and reporting for Escalated Cases.
 Documentation of all communications, whether verbal or written, with the borrower or
authorized representative, MHA Help or HSC. Appropriate documentation includes, but is
not limited to, the dates of communications, name(s) of contact person(s) and a summary
of the conversation.
 Documentation and dates of the resolution of Escalated Cases.
 Documentation and dates of the Non-Approval Notice, including transmission of NPV
values to borrowers, if applicable.
 Evidence of review or other controls that reasonably demonstrates the completeness and
accuracy of the reporting and resolution of Escalated Cases.
 All policies and procedures related to appraisals.
 Copies of appraisals obtained in response to a borrower dispute of the property value
input used in the NPV test.
 Copies of borrower communications disputing NPV inputs.
 Written policies and procedures relating to FDD forbearance plans, including:
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MHA Handbook v4.3
38o Determining eligibility for the FDD forbearance;
o Canceling existing TPPs and 2MP trial periods when borrowers accept FDD
forbearance plans;
o Terms of FDD forbearance plans offered to eligible borrowers;
o Coordination with UP; and
o TPP and 2MP trial period reconsideration, where applicable.
 Documentation of all steps performed in evaluating and processing requests for an FDD
forbearance plan.
 All policies and procedures related to the servicer’s implementation, processes, controls
and training related to the relationship manager position, including the appropriate
caseload levels.
 Information relating to the borrower’s payment history.
 All policies and procedures related to clearing Dodd-Frank Certification, Borrower Identity
and Owner-Occupancy Alerts and for addressing any potential irregularities that may be
identified independently by the servicer, including the process the servicer will take to
notify the borrower, methods for borrower communication, and the process to verify the
accuracy of information disputed by a borrower.
2.2.1 Documentation Requirements for PRA
In addition to the requirements in Section 2.2, required documentation for PRA includes, but is
not limited to:
 The servicer’s documented process for evaluating and approving borrowers for PRA
including policies and procedures related to consistent application of PRA, variations of
alternative modification waterfall steps, equity share arrangements, and, as applicable
based on Tier, the circumstances under which the servicer would reduce principal to
create (i) a mark-to-market LTV ratio below 105 percent or (ii) a monthly mortgage
payment ratio below the target monthly mortgage payment ratio.
 All documents and information related to the determination of eligibility for PRA.
 All documents and information related to the alternative modification waterfall(s) and NPV
process including accurately uploading required data into the HAMP Reporting Tool.
 For each loan file, copies of any equity share agreements between the investor and the
borrower.
2.2.2 Documentation Requirements for UP
In addition to the requirements in Section 2.2, required documentation for UP includes, but is not
limited to:

Written policies and procedures relating to UP forbearance plans, including:
o
Chapter I: MHA
Determining eligibility for the program including: unemployment status; duration
and status of unemployment benefits; waiver of any owner-occupancy
requirement; and forbearance term extension criteria;
MHA Handbook v4.3
39o Periodic assessment of a borrower’s continued eligibility for UP;
o Determining when an UP forbearance plan requires a payment and how the
payment amount is determined;
o Canceling any existing TPP determined to be eligible for an UP forbearance plan;
o The conditions upon which a borrower in an UP forbearance plan will be
considered for HAMP during the UP forbearance period but prior to the transition
to the mandatory HAMP evaluation requirements outlined in Section 5 of Chapter
III;
o The conditions upon which servicers may evaluate the borrower for HAMP
instead of an UP forbearance plan if, in the servicer’s business judgment, HAMP
is the better option for the borrower;
o Determining whether a borrower has already received unemployment assistance
(including UP, and unemployment assistance provided by the HHF programs, the
Emergency Homeowner’s Loan Program (EHLP) and other state unemployment
mortgage assistance programs (collectively, Non-MHA Unemployment
Assistance)); and
o Determining when conditions for early termination of the UP forbearance plan are
reached.
2.2.3 Documentation Requirements for HAFA
In addition to the requirements in Section 2.2, required documentation for HAFA includes, but is
not limited to:

Written policies and procedures relating to HAFA, including:
o Determining eligibility for the program including determining fair market value,
recommended list price, approved sale proceeds and approved minimum net
proceeds, as applicable;
o Establishing guidelines for allowable payoffs to junior lien holders;
o Determining when a monthly mortgage payment will be required during a short
sale;
o Determining, if applicable, when a borrower will be considered for a deed-for-
lease or an opportunity to repurchase the property at some future time; and
o Determining if and when a borrower that was determined to be ineligible for
HAFA prior to February 1, 2011 will be re-evaluated.
 All records of borrower solicitations or borrower-initiated inquiries regarding HAFA.
 The date and outcome of the consideration and evaluation for foreclosure alternatives
under HAFA and specific justification with supporting details if foreclosure alternatives
were denied under HAFA including, if utilization of HAFA was prohibited by investor
guidance, the applicable investor restriction or prohibition that prevented the servicer
from offering a borrower a HAFA foreclosure alternative and all records related to the
termination of the terms of the pre-approved HAFA short sale or expiration of HAFA
transactions without a completed short sale or acceptance of a DIL.
Chapter I: MHA
MHA Handbook v4.3
40 All documents and information related to the extinguishment and release of subordinate
liens in accordance with applicable laws.
 All documents and information received during the process of determining borrower
eligibility, including evidence of receipt of required documents such as the Hardship
Affidavit or RMA, as well as the evidence used to determine if the property was vacant or
evidence that a borrower has voluntarily elected to continue to make a full contractual
payment during the marketing period.
 All documents and information related to the terms of the pre-approved short sale or,
where there is not a pre-approved short sale, approval of an executed sales contract
including, but not limited to, issuance, as applicable, of the SSN, ARSS and HAFA
Affidavit.
 If a borrower will be renting or re-purchasing the property sold to a non-profit
organization, evidence that such organization is a non-profit.
 If the transaction is eligible for relocation incentives, documentation of the occupancy at
the time the borrower requested a HAFA short sale or DIL or approval of the terms of an
executed sales contract (if an SSN or DIL Agreement has not been issued);
documentation that the occupant will be required to vacate the property as a result of the
short sale or DIL, and the Dodd-Frank Certification and, if applicable, the Non-Owner
Occupant Certificate executed by such party or parties.
2.2.4 Documentation Requirements for 2MP
In addition to the requirements in Section 2.2, required documentation for 2MP includes, but is
not limited to:

Written policies and procedures relating to 2MP, including:
o All documents and information received during the process of determining
borrower eligibility, including evidence of application of each modification step.
o All documents and information related to the monthly payments during and after
any trial period, as well as incentive payment calculations and such other
required documents.
o Detailed records to document the reason(s) for any TPP failure.
o All documents and information related to the appropriate treatment of second
liens modified under 2MP where the modification of the first lien utilizes PRA.
o All documents and information related to the extinguishment and release of
second liens in accordance with applicable laws.
 In the case of a full extinguishment, copies of the most recent LPS match file on which
the servicer relied to determine that the HAMP-modified first lien was reported as in good
standing and was not paid off as of the effective date of the full extinguishment.
 Notification from the LPS match file that a first lien lost good standing under HAMP Tier 1
and subsequently received a permanent modification under HAMP Tier 2.
2.2.5 Documentation Requirements for HHF
In addition to the requirements in Section 2.2, required documentation for HHF includes, but is
not limited to:
Chapter I: MHA
MHA Handbook v4.3
41
Written policies and procedures relating to HHF interactions and participation, including,
but not limited to:
o All relevant records of transactions, including printouts from related NPV runs
done on behalf of an HHF Program, borrower authorizations, documentation of
the amount of any assistance received from an HHF Program and reports to the
Program Administrator reflecting loans that received HHF assistance;
o For interactions with HAMP all documentation of:
o
 HHF assistance the borrower receives to facilitate a permanent
modification; an extension of borrower notice requirements (as described
in Section 2.3 of Chapter II);
 HHF assistance and appropriate adjustments to UPB (as described in
Section 3.1 of Chapter VIII); and NPV calculations used to determine
eligibility for HAMP and PRA prior to as well as after the HHF Program’s
principal reductions
For interactions with UP all documentation:
 From the state HFA regarding guidance/instructions specific to timing and
amount of the payment; of the eligibility for UP (based on the timing and
unemployment status of the borrower at the time of evaluation); and
 Of the evaluation for HAMP (as described in Section 5 of Chapter III after
UP and HHF assistance ceases, if applicable (e.g., borrower continues to
have a hardship);
o For interactions with HAFA all documentation from the HFA regarding
guidance/instructions specific to the application, timing, and amount of the
payments, if made to the servicer; and
o For interactions with 2MP all documentation that:
 A 2MP match did not already occur or was ineligible before HFA
assistance was extended; and
 The second lien was released.
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.
2.4 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:
Chapter I: MHA
MHA Handbook v4.3
42 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 2.2 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); and
 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.
o
o
If such loan has been current, then MHA-C shall:
 Calculate the six percent requirement for the servicer pay-for-success
compensation and identify and report any discrepancies within the data in the
HAMP Reporting Tool;
 Compare results of the six percent calculation with the Program Administrator’s
payment record for the servicer and identify and report any discrepancies; and
 Determine if the borrower pay-for-performance compensation was appropriately
applied to the borrower’s loan balance; and
If such loan was not current, MHA-C will report that loan as a discrepancy.
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; and
 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 reports that relate in whole or in part to modifications under FHA-HAMP or
Chapter I: MHA
MHA Handbook v4.3
43Special 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.
2.5 FHA2LP Compliance
FHA and Treasury have agreed that each will perform certain compliance activities for FHA2LP.
FHA will validate that each loan refinanced under FHA Refinance is an eligible mortgage loan
under the eligibility criteria set forth in Section 3 of Chapter VII and the FHA Refinance ML and
will notify Treasury in a timely manner if any fraud is discovered in origination of a new FHA
Refinance loan. In addition, FHA will assess each originator’s compliance with all FHA Refinance
requirements, including such originator’s internal control program.
Treasury’s Compliance Agent for FHA2LP will perform the following activities with respect to
FHA2LP loans:
 Review that a full or partial extinguishment of the related second lien occurred consistent
with the amount reported by the FHA2LP servicer, and if applicable, appropriate reporting
to the Program Administrator, occurred for any related HAMP or 2MP loans;
 Determine the accuracy and timeliness of remittance by the servicer of investor incentive
payments;
 Evaluate documented evidence to confirm adherence by the participating servicer to
FHA2LP requirements, including modified loan terms following a Partial Extinguishment,
as set forth in Section 4.1 of Chapter VII;
 Review that the related borrower has been released from liability for the portion of second
lien that was extinguished; and
 Review the effectiveness of each participating servicer’s internal quality control plan for
FHA2LP.
Each servicer is required to develop and implement an internal control program designed to:
 Ensure effective delivery of services in connection with FHA2LP and compliance with
applicable FHA2LP documentation and reporting requirements, including the FHA
Refinance ML and existing or future guidance issued by FHA for requirements related to
eligibility, underwriting and administration of FHA Refinance;
 Monitor and detect mortgage loan fraud; and
 Monitor compliance with applicable consumer protection and fair lending laws.
The internal control program must include documentation of the control objectives for FHA2LP
activities, the associated control techniques, and mechanisms for testing and validating the
controls.
Each servicer is also required to provide FHA and Treasury’s Compliance Agent for FHA2LP, as
applicable, with access to all internal control reviews and reports that relate in whole or in part to
refinances under FHA Refinance performed by it and any external parties or consultants hired by
such servicer.
Servicers must keep copies of all lien releases, subordination agreements (if applicable) and
other related documents in its files to be made available for verification by Treasury’s Compliance
Agent for FHA2LP. Servicers must retain all documents and information received during the
process of determining borrower eligibility for FHA2LP, including lien release documentation and,
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44if applicable, the HUD-1. In addition, servicers must retain required documents for a period of
seven years from the date of the document collection .
2.6 Annual Certification
The SPA requires a servicer to submit an annual certification (Annual Certification) as to its
continuing compliance with, and the truth and accuracy of, the representations and warranties set
forth in the SPA beginning on June 1, 2010 and again on June 1 of each year thereafter during
the term of the SPA. The original form of Annual Certification is attached as an exhibit to the SPA
and is available on www.HMPadmin.com. The guidance in this section amends and restates the
original form of Annual Certification and the related delivery requirements and requires servicers
to sign and deliver the initial and subsequent certifications to MHA-C within 90 calendar days of
the effective date of the applicable certification.
2.6.1 Initial Certification
Each servicer is required to provide an initial certification (Initial Certification) after executing a
SPA, which Initial Certification will cover the relevant MHA Programs as of a fixed effective date.
The due date for the Initial Certification (Initial Certification Due Date) will be dependent upon the
date on which the servicer executes the SPA for a respective MHA Program, and the date upon
which an MHA Program becomes effective. The Initial Certification shall be delivered to MHA-C.
The table below sets forth the method to determine the Initial Certification Due Date. Each
servicer should determine its related Initial Certification Due Date by the date on which it entered
into its SPA under “SPA Execution Date.” For the Initial Certification only, each servicer will certify
that it was in compliance with, and the truth and accuracy of the representations and warranties
related to, Program guidance as of the specific date as set forth in the table under “Initial
Certification Effective Date.” Other than as described below with respect to 2MP, MHA Programs
that became effective two or more months prior to the Initial Certification Effective Date will be
included in the Initial Certification. Some programs, such as Treasury FHA-HAMP, required a
participating servicer to execute an Amended and Restated SPA or an additional Service
Schedule, as applicable, in order to participate in the MHA Program; in those cases, if the
Amended and Restated SPA or Service Schedule was signed two or more months prior to the
Initial Certification Effective Date applicable to that servicer, then that MHA Program must also be
included in the Initial Certification.
SPA
Execution
Date
On or before
October 31,
2009
November 1,
2009 through
June 30,
2010 Initial
Certification
Effective Date
As of June 30,
2010
July 1, 2010
through
October 3,
2010 As of June 30,
2011
As of
December 31,
2010
Chapter I: MHA
Programs to be Covered (Programs included if
effective for 2 months or more before the Initial
Certification Effective Date)

HAMP

HAFA

Treasury FHA-HAMP*
 HAMP
 HAFA
 Treasury FHA-HAMP*
 2MP*
 UP
 HAMP
 HAFA
 Treasury FHA-HAMP*
 2MP*
 UP
 PRA
 Any other MHA-related Programs implemented
by Treasury prior to March 31, 2011
MHA Handbook v4.3
Initial
Certification
Due Date
September
30, 2010
March 31,
2011
September
30, 2011
45*Amended and Restated SPA or Service Schedule, as applicable, required.
Example 1: If a servicer signed a SPA to participate in HAMP in April 2009, the servicer would be
required to deliver an Initial Certification on September 30, 2010, stating that it was in compliance
with, and the truth and accuracy of, the representations and warranties related to HAMP and
HAFA guidance as of June 30, 2010.
Example 2: If a servicer signed a SPA to participate in HAMP in December 2009 and signed a
Service Schedule to participate in Treasury FHA-HAMP in May 2010, the servicer would be
required to deliver an Initial Certification on March 31, 2011, stating that it was in compliance with,
and the truth and accuracy of, the representations and warranties related to HAMP, HAFA, UP
and Treasury FHA-HAMP guidance as of December 31, 2010.
Example 3: If a servicer signed a SPA to participate in HAMP in April 2009 and signed an
Amended and Restated SPA to participate in Treasury FHA-HAMP in May 2010, the servicer
would be required to deliver an Initial Certification on September 30, 2010, stating that it was in
compliance with, and the truth and accuracy of, the representations and warranties related to
HAMP and HAFA (but not Treasury FHA-HAMP) guidance as of June 30, 2010.
With respect to 2MP, servicers that executed their SPA on or before October 31, 2009,
regardless of when they executed their Amended and Restated SPA or Service Schedule, as
applicable, to participate in 2MP, are not required to certify to their compliance with the 2MP
guidelines in their Initial Certifications. Servicers that (i) executed their SPA (A) between
November 1, 2009 through June 30, 2010 or (B) between July 1, 2010 through October 3, 2010
and (ii) elected to participate in 2MP two or more months before their Initial Certification Effective
Date (i.e. as of December 31, 2010 or June 30, 2011, as applicable), must certify to their
compliance with the 2MP guidelines in their Initial Certifications.
2.6.2 Subsequent Certifications
In addition to the Initial Certification, the servicer is required to certify (Subsequent Certification)
on an annual basis as to their compliance pursuant to activities performed and obligations
satisfied during the period from the effective date of the most recent prior Certification through
and including the Subsequent Certification Effective Date. The Subsequent Certification shall be
delivered to MHA-C. Initial Certifications and Subsequent Certifications are referred to in this
Handbook as Certification(s).
Servicers are generally subject to a number of financial reporting and/or regulatory requirements,
often based on the organization’s fiscal year performance and due at, or shortly after, fiscal year
end. As many of the procedures and related controls required for Certifications will be similar to
those performed to satisfy other such requirements, a servicer may elect to time its Subsequent
Certifications to the servicer’s fiscal year end. This election will allow a servicer to incorporate
Subsequent Certifications into its normal reporting cycle. This option is not available for the Initial
Certification.
This election, if made, will be a one-time election that will apply to all Subsequent Certifications
and must be reported to MHA-C with the Initial Certification. However, this election may not
extend the effective period of the first Subsequent Certification more than 15 months following the
Initial Certification, and, depending on the timing of the servicer’s fiscal year end, may require the
first Subsequent Certification in less than 12 months.
By way of an example, and in order to provide additional clarity for servicers deciding whether to
submit Subsequent Certifications as of their fiscal year end, the following table is provided as a
guide for determining the first Subsequent Certification Effective Date:
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46Initial
Certification
Effective Date
June 30, 2010
December 31,
2010
June 30, 2011
First Subsequent Certification Effective Date if Fiscal Year End is:
September December March June
September 30,
2011
September 30,
2011
September 30,
2012 December 31,
2010
December 31,
2011
December 31,
2011 March 31,
2011
March 31,
2012
March 31,
2012 June 30, 2011
June 30, 2011
June 30, 2012
The due date for a servicer to deliver a Subsequent Certification (the Subsequent Certification
Due Date) to MHA-C is not later than 90 calendar days after the Subsequent Certification
Effective Date. If a servicer does not elect to time its Subsequent Certifications to its fiscal year
end reporting cycle, or does not specify in the Initial Certification what the Subsequent
Certification Due Date shall be, then (1) the servicer’s Subsequent Certification Effective Date
shall be the anniversary of the Initial Certification Effective Date and (2) the Subsequent
Certification Due Date shall be not later than 90 calendar days after such Subsequent
Certification Effective Date.
For any changes to existing programs announced by Treasury that may affect the timing or scope
of the certification, the related Supplemental Directive will provide guidance as to the relevant
certification effective dates and due dates for the Certifications relating to such programs.
A Subsequent Certification for HAMP is inclusive of HAMP Tier 2 for all Subsequent Certifications
with an effective date on or after September 30, 2012.
2.6.3 Subsequent Events
Servicer activities in the period between the effective date of a Certification and the due date of
the Certification will be subject to reporting in the next Subsequent Certification. However, if a
servicer becomes aware of any information or events during the period allowed for delivery that
would cause them to be unable to certify to the truth and accuracy of the representations and
warranties included in the applicable Certification (either the Initial Certification or a Subsequent
Certification), the servicer should notify MHA-C promptly and amend its Certification to include
that information.
2.6.4 Scope of the Certification
2.6.4.1 Scope of the Internal Controls Program
Servicers are expected to establish and maintain internal controls that provide reasonable
assurance that they are in compliance with MHA Program requirements. Further, servicers are
required to certify that they have developed and implemented an internal controls program to
monitor and detect loan modification fraud and to monitor compliance with applicable consumer
protection and fair lending laws, among other things, as described in the SPA.
HAMP reflects usual and customary industry standards for mortgage loan modifications contained
in typical servicing agreements, including pooling and servicing agreements governing private
label securitizations. While most servicers already have internal quality control programs in
satisfaction of regulatory and investor requirements, servicers must develop, implement,
maintain, and review internal controls that address the key activities identified in Examples of
Control Objectives, available at www.HMPadmin.com that may be unique to the MHA
Program(s).
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472.6.4.2 Internal Controls Documentation
Servicers are required to maintain documentation of the internal control objectives for Program
activities, the associated control techniques, and mechanisms for testing and validating the
controls. Control objectives for each of the key program activities may include, but are not limited
to, those included in Examples of Control Objectives, available at www.HMPadmin.com.
2.6.4.3 Quarterly Reviews
Servicers are expected to enforce and review the effectiveness of the internal controls program
on a quarterly basis throughout the period covered by the related Certification. Servicers are also
required to develop and execute a quality assurance program to assess documented evidence of
loan evaluation, loan modification and accounting processes and to confirm adherence to MHA
Program requirements. The quality assurance program should be included in the quarterly review
of internal control processes, and should be assessed to ensure that it: (i) includes loans from all
potentially relevant categories (e.g., past-due, TPPs, permanent HAMP modifications, HAMP
denials, etc); (ii) is independent from the business lines; (iii) applies appropriate sampling
methodology; (iv) reaches appropriate conclusions; (v) distributes reports to appropriate members
of management; and (vi) performs appropriate trending reporting and follow-up activities in order
to improve servicer performance (if necessary).
Servicers should consider the results of the quarterly reviews as part of the procedures performed
to support the Annual Certification process. Servicers should consider whether any unresolved
internal controls findings, either individually or in aggregate, have a material effect on their ability
to certify as to their ongoing compliance, and if so, should report any such unresolved findings as
described in Section 2.6.5.
2.6.5 Reporting Noncompliance
As required under the SPA, in the event that a servicer cannot certify as to its continuing
compliance with, or the truth and accuracy of, one or more of the representations and warranties
included in any Certification, that servicer should notify MHA-C immediately. In addition, in this
instance, that servicer should modify the related cover letter to the Certification (as defined in
Section 2.6.6). Each servicer is required to report instances of noncompliance that it believes
have a material effect on its ability to comply with MHA program requirements and describe those
instances as well as the factors it considered in determining materiality and evaluating
noncompliance in a cover letter to the Certification (see Section 2.6.6). This evaluation of
materiality may or may not be quantifiable in monetary terms and should include, but is not limited
to, consideration of the nature and frequency of noncompliance as well as qualitative
considerations, including the impact on MHA program goals and objectives.
When material instances of noncompliance are identified, the servicer’s cover letter to the
Certification should include a description of and the reason for noncompliance. Examples may
include, but are not limited to, the following:
 Any representations and warranties, or covenants that cease to be true and correct;
 Any deficiencies in the design or operating effectiveness of the internal controls over
MHA Program activities, including the servicer’s quality assurance program; or
 Any overdue, un-remediated findings resulting from compliance assessments performed
by MHA-C.
Servicers must maintain evidence of the control testing activities conducted in order to assess
compliance and submit the annual certification.
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482.6.6 Cover Letter to the Certification
Servicers should attach a separate cover letter to the Certification delivered to MHA-C. This cover
letter should include, but is not limited to, the following:
 Description of any instances of noncompliance that the servicer believes have a material
effect on its ability to comply with Program requirements as described in Section 2.6.5.
 Details of the action plan to remediate any such material noncompliance and the
timeframe within which remediation will be complete.
 With respect to the cover letter accompanying the Initial Certification, the servicer’s
election, if made, to make Subsequent Certifications effective as of the servicer’s fiscal
year end.
2.6.7 Termination of Obligation to Provide Certifications
A servicer's obligation to provide a Certification to MHA-C will continue so long as its SPA has not
been terminated. If a servicer's SPA is terminated before its Initial Certification Effective Date (as
defined in Section 2.6.1), then (a) it must deliver an Initial Certification to MHA-C not later than 90
calendar days after its Initial Certification Effective Date, which shall in this case be defined as the
termination date of the SPA and (b) it is no longer required to provide any Subsequent
Certifications. If a servicer's SPA is terminated prior to any Subsequent Certification Effective
Date (as defined in Section 2.6.2), then it must provide a final Subsequent Certification to MHA-C
not later than 90 calendar days after its Subsequent Certification Effective Date, which shall in
this case be defined as the termination date of the SPA.
2.7 Internal Quality Assurance
Each servicer must develop, document and execute an effective quality assurance (QA) program
that includes independent reviews of each MHA program (e.g., HAMP, UP, 2MP, PRA, HAFA,
Treasury FHA-HAMP, RD-HAMP and FHA2LP) in which the servicer is participating pursuant to
an executed SPA to ensure that the servicer’s implementation and execution of such program(s)
conforms to the requirements of the SPA and this Handbook.
2.7.1 Establishment of a Quality Assurance Function
Each servicer must establish an internal QA function that:
 Is independent of the servicer’s MHA management team;
 Is comprised of personnel skilled at evaluating and validating the processes, decisions
and documentation utilized throughout the implementation of each applicable MHA
program;
 Has the appropriate authority, privileges, and knowledge to effectively conduct internal
QA reviews;
 Coordinates activities and validates results with other risk and control units within the
servicer’s organization including, but not limited to, internal audit, compliance, and
operational risk;
 Evaluates whether management, at varying levels, is receiving appropriate information on
a timely basis which would allow for the identification of process failures, backlogs, or
unexpected results or impacts; and
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Evaluates the completeness, accuracy and timeliness of the servicer’s response to MHA-
C servicer-level review reports.
2.7.2 Scope of Quality Assurance Reviews
The QA function must conduct reviews that are commensurate with the size, complexity, and risk
of the servicer’s program activities. The QA function must also be capable of assessing the
impacts and consequences of identified risks and weaknesses, especially those that may have
adverse borrower impacts (e.g., non-approvals, foreclosures, broad-based exclusions, servicing
transfers, fraud identification, etc.). The established QA function must evaluate all components of
the servicer’s participation in applicable MHA programs, including, but not limited to:
 Availability and responsiveness of servicing personnel to borrower inquiries, questions,
and complaints , including Escalated Cases;
 Solicitation and outreach to potentially eligible borrowers;
 Determination of borrower eligibility for any MHA program;
 Pre-screening practices exclusion from solicitation due to known eligibility failures or
automated programs used to target and identify potentially eligible or qualified individuals
for MHA programs;

 Tracking and retention of documentation submitted by borrowers;
Documentation and application of servicer-specific HAFA and PRA Policies;
 Documentation and application of investor-specific requirements for all MHA programs;
 Compliance with the requirements concerning Borrower Notices as described in Section
2.3 of Chapter II;
 Reporting of Government Monitoring Data as described in Section 4.1.2 of Chapter II;
 Reporting of reason codes as described in Section 11.4.1 of Chapter II;
 Adherence to prohibitions on referral of loans to foreclosure and conducting of scheduled
foreclosure sales as described in Section 3 of Chapter II and elsewhere in the Handbook;
 Underwriting, including assessment of imminent default and hardship circumstances,
calculation of borrower income, debts and escrow analysis; valuation of property;
application of each applicable standard modification waterfall and, if required, the
applicable alternative modification waterfall(s);
 Base NPV Model calculations:

o For all servicers, the QA function must assess controls designed to ensure the
accuracy of the Base NPV Model inputs and outputs and the appropriate use,
management, and storage of NPV-related data.
o In addition, for servicers that have recoded the Base NPV Model into their loss
mitigation systems, the QA function must assess the servicer’s model management
and application development processes.
Documentation of a request for and approval of a modification (or other loss mitigation
option) by the mortgage insurer, investor and/or other interested party in a loss position;
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50 Conduct of trial period plans, including documentation, application of payments and use
of suspense/unapplied funds accounts, credit reporting and conversion to permanent
modification for both first and second lien mortgages as appropriate;
 Correctly matching the terms of a borrower’s second lien modification with the terms of
the borrower’s first lien modification for purposes of processing 2MP modifications;
 Timely consideration of alternative loss mitigation options, as well as other foreclosure
alternatives including HAFA, when a permanent modification is not appropriate;
 Management of Escalated Cases as described in Section 3;
 External reporting (e.g., to credit bureaus, mortgage insurers, investors and guarantors);
 Reconciliation and distribution of incentives payments;
 Reconciliation and correction of MHA data with the Program Administrator for the HAMP
Reporting Tool;
 Maintenance of documentation appropriate to support MHA requirements and decisions;
and
 Reporting of MHA data timely and accurately for recording in the HAMP Reporting Tool,
including data related to incentive payments, and the process used to map program data
from the servicer’s loss mitigation system to the HAMP Reporting Tool.
2.7.3 Quality Assurance Review: Methodology, Timing and Reporting
The QA plan must include a variety of audit techniques including loan file evaluations that are
based on an appropriate sampling process: either statistically valid sampling with a 95 percent
confidence level, or a stratified sample of loans. In either case, the sampling methodology must
be documented and must include both random and risk-based selection criteria, as appropriate.
The QA plan must ensure that other available information such as information relating to
complaints or the results of prior reviews is documented and used as appropriate to determine
the focus of QA activities and the loan sample criteria.
QA reviews must occur at least quarterly. Within 45 calendar days of QA review completion, a
report must be distributed to the appropriate executives or board-level committees, including
senior management independent of the area under review. The report must include at least the
following:
 Results of the QA reviews;
 Results of the latest MHA-C servicer-level review reports;
 Trending reports:
o
Each trending report must summarize the data from the 12 months prior to the report
date. The trending data must be used in management’s assessment of the
effectiveness of established MHA processes and training.
 Recommendations to improve internal oversight;
 Recommendations to improve MHA processes and training; and
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Remediation actions, if necessary.
The QA plan must include a rigorous follow up process (generally at 30-day increments after
report issuance) to ensure that management is taking necessary remediation actions to address
identified issues, including assigning a specific manager to implement process improvements and
oversee remediation efforts addressing exceptions identified by QA. Remediation efforts must
include re-evaluating loans not properly considered for MHA programs if appropriate.
Results of QA activities must be supported by adequate work papers and other documentation
that is well organized and sufficiently detailed to allow a knowledgeable third party who did not
participate in the review to assess the documentation and understand how the conclusions
reached in the associated report are substantiated.
Results of QA activities, the written QA plan, and all associated documentation including work
papers must be retained in accordance with the records retention provisions of the SPA and
made available to MHA-C upon request.
2.7.4 Relationship Manager Assessment
Servicers who are subject to Section 4 must include in their internal quality assurance plan, or
through other means such as Internal Audit, appropriate assessments of relationship manager
activities.
These assessments should include, but are not limited to, coverage of the following areas:








Timing of communications to borrowers about relationship manager assignment and
changes;
Relationship manager access to information, including the borrower’s current status in
the delinquency or imminent default resolution process, and appropriate training to
understand the information;
Relationship manager coordination of document and information flow to and from
borrowers;
Relationship manager’s access to individuals with the ability to stop foreclosure
proceedings when necessary to comply with MHA requirements;
Organizational structure and staffing levels such that relationship managers can properly
carry out responsibilities;
Relationship manager input on the certification prior to foreclosure sale required under
Section 3.4.3 of Chapter II;
Servicer communications with borrowers in the event of servicing transfers; and
Relationship manager notification when cases are escalated under Section 3.2 of
Chapter I.
2.8 Dodd-Frank Certification, Borrower Identity and Owner Occupancy
Compliance
Review of Dodd-Frank Certification, borrower identity and owner-occupancy compliance will be
conducted in an effort to ensure that (including non-borrower occupants, as applicable) applying
for or receiving benefits under MHA:
 Are the individuals they have represented themselves to be (borrower identity);
 Meet the owner-occupancy requirements of the MHA program(s) in which they
participate, if applicable (owner-occupancy); and
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Have not been convicted of certain crimes, within the applicable time period that under
the Dodd-Frank Act would make them ineligible for MHA assistance (Disqualifying
Crime), as attested to in their signed Dodd-Frank Certification.
MHA-C has retained a contractor (Vendor) to gather, analyze and share with servicers,
information regarding individuals applying for and receiving assistance under MHA with respect to
borrower identity and owner-occupancy status and the accuracy of their Dodd-Frank Certification.
The Vendor will be provided identifying information for loans selected for review from loans
entered into the HAMP Reporting Tool and will conduct research and analysis to identify potential
borrower identity and owner-occupancy discrepancies for servicers to investigate further.
Additionally, on some, but not all of the selected loans, the Vendor will conduct a criminal
background check through public records to identify potential inaccuracies with respect to the
individual’s attestation in their Dodd-Frank Certification. The results of the Vendor research and
analysis with respect to borrowers will be provided to servicers to assist them in complying with
the Dodd-Frank Act and their responsibilities with respect to MHA guidelines on borrower identity
and owner-occupancy. If the Vendor identifies a potential irregularity with respect to any loan
reviewed for borrower identity or owner-occupancy compliance or if a borrower appears to have
been convicted of a Disqualifying Crime, the Vendor will post an “Alert” status in a web-based
portal for that loan. Servicers will periodically access this portal (viewing only their own loans)
and evaluate the information provided with the Alert. Servicers will undertake their own
evaluation of the Alerts, perform any necessary additional research, communicate with the
borrower as described herein, and ultimately either “clear” the Alert or post a status of “not clear”
on the portal.
Servicers must take such action as necessary to prevent loans associated with Alerts from
reaching a status where Treasury pays any incentives until the Alert has been “Cleared” by the
servicer.
Individuals associated with Alerts that are not ultimately “Cleared” are not eligible for participation
in any MHA program. If the individual is a borrower (as opposed to a non-borrower occupant), the
respective loan must be canceled from Treasury’s system of record. Treasury will recapture any
servicer, borrower or investor incentives previously paid on a loan cancelled from the HAMP
Reporting Tool as a result of borrower identity, owner-occupancy or borrower Dodd-Frank
Certification non-compliance.
2.8.1 Borrower Eligibility & Compliance Portal
To facilitate the exchange of communication among Treasury, the Vendor and servicers, the
Vendor has established a web-based Borrower Eligibility & Compliance (BE&C) Portal. The
Vendor will issue an “Alert” to servicers on any loan for which it identifies a potential borrower
identity or owner-occupancy irregularity, or a possible Disqualifying Crime, and will share
information relevant to the Alert with the applicable servicer. The BE&C Portal will also be used
by servicers to report on their efforts to investigate and resolve Alerts. The Vendor will only allow
Servicers to access loans in their own servicing portfolios on the BE&C Portal.
Servicer questions regarding the technical use of the BE&C Portal or the content of a particular
Alert on the BE&C Portal should be raised directly with the Vendor.
2.8.2 Loan Selection
Loans will be selected for Vendor review from loans entered into the HAMP Reporting Tool from
the following programs: HAMP, Treasury FHA-HAMP, RD-HAMP, 2MP and HAFA. Selection will
include loans in active TPPs, those that have been permanently modified, and loans in
connection with pending or completed HAFA transactions. Dodd-Frank Certification compliance
will only be conducted on loans with TPP Effective Dates on or after September 22, 2010, 2MP
modifications that have modification dates on or after September 22, 2010 and corresponding
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53GSE first lien modifications, or HAFA transactions that were entered into the HAMP Reporting
Tool on or after September 22, 2010.
Borrower identity and owner occupancy review, when applicable, on all new TPPs, 2MP
modification with corresponding GSE first lien modifications and HAFA transactions reported to
the HAMP Reporting Tool during the current month’s reporting cycle will be performed.
Disqualifying Crime review will be performed on a random sample of those loans.
2.8.3 Servicer Documentation
Regardless of the form of the MHA request, in every case servicers are required to maintain
executed copies of the Hardship Affidavit and all application materials including the Dodd-Frank
Certification and when applicable, the RMA. When a servicer enters a transaction in the HAMP
Reporting Tool, it is representing that it has obtained executed copies of all requisite program
documentation and that the borrower (including non-borrower occupants, as applicable) and the
loan meet all applicable program requirements.
2.8.4 Hold on Program Participation for Trial Period Plans or Pending HAFA Transactions
Servicers must take such actions as necessary to prevent loans in TPP status from converting to
permanent modifications and to prevent pending HAFA transactions from closing, upon discovery
by the servicer that:
 There is a missing or unexecuted RMA or Dodd-Frank Certification; or
 Upon receipt of notification from the Vendor of an “Alert” status in the BE&C Portal for
that loan.
In all cases the Vendor will first review loans for borrower identity and, when applicable
occupancy, before conducting a review for Dodd-Frank Certification compliance. Once a servicer
has placed a hold on a loan, the servicer may not release the hold and complete the permanent
modification or HAFA transaction until the later of (i) the servicer’s receipt of notification from the
Vendor that the loan is not subject to an Alert with respect to identity, Dodd-Frank Certification
and when applicable, owner occupancy, or (ii) clearance by the servicer of all identity, occupancy
or Dodd-Frank Certification Alerts posted by the Vendor with respect to the loan.
2.8.5 Vendor Review and Alert Notification
If the Vendor identifies a potential irregularity with respect to any loan reviewed for borrower
identity or owner-occupancy compliance, or if a borrower appears to have been convicted of a
Disqualifying Crime, the Vendor will post an “Alert” status in the BE&C Portal for that loan. The
BE&C Portal will provide the servicer with the type of Alert (borrower identity, owner-occupancy or
Dodd-Frank Certification), and provide servicers with the information upon which the Alert was
based. The servicer must independently evaluate the Alert and associated material and conduct
any additional due diligence necessary to clear the Alert. This includes, where required under
this guidance or applicable law, rule or regulation, working with the borrower.
The Vendor will notify servicers on a weekly basis (or such other time frame as Treasury and/or
MHA-C may direct), of any new Alerts it has posted to the BE&C Portal. Within two (2) business
days after receipt of this notification, the servicer must access the BE&C Portal to retrieve the list
of new Alerts posted.
If a loan is subject to a borrower identity Alert, the Vendor will not research Dodd-Frank
Certification compliance until the borrower identity Alert has first been cleared and the correct
identity of the borrower has been determined.
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542.8.6 Alert Clearance Process
Within ten (10) business days after a borrower identity, owner-occupancy or Dodd-Frank
Certification Alert status is posted on the BE&C Portal, the servicer must evaluate the information
provided by the Vendor, as well as any other information the servicer may have relied upon to
make the initial identity or occupancy determination and must either:
(i) make a determination that the servicer has sufficient evidence to confirm the borrower’s
identity, occupancy status or Dodd-Frank Certification compliance in accordance with
program requirements; document the basis for this determination and maintain it in the
servicing system or mortgage file; and use the BE&C Portal to report a “Cleared” status in
accordance with the guidance in this section; or
(ii) notify the borrower in writing, by certified mail with return receipt requested that the
servicer was unable to verify the accuracy of the borrower’s identity, owner occupancy
status, or Dodd-Frank Certification compliance.
All borrower Alert notices under this section must:
a. Provide the borrower with the underlying information upon which the Alert was issued
(which may include the information provided by the Vendor and/or any additional
information obtained by the servicer). To the extent servicer is providing information
prepared by the Vendor, borrower shall be notified that: the information was collected
from public sources; they have a right under the Fair Credit Reporting Act to request the
underlying information from www.cebsupport.com; and that the Vendor is not a consumer
reporting agency and did nothing to influence the decision of their servicer.
b. Instruct the borrower that they have fifteen (15) calendar days from the date of the
communication from the servicer to provide any information that might help the servicer
clarify the information upon which the Alert was issued and verify the borrower’s original
attestation.
c.
State that failure to respond to the notice by the date specified or failure to verify the
accuracy of the borrower’s identity, occupancy status, or Dodd-Frank Certification may
result in the borrower being ineligible for any housing program funded under the
Emergency Economic Stabilization Act of 2008 (EESA), which includes the program for
which the borrower has been accepted, and with respect to permanent modifications,
pay-for-success benefits to which the borrower might otherwise be entitled to.
d. Provide contact information for the borrower’s relationship manager, if applicable, or
other point of contact at the servicer.
e. With respect to an identity or Dodd-Frank Certification Alert placed on a loan subject to a
pending HAFA transaction involving a non-borrower occupant, the servicer must either
work with the borrower and/or non-borrower occupant to clear the Alert or offer the
borrower the option to withdraw the request for relocation assistance and complete the
transaction.
With respect to Alerts issued on loans associated with a closed HAFA transaction, loans that
have been paid off, loans that have been extinguished, or where the servicer is otherwise unable
to locate the borrower, the servicer may, but is not required to send the Alert notice required by
this section. However, if the servicer is unable to clear an Alert, it will be subject to recapture of
any servicer, borrower or investor incentives previously paid on the loan as described in the
guidance.
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55Servicers will not receive notification of, or be expected to clear Alerts involving non-borrower
occupants that received relocation assistance in conjunction with a closed HAFA transaction.
Additionally, there will be no recapture of relocation incentives paid to non-owner occupants when
the non-owner occupant is the subject of the Alert.
2.8.6.1 Servicer Responsibility for Assessing Information
Servicers bear sole responsibility for assessing the validity of any information provided by
Vendor, borrower or non-borrower occupant, if applicable, and accepting or rejecting such
information in determining whether the borrower is compliant with the provisions of Section
1481(d) of the Dodd-Frank Act and with program guidelines on borrower identity and, as
applicable, owner-occupancy. Servicers should make every effort to clear Alerts within ten (10)
business days of the borrower response due date. However, as necessary servicers should grant
extensions of time to submit information necessary to clear Alerts. Extensions should be granted
in fifteen (15) calendar day increments and should not exceed a total of forty-five (45) calendar
days.
Until such time as the servicer reports a Cleared status for an individual who is subject to an
Alert, the subject individual is not eligible for participation in any mortgage assistance program
authorized or funded under EESA (e.g., HAMP, 2MP, HAFA, Treasury FHA-HAMP, RD-HAMP,
FHA2LP, FHA Refinance of Borrowers in Negative Equity Positions Program, and the Hardest Hit
Fund).
2.8.7 Reporting Clearance Status
No later than ten (10) business days following the due date specified in the Alert notice and at
least once each month thereafter until the Alert is “Cleared” or “Not Cleared”, the servicer must
use the BE&C Portal to report the status of efforts to clear the Alert, using one of the Alert status
types listed below.
If an Alert is received on a loan associated with a closed HAFA transaction and the servicer’s own
research has not resulted in information sufficient to clear the Alert, the servicer must, within forty-
five (45) calendar days of receipt of the Alert status, report a Not Clear status to the BE&C Portal
using one of the Alert status types listed below.
2.8.7.1 Identity/Occupancy Verification Alert Status
If the servicer received an Alert for both Borrower identity and owner-occupancy on the same
loan, the servicer must report the status of each Alert separately.
a. Cleared—Servicer Reporting Error: The servicer made a data reporting error and has
corrected it in the HAMP Reporting Tool and the BE&C Portal.
b. Cleared—Identity Confirmed: The borrower provided sufficient documentation
confirming identity.
c.
Cleared--Occupancy Confirmed: The borrower provided sufficient documentation to
confirm that they met the owner-occupancy requirements of the program or that
owner-occupancy is not required.
d. Investigation in Progress: The servicer is still investigating the Alert or has granted
the borrower an extension of time for receipt of sufficient clearance evidence. This
status requires input to the BE&C Portal of the extension date.
e. Non-Approval or Notice of Ineligibility Sent: The servicer has exhausted efforts to
clear the Alert and has issued a Non-Approval or other notice of ineligibility to the
borrower.
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Not Cleared: The borrower did not provide sufficient documentation to clear the
identity and/or occupancy Alert. The Not Cleared status is a final determination and
should only be used after the borrower has received a Non-Approval Notice or notice
of ineligibility and the 30 day dispute period has expired.
2.8.7.2 Dodd-Frank Certification Compliance Alert Status
a. Cleared—Mistaken Identity: The borrower or non-borrower occupant provided
sufficient documentation showing that the individual in the Alert is not the borrower or
non-borrower occupant.
b. Cleared—Not a Disqualifying Crime: The borrower or non-borrower occupant
provided sufficient documentation showing that there was no conviction or that the
conviction was not for a Disqualifying Crime.
c.
Cleared—Outside Time Limit: The borrower or non-borrower occupant provided
sufficient documentation showing that the conviction was outside the applicable
timeframe.
d. Cleared Relocation Assistance for Non-Borrower Withdrawn: The borrower has
withdrawn a request that Relocation Assistance be paid to a non-borrower occupant
in conjunction with a pending HAFA transaction.
e. Investigation in Progress: The servicer is still investigating the Alert or has granted
the borrower an extension of time for receipt of sufficient clearance information. This
status requires input to the BE&C Portal of the extension date.
f.
Non-Approval or Notice of Ineligibility Sent: The servicer has exhausted efforts to
clear the Alert and has issued a Non-Approval or other notice of ineligibility to the
borrower.
g. Not Cleared: The borrower did not provide sufficient documentation demonstrating
that they had not been convicted of a Disqualifying Crime. The Not Cleared status is
a final determination and should only be used after the borrower has received a Non-
Approval or Termination notice and the 30 day dispute period has expired.
2.8.8 Not Cleared Borrower Notices
If a servicer has independently determined based on its own evaluation of an Alert that a
borrower has misrepresented his or her identity, or that the property is not owner occupied, if
required by program rules, or the borrower or non-borrower occupant was convicted of a
Disqualifying Crime, the servicer must, within ten (10) business days of the due date specified on
the Alert notice to the borrower or any extension thereof, take the actions described below. If the
borrower is in an active TPP or pending HAFA transaction, the servicer must send a notice in
accordance with Sections 2.3.2.5 of Chapter II or Section 4.2 of Chapter IV, respectively.
If the borrower is in a TPP or a pending HAFA transaction and the servicer is unable to clear the
Alert, the servicer must designate the loan “Not Cleared” on the BE&C Portal and cancel the
transaction in the HAMP Reporting Tool. Following cancellation of a TPP or pending HAFA
transaction, servicers may, but are not required to, offer the borrower a proprietary modification or
other proprietary loss mitigation option. If the borrower is in a permanent modification and the
servicer is unable to clear the Alert, the servicer must designate the loan “Not Cleared” on the
BE&C Portal and cancel the transaction in the HAMP Reporting Tool.
If the servicer identifies that the loan has received or is receiving assistance from a HHF program,
the servicer must notify the relevant HFA contemporaneously with the notice sent to the borrower
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57in accordance with Sections 2.3.2.5 of Section II or Section 4.2 of Chapter IV, and work with the
HFA before cancelling the related loan in the HAMP Reporting Tool. Servicers should allow the
HFA a minimum of 30 days and a maximum of 60 days to resolve the Alert before cancelling the
loan in the HAMP Reporting Tool.
Cancellation in the HAMP Reporting Tool does not terminate or alter a modification agreement
executed between the servicer and borrower.
In the event that a permanent HAMP modification is cancelled as a result of borrower identity,
owner-occupancy or Dodd-Frank non-compliance, servicers may, but are not required to convert
the borrower to a proprietary loss mitigation option. However, if the servicer determines in
conjunction with a pending cancellation that it has cause to change any term of its modification
agreement with the borrower, including the borrower’s expectation of receipt of pay-for-success
incentives, the servicer must notify the borrower in writing of the change(s) and provide the
borrower a period of thirty (30) calendar days from the date of the notice to dispute the action
prior reporting a “Not Cleared” status or cancelling the loan in the HAMP Reporting Tool. Such
notice must include contact information for the borrower’s relationship manager, if applicable, or
other contact at the servicer and MHA-Help. If the cancellation does not impact the borrower’s
modified loan terms and the servicer intends to continue to pay any applicable pay-for-success
incentives, no borrower notice is required.
No borrower notice is required if the loan is associated with a closed HAFA transaction.
2.8.9 Treasury System Reporting and Incentives
No later than the (4 th ) fourth business day of the month after the expiration of the 30-day dispute
period (or such later period as required to review supplemental material provided by the borrower
or an HFA to clear or resolve Alerts when a borrower benefits from more than one EESA-funded
program), the servicer must cancel the loan in the HAMP Reporting Tool using the following
reason codes: if the borrower is ineligible due to an alert based on owner occupancy or borrower
identity, report Reason Code (21) Application Discrepancy; if the borrower is ineligible due to an
alert based on potential Dodd-Frank Certification noncompliance by the borrower, report Reason
Code (24) Dodd-Frank Certification Non-Compliance; except that in the case of a HAFA
transaction, report reason code (7) Other. If as a result of the Alert clearance process, the
servicer determines that any information in the HAMP Reporting Tool was incorrect, the servicer
must concurrent with submitting the corrected information to the BE&C Portal in the manner
described in the instructions found on the BE&C Portal, also submit corrected information to the
HAMP Reporting Tool.
Treasury will recapture any servicer, borrower or investor incentives previously paid on a loan
cancelled from the HAMP Reporting Tool as a result of borrower identity, owner-occupancy or
Dodd-Frank non-compliance.
2.8.10 Interaction with Other EESA Programs
It is possible that a single borrower (including non-borrower occupants, as applicable) or loan
could benefit from more than one EESA funded program at the same time. For example, a
borrower whose loan was permanently modified under HAMP may also have a second lien
modified through 2MP or receive assistance through an HHF unemployment assistance program.
2.8.10.1 Borrowers In Multiple MHA Programs
In the event a borrower (including non-borrower occupants, as applicable) that is subject to an
Alert that cannot be cleared is found to be benefiting from another EESA funded program(s),
Treasury will provide the servicer(s) of the other respective MHA program(s) notice of an Alert
through the portal and that servicer(s) is required to evaluate the Alert with respect to the
borrower’s transaction in accordance with the guidance in this Section 2.8.
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58In the event one servicer is able to clear an Alert but another servicer is unable to clear the Alert
with respect to the same alert type (owner occupant, Borrower Identity or Dodd Frank
Certification), each servicer must report the clearance or non-clearance respectively. In this
instance, SIGTARP will be notified of the discrepancy.
2.8.10.2 Borrowers In MHA and HHF Programs
In the event a borrower is subject to an Alert that cannot be cleared and the servicer is aware that
the borrower is also benefiting from an EESA funded HHF program, the servicer must notify the
relevant HFA as described in Section 2.8.8 and work with the HFA before cancelling the related
loan in the HAMP Reporting Tool. Servicers should allow the HFA a minimum of 30 days and a
maximum of 60 days to resolve the alert before cancelling the loan in the HAMP Reporting Tool.
3 Escalation of Borrower Inquiries
3.1 Treasury’s Borrower Support Centers
The HOPETM Hotline, a 24-hour telephone help-line operated by the non-profit, Homeownership
Preservation Foundation, provides homeowners with free foreclosure prevention information and
housing counseling referrals. Under contract with the Program Administrator, the HOPETM Hotline
assists borrowers with a preliminary assessment of their eligibility for MHA Programs and also
connects borrowers with detailed program or denial questions to MHA Help, a team of housing
counselors dedicated exclusively to working with borrowers and servicers to resolve MHA
escalated cases. Treasury established a similar resolution resource, the HAMP Solution Center
(HSC), to manage escalated cases received from housing counselors, government offices, and
other third parties acting on behalf of a borrower.
Specially trained personnel at MHA Help and HSC handle Escalated Cases (as defined in
Section 3.2), evaluating the circumstances and status of a borrower’s request for assistance
under an MHA Program and working with the servicer to identify and resolve the case in a
manner consistent with MHA program guidelines. To facilitate review and response to cases
escalated to servicers by HSC and MHA Help, servicers must report to HSC or MHA Help the
status of referred Escalated Cases and, upon request, provide all necessary information required
to assess the borrower’s Escalated Case, including, but not limited to:
 Debt and income inputs, assumptions, and calculations used to evaluate the borrower;
 Name of the investor/guarantor and Pool ID if the reason for denial is “Investor/Guarantor
Not Participating,” unless restricted by confidentiality;
 Correspondence by either the borrower or the servicer relative to the applicable MHA
Program evaluation;
 Timeline of events constructed by the servicer relative to the applicable MHA Program
evaluation; and
 Other relevant data relied upon by the servicer in conducting the evaluation.
Servicers must permit calls with MHA Help or HSC to be recorded for quality control and training
purposes.
3.2 Servicer Escalated Case Management
All servicers are required to have written procedures and personnel in place to provide timely and
appropriate responses to borrower inquiries and disputes that rise to the level of an “Escalated
Case,” which includes:
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59 Allegations that the servicer did not assess the borrower for the applicable MHA
Program(s) according to program guidelines;
 Inquiries regarding inappropriate program denials;
 Initiation or continuance of foreclosure actions in violation of Section 3 of Chapter II; or
 Cases referred to the servicer by HSC and MHA Help.
Servicers are not required to consider a borrower’s request to be re-evaluated for HAMP Tier 1 as
an Escalated Case where the borrower has already received a HAMP Tier 2 modification and
executed the Modification Agreement.
The servicer may handle Escalated Cases received from HSC, MHA Help, a borrower, an
authorized advisor, Treasury, other federal agencies or elected officials (each, a Requestor).
3.2.1 Staffing Requirements
Servicers must designate one or more persons to comply with the requirements of this Section
and to handle inquiries that rise to the level of an Escalated Case. Servicers must be sufficiently
staffed to manage the escalation case load in accordance with the timing requirements of Section
3.3. The staff handling the Escalated Cases must be trained on the servicer’s case escalation
procedures, knowledgeable about MHA Program guidelines and possess the necessary authority
to achieve a case resolution in accordance with this Section. For those servicers that are required
to report data to the Program Administrator via the HAMP Monthly Servicer Survey, the staff
handling the Escalated Cases must be servicer personnel that are independent from the servicer
personnel that made the initial MHA eligibility determination on the loan.
3.2.2 Accessibility
The staff handling Escalated Cases must be accessible directly by phone and e-mail (may be a
group e-mail address). Servicers are reminded that they must follow applicable laws to protect the
privacy of borrowers. In addition, the staff must have access to all pertinent borrower
documentation and information in the servicing system and/or mortgage file and be capable of
sending and receiving documentation and information that will support the resolution of an
Escalated Case.
3.2.3 Single Point of Contact
If the servicer receives an Escalated Case that is associated with a borrower who has been
assigned a relationship manager in accordance with Section 4, the servicer must involve the
relationship manager as appropriate and necessary to resolve the Escalated Case. Following
resolution, the relationship manager must have access to all documentation related to the
Escalated Case. Treasury does not intend for the existence of a relationship manager to alter the
existing responsibilities of the servicer in managing and resolving Escalated Cases.
3.3 Escalation Resolution Process
The servicer must review each Escalated Case received from a Requestor against the
information and documentation in the servicing system and/or mortgage file and data reported to
the HAMP Reporting Tool to determine the accuracy of the inquiry and reach a resolution. As
necessary, the servicer’s evaluation will include, but is not limited to, review or recalculation of the
HAMP modification waterfalls and NPV testing.
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603.3.1 Timing
Escalated Cases should be date stamped upon receipt. Within five business days following
receipt of an Escalated Case from a Requestor, the servicer must acknowledge the inquiry in
writing via e-mail, fax or mail and must provide the Requestor and, as applicable, the borrower:
 A case reference name or number;
 A date by which the servicer will resolve the Escalated Case and provide a response
(Resolution Date), which may not exceed 30 calendar days from the later of (i) the date
the inquiry was received or (ii) if authorizations (including any necessary third party
authorizations) are required, the date on which the authorizations are received by the
servicer); and
 A toll-free escalation contact phone number at the servicer.
If the servicer fails to comply with the requirement to resolve the Escalated Case by the
Resolution Date, the servicer must send an updated status in writing to the Requestor and, as
applicable, the borrower, on the Resolution Date and every 15 calendar days thereafter until the
Escalated Case is resolved. The updates must be sent via e-mail, fax or mail.
3.3.2 Authorization
Servicers must ensure that a borrower’s information, including personally identifiable Information
(PII), is not disclosed to any individual or entity, including the Requestor, unless the borrower and
co-borrower have each authorized release of such information in writing. By signing an RMA or
Hardship Affidavit, a borrower and co-borrower each authorizes the servicer to disclose PII and
the terms of any MHA agreements to (i) representatives of Treasury; (ii) personnel of the Program
Administrator and MHA-C; (iii) any investor, insurer, guarantor or servicer that owns, insures,
guarantees or services the first lien or subordinate lien mortgage loan(s) for the borrower; (iv)
companies that perform support services in conjunction with MHA; and (v) any HUD-certified
housing counselor. If a servicer is in receipt of an RMA or Hardship Affidavit signed by the
borrower(s), no additional release is needed to disclose such information to MHA Help or HSC.
3.3.3 Case Resolution
An Escalated Case is considered to be resolved when the inquiry has been reviewed in
accordance with the applicable MHA program guidelines and the servicer:
 Determines whether there should be any change in the original determination and
identifies a proposed resolution that corresponds to one of the Resolution Categories
listed below;
 Documents whether any change in the original determination is required and the
proposed resolution in the servicing system and/or mortgage file including the date the
servicer reached the proposed resolution and the basis for the resolution;
 Within 10 business days of identifying the proposed resolution, communicates in writing
to the Requestor and, as applicable, the borrower, the determination of whether any
change in the original determination is appropriate and the proposed resolution and next
steps (if applicable, this communication may be a TPP Notice, Modification Agreement or
short sale or deed-in-lieu agreement); and
 Takes the first action to implement the resolution.
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
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HAMP/2MP Trial
HAMP/2MP Permanent Modification
Alternative Modification
Payment/Forbearance Plan
Borrower Current
Loan Payoff
Short Sale/Deed in Lieu
Foreclosure Initiated/Pending
Foreclosure Completed
Action Not Allowed – Litigation/Bankruptcy in Process
Non-MHA Issue(s)
If the case was referred by HSC or MHA Help, the servicer may not consider the case resolved
unless HSC or MHA Help concurs with the proposed resolution, with evidence of this concurrence
retained in the servicing file. When seeking the concurrence of HSC or MHA Help, servicers
must provide documentation supporting the basis for the proposed resolution.
3.3.4 Substantially Similar Cases
Servicers are not required to review a case, and a case will not be deemed an Escalated Case,
when the substance of the inquiry pertains to the same borrower and loan and is substantially
similar to a previously resolved Escalated Case. When a case is referred by HSC or MHA Help
and the servicer has determined that the referral constitutes a substantially similar case, HSC or
MHA Help must concur with the determination with evidence of this concurrence retained in the
servicing file. When seeking the concurrence of HSC or MHA Help, servicers must provide
documentation supporting the basis for the determination. The servicer must document in the
servicing system and/or mortgage file the decision not to review a substantially similar case.
3.3.5 Ongoing Litigation
If, in the course of determining the accuracy of an Escalated Case, a servicer is advised by its
legal counsel that the servicer cannot provide any information regarding the issues related to the
Escalated Case due to pending litigation involving the servicer and the borrower, the servicer
should resolve the Escalated Case by communicating this in writing to the Requestor and
providing the Requestor with the relevant litigation case name, case number and date and court
of filing. The Resolution Category “Action not Allowed – Litigation/Bankruptcy in Process” should
be used. If the Requestor is HSC or MHA Help, the servicer still must obtain concurrence from
either HSC or MHA Help before the case can be resolved. Notwithstanding the foregoing, where
the only litigation is a judicial foreclosure where claims disputing issues of fact have not been
raised, the servicer must provide information regarding the issues related to the Escalated Case
and respond fully to the Requestor.
3.4 Protections Against Unnecessary Foreclosure
3.4.1 Suspension of Referral to Foreclosure
A servicer may not refer any loan to foreclosure or conduct a scheduled foreclosure sale (except
as provided under Section 3.4.2) unless and until the servicer has resolved the Escalated Case in
accordance with Section 3.3.
3.4.2 Suspension of Scheduled Foreclosure Sale
When a servicer receives an Escalated Case from a Requestor after a foreclosure sale date has
been scheduled and the Escalated Case 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
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62necessary to resolve the Escalated Case. Servicers are not required to suspend a foreclosure
sale when an Escalated Case is received after the Deadline.
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.
If an Escalated Case is pending at the time of a foreclosure sale, the servicer must still resolve
the Escalated Case in accordance with Section 3.3 and, when appropriate, the servicer will be
required to take corrective action even if the foreclosure sale has taken place.
4 Single Point of Contact
Servicers that have a Program Participation Cap of $75,000,000 or more as of May 18, 2011,
must establish and implement a process through which borrowers who potentially are eligible for
HAMP (Tier 1 or Tier 2), UP, or HAFA are assigned a relationship manager to serve as the
borrower’s single point of contact. The same relationship manager is responsible for managing
the borrower relationship throughout the entire delinquency or imminent default resolution
process, including any home retention and non-foreclosure liquidation options, and, if the loan is
subsequently referred to foreclosure, must be available to respond to borrower inquiries regarding
the status of the foreclosure.
Each such servicer must assign a relationship manager to a delinquent borrower or a borrower
who requests consideration under imminent default immediately upon the successful
establishment of Right Party Contact with the borrower and (i) the determination by the servicer of
a borrower’s potential eligibility for HAMP, UP or HAFA based on information disclosed during the
initial telephone interview or other oral communication, or (ii) upon receipt from the borrower of
any completed or partially completed Initial Package (as defined in Section 4 of Chapter II) signed
by the borrower. Borrowers who are in the process of being evaluated for HAMP, UP, or HAFA,
who are in a TPP or an UP forbearance plan or who have executed a SSA or DIL Agreement as
of September 1, 2011 must be assigned a relationship manager no later than November 1, 2011.
Borrowers who were determined to be ineligible for HAMP, UP or HAFA prior to September 1,
2011 and who request re-evaluation after that date must be assigned a relationship manager if
the servicer determines that there has been a significant change in the borrower’s circumstances
that merits a re-evaluation in accordance with Section 1.2 of Chapter II.
In all of these circumstances, the relationship manager must provide written notice to the
borrower within five business days of the assignment, which notice must include a toll-free
telephone number and at least one other method by which the borrower may directly contact the
relationship manager, as well as the preferred means by which documents should be delivered by
the borrower to the servicer. The relationship manager must attempt to initiate contact with the
borrower promptly following the assignment. All references in this Section 4 to communication
with the borrower include communication with the borrower’s authorized advisor as instructed by
the borrower. If the servicer has already established a single point of contact for a borrower, that
single point of contact may continue to serve as the relationship manager without the need for
additional notification to the borrower, provided all other requirements of this Section 4 are met.
In the event that it is necessary to change the relationship manager (e.g., relationship manager
no longer employed, work responsibilities change, on extended leave), the servicer must provide
written notification of the changed contact information to the borrower within five business days of
assignment of the new relationship manager.
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634.1 Relationship Manager Responsibilities
The relationship manager has primary responsibility for coordinating the servicer’s actions to
resolve the borrower’s delinquency or imminent default until all available home retention and non-
foreclosure liquidation options have been exhausted and for communicating those actions to the
borrower. When other servicer personnel with specialized expertise communicate with the
borrower, the servicer must ensure that the relationship manager is aware of the content and
outcome of those communications. The relationship manager’s responsibilities include, without
limitation:
 Communicating the options available to the borrower for resolving the delinquency or
imminent default, the actions the borrower must take to be considered for those options,
the timing requirements for completion of actions by the borrower and the servicer, and
the status of the servicer’s evaluation of the borrower for those options;
 Coordinating maintenance and tracking of documents provided by the borrower so that
the borrower generally will not be required to resubmit the same documented information,
and that the borrower is notified promptly of the need for additional information;
 Being knowledgeable about the borrower’s situation and current status in the entire
delinquency or imminent default resolution process, including any home retention or non-
foreclosure liquidation options; and
 Coordinating with other personnel (in-house or third-party) responsible for ensuring that a
borrower who is not eligible for MHA programs is considered for other available
proprietary loss mitigation options.
Additionally, the relationship manager must be aware of MHA program requirements and
timelines and must coordinate with the borrower and in-house and third-party servicer personnel
to promote compliance with those requirements and timelines.
If a loan is referred to foreclosure and loss mitigation options have been exhausted so that the
relationship manager is no longer actively managing the relationship with the borrower, the
relationship manager must continue to be available to respond to borrower inquiries related to the
borrower’s foreclosure status. If a foreclosure sale is scheduled, the servicer must, prior to
completion of the written pre-foreclosure certification required under Section 3.4.3 of Chapter II,
obtain from the relationship manager affirmation via email or other writing that, to the best of the
relationship manager’s knowledge, all available loss mitigation alternatives have been exhausted
and a non-foreclosure outcome could not be reached.
In order to carry out these responsibilities the relationship manager must have:
 Access to current information and personnel (in-house or third-party) sufficient to timely
and accurately inform the borrower of the current status of the workout, liquidation and/or
foreclosure activities; and
 Direct and immediate access to personnel with the authority to stop foreclosure
proceedings when necessary or appropriate to comply with MHA program guidelines, and
an obligation to communicate immediately to such personnel any information received by
the relationship manager indicating that it may be necessary or appropriate to stop a
foreclosure proceeding as required by MHA program guidelines.
If the borrower notifies the relationship manager that he or she wishes to escalate a complaint or
dispute an ineligibility decision, the relationship manager must assist the borrower in contacting
the servicer’s staff handling Escalated Cases and, upon request, must provide contact
information for MHA Help.
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64The term “relationship manager” means an employee of the servicer that manages the
relationship with the borrower during the delinquency or imminent default resolution process and
is not intended to imply that such individual has personnel management responsibilities.
4.2 Staffing and Caseload Management
Each servicer must develop and implement a policy that identifies experience and training
requirements for the relationship manager position and the appropriate caseload levels to ensure
that relationship managers can successfully fulfill the requirements of this Section 4. The policy
must include a provision for providing effective relationship management to borrowers whose
primary language is other than English. The relationship manager must be supported by an
organizational structure that is capable of carrying out the relationship manager’s responsibilities
described in this Section 4 when the relationship manager is not available.
5 Federally Declared Disasters
When Federal Emergency Management Agency (FEMA) declares an area to be impacted by a
federally declared disaster (FDD) either as set forth at http://www.fema.gov/disasters or as
confirmed by the local FEMA office, servicers should consider the impact of the FDD on
borrowers that are being evaluated for or participating in the MHA Program.
5.1 Flexibility with Borrowers in FEMA Designated FDD Areas
With respect to loans secured by properties in an area designated by FEMA as being covered by
an FDD or borrowers whose principal place of business or employment is located in such an
area, Treasury encourages servicers to extend MHA time periods so borrowers are not
disadvantaged due to additional FDD related hardships. Such time periods include, but are not
limited to,
• Time periods during which servicers solicit borrowers, attempt to establish “Right Party
Contact”, require delivery of documents from a borrower (e.g., including, but not limited
to, documentation required for an initial evaluation or underwriting or the borrower’s
delivery of an executed permanent modification agreement, or deed-in-lieu agreement or
require initiation of case escalations);
• Forbearance time periods scheduled to expire under UP; and
• Dates for closing a short sale or deed-in-lieu transaction under the HAFA or termination
of pre-approved HAFA marketing periods.
Treasury also encourages servicers to be accommodating to borrowers and to exercise good
business judgment when considering the validity of existing property valuations for use in
evaluating a borrower for HAMP, 2MP or HAFA. If it is clear to a servicer that the continued
validity of a property valuation is questionable, servicers should consider obtaining a new
valuation once the servicer has a better understanding of the property’s situation. During this
period of evaluation, servicers are strongly encouraged to grant the borrower forbearance for a
period beyond 90 days following the date of the FDD disaster declaration, as necessary.
5.2 Forbearance until Servicer makes Contact with Borrower in an FDD
Area
Notwithstanding the forgoing, for a borrower (i) who has requested or is being considered for, or
has received, assistance under MHA, (ii) whose loan is secured by a property located in an area
designated by FEMA as being covered by an FDD and (iii) who misses one or more mortgage
payments (after the occurrence of the FDD), the servicer cannot, for 90 days following the FDD
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65designation, take any action that would adversely affect the borrower's eligibility for, or good
standing under, MHA until and unless there is contact with the borrower to establish whether the
borrower requires FDD forbearance.
5.3 Forbearance Plans under HAMP and 2MP
Borrowers not able to make monthly mortgage payments due to a FDD who are (1) in the process
of being evaluated for a TPP under HAMP or a trial period under 2MP; (2) in a TPP under HAMP
or a trial period under 2MP; or (3) in a permanent modification under either HAMP or 2MP should
be considered for an FDD forbearance plan in accordance with industry practice and investor
guidelines.
Servicers should, in accordance with investor guidelines, offer a minimum of three months of
forbearance to a borrower with a loan that is eligible for HAMP who requests forbearance as a
result of an FDD and meets the following minimum eligibility criteria:
 The borrower suffered a hardship, such as a loss of employment, reduction in income or
increase in expenses, or has been displaced from his or her home and cannot make the
monthly mortgage payments as a result of an FDD.
 The location of either (i) the property securing the loan; or (ii) the borrower’s principal
place of business or employment is located in an area designated by FEMA as being
covered by the FDD as set forth at http://www.fema.gov/disasters or as confirmed by the
local FEMA office.
Servicers should follow their standard practices with respect to the evaluation of borrowers and
documentation of FDD forbearance plans.
5.3.1 FDD Forbearance Plan during a HAMP Trial Period Plan or 2MP Trial Period
In accordance with investor guidelines, any borrower in a HAMP TPP or 2MP trial period who
suffers an FDD-related hardship, meets the eligibility criteria set forth in Section 5.2 for FDD and
requests a forbearance should be offered an FDD forbearance plan. Likewise, servicers should
offer an FDD forbearance plan to borrowers who are in the process of being evaluated for a
HAMP TPP or 2MP trial period at the time they are impacted by an FDD if they request an FDD
forbearance plan and meet the eligibility criteria, even if their HAMP TPP or 2MP trial period has
not started. A borrower is not obligated to accept an FDD forbearance plan, and a servicer may
not require that a borrower in a HAMP TPP or 2MP trial period convert to an FDD forbearance
plan.
5.3.1.1 Cancellation of HAMP Trial Period Plan or 2MP Trial Period
If a borrower who is currently in a HAMP TPP or 2MP trial period accepts the FDD forbearance
plan, the HAMP TPP or 2MP trial period must be cancelled and, for HAMP, the servicer must
submit a Trial Fallout reason code indicating that the borrower is entering an FDD forbearance
plan. For a cancelled 2MP trial period, no action is required in the HAMP Reporting Tool when
cancelling a 2MP trial period.
5.3.1.2 Exiting the Forbearance Plan after Cancellation of TPP or 2MP Trial Period

If, at the conclusion of the FDD forbearance plan, the borrower (i) has not sustained a
change in financial circumstance and (ii) has the ability to pay trial period payments that
were not paid during the forbearance period, the servicer should start a new HAMP TPP
or 2MP trial period, as applicable, with the same monthly trial period payments as the
cancelled HAMP TPP or 2MP trial period without collecting updated documents or re-
evaluating. To assist the borrower in paying the trial period payments that were not paid
during the forbearance period, the servicer may use any combination of borrower
contributions, forbearance, forgiveness or term extension. However, in no event may the
servicer advance funds for the borrower and establish and require payments on a
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66separate repayment plan for the trial period payments unpaid during the FDD
forbearance period. For a 2MP trial period, servicers must confirm prior to placing the
borrower into a new 2MP trial period that the borrower has a corresponding permanent
HAMP-modified first lien, or a HAMP TPP, if applicable, and that the HAMP-modified first
lien is in good standing.
 If, at the conclusion of the FDD forbearance plan, the borrower (i) has not sustained a
change in financial circumstance, (ii) does not have ability to pay trial period payments
that were not paid during the forbearance period or investor guidelines prohibit the
forbearance, forgiveness or term extension for such amounts and (iii) the FDD
forbearance period was 90 days or less, the servicer may, subject to investor guidance,
re-evaluate borrower eligibility without obtaining updated documents. The servicer must
re-run the waterfall evaluation to establish the terms for the new HAMP TPP or 2MP trial
period, including the monthly trial period payment, and conduct a net present value
assessment and start a new HAMP TPP or 2MP trial period if the borrower qualifies. For
a 2MP trial period, servicers must confirm at the time of re-evaluation for a new 2MP trial
period that the borrower has a corresponding permanent HAMP-modified first lien, or a
HAMP TPP, if applicable, and that the HAMP-modified first lien is in good standing.
 If, at the conclusion of the FDD forbearance plan, the borrower (i) has not sustained a
change in financial circumstance, (ii) does not have ability to pay trial period payments
that were not paid during the forbearance period (or investor guidelines prohibit the
forbearance, forgiveness or term extension for such amounts) and (iii) the FDD
forbearance period was more than 90 days, the servicer should re-evaluate the
borrower’s eligibility using updated documents and start a new HAMP TPP or 2MP trial
period if he or she qualifies. For a 2MP trial period, servicers must confirm at the time of
re-evaluation for a new 2MP trial period that the borrower has a corresponding
permanent HAMP-modified first lien, or a HAMP TPP, if applicable, and that the HAMP-
modified first lien is in good standing.
 If, at the conclusion of the forbearance plan, the borrower has had a change in financial
circumstance, servicers should re-evaluate the borrower using updated documents and
start a new HAMP TPP or 2MP trial period if the borrower qualifies. For a 2MP trial
period, servicers must confirm at the time of re-evaluation for a new 2MP trial period that
the borrower has a corresponding permanent HAMP-modified first lien, or a HAMP TPP,
if applicable, and that the HAMP-modified first lien is in good standing.
In all instances, any HAMP TPP or 2MP trial period commenced after the forbearance plan will be
considered a new HAMP TPP or 2MP trial period wherein the borrower will be expected to make
three monthly trial period payments prior to converting to a permanent modification. Borrowers
that were previously in a HAMP TPP and, after the forbearance plan, do not qualify for HAMP
Tier 1 or HAMP Tier 2, must be evaluated for other available options in accordance with current
guidance.
The servicer must provide notice to the borrower in writing that, if the FDD forbearance plan is
accepted, his or her HAMP TPP or 2MP trial period will be cancelled and any new HAMP TPP or
2MP trial period (whether on the terms of the cancelled HAMP TPP or 2MP trial period or on
terms determined in connection with a new re-evaluation) will require receipt of three trial period
payments under the new HAMP TPP or 2MP trial period. As servicers may not know at the time
of the offer of the FDD forbearance plan whether a borrower will be re-evaluated, servicers
should advise borrowers that they may be required to submit updated documentation to be re-
evaluated and the borrower may not qualify for HAMP or 2MP, as applicable, at the time of
reconsideration if the borrower’s financial circumstances have changed.
Chapter I: MHA
MHA Handbook v4.3
675.3.2 FDD Forbearance Plan Following Modification
As described above, a borrower in a permanent modification under either HAMP or 2MP who
suffers an FDD-related hardship and meets the eligibility criteria for an FDD forbearance plan
should be offered an FDD forbearance plan. During the FDD forbearance plan period, if possible,
servicers should not submit Official Monthly Reporting (OMR) transactions to the HAMP
Reporting Tool. As a result, no borrower, servicer or investor incentives dependent upon the
receipt of an OMR will be disbursed during the FDD forbearance plan period. At the end of the
FDD forbearance plan, servicers should resume reporting OMR transactions to the HAMP
Reporting Tool to reflect the status of the permanent modification at that point in time. At such
time, in accordance with existing protocol, the HAMP Reporting Tool will disburse incentives as
appropriate, depending on the status of the permanent modification which would include
incentives earned during the forbearance plan period.
If it is not possible for a servicer to hold OMRs for modified loans in FDD forbearance plans, the
servicer should report the OMR accurately to reflect the borrower’s payment activity. If the
borrower loses good standing in the HAMP Reporting Tool prior to being able to resume
payments, but the borrower has not had a change of financial circumstance and is able to pay the
mortgage payments that were not paid during the forbearance period (through borrower
contributions, forbearance, forgiveness or term extension), the servicer should reinstate the
permanent modification in the HAMP Reporting Tool as active. In this instance, the servicer
should resume reporting OMRs on such modifications.
In order for the borrower to continue in any permanent modification and for resumption of
distribution of incentives at the end of the FDD forbearance plan, the loan cannot have lost good
standing. Accordingly, any mortgage payments that were not paid during the forbearance period
must be paid by the borrower or forborne, forgiven or added to the end of the loan’s term as a
term extension, such that the borrower retains good standing. Servicers may establish a
separate repayment plan for the unpaid mortgage payments from the FDD forbearance period.
The repayment plan must be based on the borrower’s income and ability to pay both the modified
mortgage payment and the unpaid mortgage payments from the FDD forbearance period.
If paying in accordance with the FDD forbearance plan would result in the borrower becoming
three full monthly payments past due, the servicer must inform the borrower in writing at the time
the FDD forbearance plan is offered that by paying in accordance with the plan, the borrower may
lose good standing under HAMP or 2MP unless the borrower is able to pay all mortgage payment
amounts that were unpaid during the forbearance period. If this is not possible, the servicer
should evaluate the borrower for any other loss mitigation alternative, including for a HAMP loan,
HAMP Tier 2 (if the loss of good standing was on a permanent modification under HAMP Tier 1)
prior to commencing foreclosure proceedings.
5.4 Foreclosure and a FDD Forbearance Plan
A servicer may not refer a loan to foreclosure or conduct a scheduled foreclosure sale in the
following circumstances:
• If the borrower requested consideration and is being evaluated for an FDD forbearance
plan; or
• During an initial FDD forbearance plan or any extension thereof.
5.5 Late Fees
Late charges may accrue while the servicer is determining borrower eligibility for an FDD
forbearance plan and during the forbearance period. However, a servicer must not collect late
charges from the borrower during the forbearance period.
Chapter I: MHA
MHA Handbook v4.3
68CHAPTER II: HOME AFFORDABLE MODIFICATION PROGRAM
Chapter II
Home Affordable Modification
Program (HAMP)
Chapter I: MHA
MHA Handbook v4.3
691 Eligibility
1.1 HAMP Eligibility Criteria
1.1.1 Basic HAMP Eligibility Criteria
First lien
The mortgage loan is a first lien mortgage loan originated on or before
January 1, 2009. This includes mortgages secured by:
 Cooperative shares,
 Condominium units, and
 Manufactured housing (the first lien mortgage loan must be
secured by the manufactured home and the land, both of which
must be classified as real property under applicable state law).
The reference to “originated on or before” refers to the date on which the
loan was first originated (i.e., not the date a loan may have been modified
previously).
Not condemned The property securing the mortgage loan has not been condemned or is
not in such poor physical condition that it is not habitable even if not
condemned. Servicers must retain in the mortgage file and/or servicing
system all evidence related to the basis for the determination of an
uninhabitable condition.
Financial
hardship A borrower has documented a financial hardship and represented that he
or she does not have sufficient liquid assets to make the monthly
mortgage payments.
Escrow account
established The borrower agrees to set up an escrow account for taxes and hazard
and flood insurance prior to the beginning of the trial period if one does
not currently exist.
Unpaid principal
balance limits The current unpaid principal balance (UPB) of the mortgage loan prior to
capitalization is not greater than:
 1 Unit $729,750
 2 Units $934,200
 3 Units $1,129,250
 4 Units $1,403,400
Single family
property The mortgage loan is secured by a one- to four-unit property.
Program cut-off
date The borrower has submitted an Initial Package (as defined in Section 4)
on or before December 31, 2015 and the Modification Effective Date is on
or before September 30, 2016.
Chapter II: HAMP
MHA Handbook v4.3
701.1.2 HAMP Tier 1 Eligibility Criteria
A loan is eligible for Home Affordable Modification Program (HAMP) Tier 1 if the servicer verifies
that, in addition to satisfaction of the basic eligibility criteria for HAMP described in Section 1.1.1,
all of the following criteria are met:
Not previously
HAMP modified The mortgage loan has not been previously modified under HAMP. For
more information, refer to the Continued Eligibility due to Change in
Circumstances guidance in Section 1.2.
Delinquent or in
imminent default The mortgage loan is delinquent or default is reasonably foreseeable.
Loans currently in foreclosure are eligible.
Owner-occupied The mortgage loan is secured by a single family property that is occupied
by the borrower as his or her principal residence. Additionally, a loan may
be considered for HAMP Tier 1 if:
Minimum
monthly
mortgage
payment ratio
 The property was originally non-owner occupied, but the servicer
can verify that it is currently the borrower’s principal residence.
 The borrower is displaced (e.g., military deployment, permanent
change of station orders, out of area job transfer or foreign
service assignment) but was occupying the property as his or her
principal residence immediately prior to his or her displacement,
intends to occupy the property as his or her principal residence in
the future and the borrower does not own any other single family
real estate (evidence may include but is not limited to: a credit
report, property title search, military change of station orders or
employer letter).
The borrower’s monthly mortgage payment (including principal, interest,
taxes, insurance, and when applicable, association fees, existing escrow
shortages) prior to the modification is greater than 31 percent of the
borrower’s verified monthly gross income.
1.1.3 HAMP Tier 2 Eligibility
A mortgage loan may be eligible for HAMP Tier 2 2 if (i) the borrower satisfies the basic eligibility
criteria for HAMP set forth in Section 1.1.1; (ii) the loan did not satisfy the criteria in Section 1.1.2
for HAMP Tier 1 or, upon evaluation for a HAMP Tier 1 modification, failed to receive a
modification under HAMP Tier 1; and (iii) the following criteria are met, if applicable:
Owner occupied
or rental
property
The mortgage loan is secured by a single family property that is either


Owner-occupied as set forth in 1.1.2; or
A rental property (defined below).
A “rental property” is a property that is used by the borrower for rental
purposes only and not occupied by the borrower, whether as a principal
residence, second home, vacation home or otherwise.
A mortgage loan secured by a rental property may be considered for a
HAMP Tier 2 modification if the rental property is
2
For clarity, a HAMP modification in existence prior to June 1, 2012, is referred to as “HAMP Tier 1” and
references to “HAMP Tier 1” refers both to HAMP modifications completed under guidance in effect prior to
June 1, 2012 and HAMP Tier 1 modifications completed after June 1, 2012.
Chapter II: HAMP
MHA Handbook v4.3
71(i) occupied by a tenant as their principal residence;
(ii) occupied by the borrower’s legal dependent, parent or
grandparent as his or her principal residence without rent being
charged or collected; or
(iii) vacant and available for rent.
A property that is or will be offered for rent on a seasonal basis and is
available for use by the borrower when it is not rented is not eligible for a
HAMP modification. If the mortgage loan is secured by a rental property,
the borrower must make the certifications described in Section 4.1.1.2.
Previous HAMP
Tier 2 TPP or
permanent
modification A mortgage loan has not received a permanent modification or TPP under
HAMP Tier 2.
Previous HAMP
Tier 1
permanent
modification A mortgage loan on which the borrower lost good standing under a HAMP
Tier 1 permanent modification, and, at the time of evaluation for HAMP
Tier 2, at least 12 months have passed since the HAMP Tier 1
Modification Effective Date or the borrower has experienced a change in
circumstances.
Previous HAMP
Tier 1 TPP A mortgage loan that received a HAMP Tier 1 TPP but on which the
borrower defaulted.
Previous
consideration for
HAMP A mortgage loan was evaluated for HAMP prior to June 1, 2012 and was
not offered a HAMP Tier 1 TPP as long as the non-approval was not due
to borrower fraud or non-compliance with section 1481 of Dodd-Frank Act
(as defined in Section 1.7 of Chapter I).
Delinquent or
imminent default A mortgage loan is delinquent (which, in the case of a mortgage loan
secured by a rental property, means two or more payments are due and
unpaid) or default is reasonably foreseeable; provided, however, that a
mortgage loan secured by a rental property that is not in default even if
default is reasonably foreseeable is not eligible for HAMP Tier 2. Loans
currently in foreclosure are eligible.
1.2 Additional Factors Impacting HAMP Eligibility
Certain factors impacting HAMP eligibility are described below:
No waiver of
legal rights The servicer may not require a borrower to waive legal rights as a condition
of HAMP.
No up-front
contribution The servicer may not require a borrower to make any “good faith” payment or
up-front cash contribution to be considered for HAMP.
Active litigation A borrower in active litigation regarding the mortgage loan is eligible for
HAMP.
Chapter II: HAMP
MHA Handbook v4.3
72Redemption
rights following
foreclosure Whether a borrower can qualify for HAMP if the mortgage loan is currently in
the redemption period after a foreclosure sale is dependent on the amount of
time remaining in the redemption period and other legal requirements of the
state in which the property is located. When permissible under state law, the
servicer should, on a case-by-case basis, seek investor approval prior to
evaluating a borrower for HAMP during a redemption period.
Balloon loans Balloon loans that have matured or that mature during the HAMP trial period
are eligible for HAMP subject to investor guidelines.
Borrower is a
natural person The borrower must be a natural person. Mortgage loans made to, or secured
by properties owned by, corporations, partnerships, limited liability companies
or other business entities) are not eligible for assistance under HAMP.
Inter vivos
Revocable
Trust A loan secured by a property owned by an inter vivos revocable trust is
eligible for HAMP as long as the borrower:
 Is a trustee of the trust and
 Is a primary beneficiary of the trust,
In the case of such a property where the borrower, as trustee, occupies the
property as his or her principal residence. , the loan must first be considered
for HAMP Tier 1 and, if the loan is determined to not qualify for HAMP Tier 1,
must then be considered for HAMP Tier 2.
Where the borrower, as trustee, does not occupy the property as his or her
principal residence, the loan may only be considered for HAMP Tier 2.
The borrower must sign all HAMP-related documents in both an individual
capacity and as trustee of the inter vivos revocable trust.
Subordinate
Liens HAMP does not require extinguishment of subordinate lien instruments as a
condition of modification. However, servicers must follow investor guidance
to ensure first lien priority.
HUD
Counseling 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 permanent
modification, even if they recently completed counseling. See Section 6.7 for
more information.
Charged off
loans Servicers are not required to consider for HAMP a mortgage loan that has
been charged off if the servicer has released the borrower from liability for the
debt and provided a copy of such release to the borrower. The servicer must
retain in the mortgage file and/or servicing system all evidence related to the
charge off including the release of liability.
Chapter II: HAMP
MHA Handbook v4.3
73Continued
Eligibility due
to Change in
Circumstance
A mortgage loan that (i) has been evaluated for HAMP, but does not meet the
minimum eligibility criteria described in Sections 1.1.1 and, either 1.1.2 or
1.1.3, or (ii) meets the applicable minimum eligibility criteria, but is not
qualified for HAMP by virtue of a negative NPV test result, excessive
forbearance or other financial reason may be reconsidered for HAMP at a
future time if the borrower experiences a change in circumstance.
Notwithstanding the foregoing, a borrower who defaults after making one or
more HAMP Tier 1 trial period payment(s) and later requests HAMP
consideration must be considered for a HAMP Tier 2 TPP on the same
mortgage loan even if the borrower does not demonstrate a change in
circumstance.
If a borrower receives a HAMP Tier 2 TPP or permanent modification and
defaults or loses good standing thereon, respectively, the borrower cannot be
considered under this section for a HAMP Tier 1 modification with respect to
the same mortgage loan.
A borrower that rejects a modification offer for a mortgage loan under HAMP
(Tier 1 and/or Tier 2) is not eligible for future consideration under either Tier
for the same mortgage loan unless the borrower experiences a change in
circumstance. However, the mortgage loan must be considered for other
available loss mitigation options, including HAFA. A borrower may reject a
modification offer (i) orally or in writing; (ii) by failing to make the first TPP
payment; (iii) by failing to execute and return the permanent modification
agreement after having made all required TPP payments.
A borrower who fails to make the first trial period payment under a TPP for
either HAMP Tier 1 or Tier 2 is deemed to have not accepted the offer. The
loan may be considered again for HAMP if, at some future time, the borrower
experiences a change in circumstance.
Servicers must have an internal written policy which defines what the servicer
considers a change in circumstance and outlines when a borrower will be re-
evaluated for HAMP. Servicers may limit the number of reconsideration
requests in accordance with its written policy and must apply the policy
consistently for all similarly situated borrowers. The servicer’s policy must
allow a borrower to request re-evaluation based on a change in circumstance
at least one time. Notwithstanding the foregoing, a mortgage loan that was
determined ineligible for a HAMP Tier 1 modification prior to June 1, 2012,
absent a change of circumstances, must, upon receipt of a request from a
borrower on or after June 1, 2012, be evaluated for HAMP Tier 2 without
need to show a change in circumstances.
A servicer may reconsider a borrower multiple times if the borrower claims
multiple changes in circumstance. In addition to the policy regarding
consideration of a borrower with a change in circumstance, servicers must
continue to allow a borrower to request re-evaluations based on disputed
NPV inputs in accordance with the guidance set forth in Section 2.3.2.1. Any
determination regarding whether a change of circumstance has or has not
occurred must be communicated to the borrower and documented in the
mortgage file and/or servicing system.
Chapter II: HAMP
MHA Handbook v4.3
74Loss of
Eligibility
HAMP Tier 1 - A servicer’s obligation to offer the borrower a HAMP Tier 1
modification is considered satisfied, and the borrower is not eligible for a
subsequent offer under HAMP Tier 1, if (i) the borrower received a HAMP
Tier 1 or HAMP Tier 2 modification of the loan and lost good standing (as
defined in Section 9.4); or (ii) the borrower received a HAMP Tier 1 or HAMP
Tier 2 TPP offer on such loan and, after making the first trial period payment,
failed to make one or more of the remaining trial period payments by the last
day of the month in which it was due; or (iii) for TPPs with effective dates
prior to June 1, 2010, the borrower failed to provide all required documents
by the end of the trial period. In cases where a borrower defaults after
making one or more HAMP Tier 1 trial period payment(s), the borrower must,
upon requesting HAMP consideration, be considered for a HAMP Tier 2 trial
period plan on the same mortgage loan even if the borrower does not
demonstrate a change in circumstance.
HAMP Tier 2 - A servicer’s obligation to offer the borrower a HAMP Tier 2
modification on a loan is considered satisfied, and the borrower is not eligible
for a subsequent offer under HAMP Tier 2 on such loan, if (i) the borrower
received a HAMP Tier 2 modification on such loan and lost good standing (as
defined in Section 9.4); or (ii) the borrower received a HAMP Tier 2 TPP offer
on such loan and, after making the first TPP payment, failed to make one or
more of the remaining trial period payments by the last day of the month in
which it was due. If a borrower fails to make the initial TPP payment under
HAMP Tier 2, they may be considered for another HAMP Tier 2 TPP on the
same loan if they can demonstrate a change of circumstance.
Borrower
Incorrectly
Denied HAMP If a servicer determines, as the result of an escalation, through the servicer’s
internal quality control process or through an MHA-C review, that a borrower
was incorrectly denied a TPP, the servicer must offer the borrower a TPP
based on the status of the borrower and the loan at the time of the servicer’s
initial evaluation and must, to the greatest extent possible, put the borrower in
the same position as he or she would have been in if the servicer had offered
the borrower the TPP in accordance with MHA guidelines. A servicer may
not back date the TPP to satisfy this requirement. If a servicer is unable to
put a borrower who occupies the property as a principal residence in the
same position as he or she would have been if the servicer had offered the
borrower a HAMP Tier 1 TPP in accordance with MHA guidelines, the
servicer must first consider the borrower for a HAMP Tier 2. In all cases, the
servicer must document the reasons for any inability to put such borrower
into a HAMP TPP in the mortgage file and/or servicing system.
Co-Borrower An occupying co-borrower may be considered for HAMP if a quitclaim deed
evidencing that the non-occupying co-borrower has relinquished all rights to
the property has been recorded. Servicers must refer to investor guidance to
determine which parties are required to sign the HAMP documents.
Chapter II: HAMP
MHA Handbook v4.3
75Limit on
Multiple
Modifications
An individual, as a borrower or co-borrower, may receive permanent HAMP
modifications on mortgages secured by up to six properties. Specifically, a
borrower may receive one permanent modification under either HAMP Tier 1
or HAMP Tier 2 on the loan secured by his or her owner-occupied property.
If the borrower loses good standing on a HAMP Tier 1 modification, the
borrower may also receive a HAMP Tier 2 permanent modification of the
same loan. Furthermore, a borrower may receive one HAMP Tier 2
permanent modification with respect to each of five other properties that meet
the HAMP Tier 2 eligibility requirements. A borrower is considered to have
received a permanent modification with respect to a property if he or she is
obligated as a borrower or co-borrower on the note or mortgage secured by
that property. A borrower may not be reconsidered for HAMP Tier 1 after
failing a HAMP Tier 1 TPP or losing good standing on a HAMP Tier 1 or
HAMP Tier 2 permanent modification on the subject property. Therefore, if a
husband and wife modify under HAMP Tier 1 the loan secured by their
principal residence and the husband and son are co-borrowers on a loan
secured by the son’s principal residence, the servicer may only offer a
modification under HAMP Tier 2 for the loan secured by the son’s principal
residence (assuming such loan meets all other requirements for HAMP Tier
2).
A borrower who fails a HAMP Tier 2 TPP or loses good standing under a
HAMP Tier 2 permanent modification (whether on a principal residence or a
rental property) is not eligible for another Tier 2 modification on the same
mortgage loan.
Non-Occupant
Co-Borrower
Income of both a borrower and co-borrower must be used for HAMP
evaluation, even if the co-borrower is not an occupant of the property. Non-
occupant borrowers are subject to the limit on the number of modifications
each borrower may receive even if the co-borrower owns other properties
that secure other mortgage loans that would be eligible for HAMP
consideration.
If a servicer can discern, from review of the RMA or other income
documentation, that a non-occupant co-borrower has a loan on his or her
principal residence or loan(s) on rental properties, the servicer should inform
the co-borrower of the modification limit. In the event of a failure of a TPP on
a loan where a non-occupant co-borrower’s income was used, the co-
borrower remains eligible for HAMP consideration in accordance with the
modification limit.
Unemployed
Borrower
A borrower who is currently receiving unemployment benefits should be
evaluated for UP as set forth in Chapter III.
If a borrower who is eligible for UP declines an offer for an UP forbearance
plan, the servicer is not required to offer the borrower a modification under
HAMP; however, the servicer may (but is not required to), in accordance with
investor guidelines, offer to evaluate the borrower for HAMP.
Chapter II: HAMP
MHA Handbook v4.3
76Borrowers in
Bankruptcy Borrowers in active Chapter 7 or Chapter 13 bankruptcy cases are eligible for
HAMP at the servicer’s discretion in accordance with investor guidelines, but
servicers are not required to solicit these borrowers proactively for HAMP.
Notwithstanding the foregoing, such borrowers must be considered for HAMP
if the borrower, borrower’s counsel or bankruptcy trustee submits a request to
the servicer. However, if the borrower is also unemployed, the servicer must
evaluate the borrower for UP, subject to any required bankruptcy court
approvals, before evaluating the borrower for HAMP.
Borrowers
Discharged
from Chapter 7
Bankruptcy Borrowers who have received a Chapter 7 bankruptcy discharge in a case
involving the first lien mortgage who did not reaffirm the mortgage debt under
applicable law are eligible for HAMP.
First Lien
Home Equity
Loans and
Lines of Credit Servicers must consider for modification all first lien home equity loans
(HELs) and home equity lines of credit (HELOCs) that meet the basic HAMP
eligibility criteria so long as the servicer has the:
 Capability within its servicing system and/or mortgage file to clearly
identify the loan as a first lien; and
 Ability to establish an escrow for the loan as required by this
Handbook.
Servicers that have servicing systems that do not provide the required
functionality are strongly encouraged to complete system enhancements that
will allow modification of first lien HELs and HELOCs.
If a servicer utilizes a separate servicing system for first lien mortgage loans
other than HELs and HELOCs and would convert the HEL or HELOC to the
first lien mortgage system in order to establish an escrow account, then the
servicer may wait until the borrower successfully completes the TPP before
establishing an escrow account. However, the servicer is still required to
include the escrow amount in the trial period payment.
Any modification of a first lien HELOC must result in a modified loan that is a
fixed rate, fully amortizing loan that does not permit the borrower to draw any
further amounts from the line of credit.
Loan-to-value
(LTV) Ratio Servicers may not refuse to evaluate an otherwise eligible borrower based on
the LTV ratio of the mortgage loan except to the extent it impacts the NPV
evaluation or the principal forbearance limit described in Section 6.6.
Failure to file
Tax Return A borrower is eligible for HAMP even if the borrower did not file a tax return,
as long as the borrower documents the reason for not filing. The servicer
must review and approve the borrower’s rationale. A borrower is not eligible
for HAMP if the borrower was required to file a tax return but failed to do so.
2 Communication and Borrower Notices
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
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77HAMP 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 state HFAs with respect to HHF, or 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.
A model written authorization form is available on www.HMPadmin.com . When provided by or on
behalf of a borrower, this model authorization, subject to applicable law, must be accepted by
servicers in lieu of any servicer-specific form(s). Servicers are encouraged to continue to accept
other counseling agency, non-profit organization, legal services or other proprietary authorization
forms that are substantially similar in content to the model authorization (provided such form
complies with any applicable federal, state, or local privacy law, rule or regulation). The
authorization must be completed and executed by the borrower and, if applicable, the co-
borrower. Servicers may refuse to accept an authorization because it is not signed by all
borrowers on the related note.
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 third party to act on behalf of
the borrower are 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 e-mail address provided by the borrower
when the borrower has agreed to receive communications electronically. Such e-mail address
must be documented in the servicing system and/or mortgage file.
2.2 Borrower Solicitation
Each servicer must have clear and comprehensive internal written policies for identification and
solicitation of borrowers who are potentially eligible 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,
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
Not condemned or not in such poor physical condition that the property is not habitable
even if not condemned.
Loan originated on or before January 1, 2009,
UPB does not exceed HAMP limits, and
Not previously modified under HAMP.
Subject to the foregoing, 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 I, except that
services are not required to solicit borrowers who, prior to June 1, 2012




Were two or more payments delinquent and did not occupy the mortgage property as a
principal residence;
Were two or more payments delinquent and were already solicited in accordance with the
“Reasonable Effort” requirement;
Were evaluated and determined to be ineligible for HAMP; or
Had a payment default on a TPP or lost good standing on a HAMP Tier 1 permanent
modification.
Though proactive solicitation is not required, on and after June 1, 2012 and subject to the
guidelines set forth in Section 1.2 under “Continued Eligibility due to Change in Circumstances,”
all of these classes of borrowers may request consideration for HAMP and, upon submission of,
an Initial Package or, at a minimum, an RMA, must be evaluated for the appropriate HAMP Tier
based on their eligibility. Furthermore, if any of such class of borrower cures the original
delinquency that occasioned an initial solicitation or evaluation for HAMP and such borrower
subsequently re-defaults, servicer must re-screen the borrower for HAMP as appropriate and in
accordance with the guidance below in Section 2.2.1.
Solicitation is for general assistance under the MHA Program and need not be specific as to
HAMP Tier 1 or Tier 2. Solicitation must include written communication clearly describing HAMP.
Use of the form of solicitation letter available on www.HMPadmin.com shall satisfy this
requirement. The servicer’s HAMP solicitation may also identify other options potentially available
to help the borrower cure the delinquency and retain homeownership.
Servicers may, but are not required to, proactively solicit for HAMP Tier 2 a borrower who
defaulted on a HAMP Tier 1 TPP prior to June 1, 2012. However, upon receipt of, at a minimum,
an RMA or an Initial Package, a servicer must consider for HAMP Tier 2 any borrower who
previously defaulted on a HAMP Tier 1 TPP.
With respect to borrowers who default on a HAMP Tier 1 TPP after June 1, 2012 servicers may,
but are not required to, automatically evaluate such borrowers for HAMP Tier 2 prior to sending a
Non-Approval Notice. In conducting an evaluation within 30 calendar days of a HAMP Tier 1
payment default, the servicer should use the same income and debt documentation and property
value assessments used in the HAMP Tier 1 evaluation, unless the servicer has reason to believe
that the income and debt documentation or property value assessments are no longer accurate
(e.g., the borrower is now unemployed). If the HAMP Tier 2 evaluation takes place more than 30
days after the date of the HAMP Tier 1 TPP default, the servicer must obtain updated income and
debt information and property value assessments.
If the HAMP Tier 1 TPP was based on an analysis done on or after June 1, 2012, the servicer will
use the results of the original NPV analysis in making the decision to offer HAMP Tier 2. If the
HAMP Tier 1 TPP was based on an analysis prior to June 1, 2012 , the servicer must complete a
new NPV analysis using the borrower income documentation used in the HAMP Tier 1
evaluation. In either case, in addition to satisfying the guidelines for a HAMP Tier 2 set forth
herein, the NPV analysis must indicate that the borrower is eligible for HAMP Tier 2 and the
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79servicer must ensure that the borrower’s HAMP Tier 2 post-modification monthly principal and
interest payment must be at least ten percent less than the monthly payment that was payable
under the HAMP Tier 1 TPP.
Even if a servicer elects to automatically evaluate a borrower as described herein, whenever
there is a payment default on a HAMP Tier 1 TPP, the servicer must first complete a re-
calculation of the trial period payment in accordance with Section 5.
Servicers may, but are not required to, proactively solicit a borrower for HAMP Tier 2 if the
borrower has lost good standing under a HAMP Tier 1 permanent modification. Borrowers who
have lost good standing are eligible for reconsideration for HAMP Tier 2 on the earlier of (i) 12
months after the HAMP Tier 1 modification effective date or (ii) when the borrower has
experienced a change of circumstance.
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:
 The servicer made a minimum of four telephone calls to the last known phone numbers
of record, at different times of the day; and
 The servicer sent two written notices to the last address of record by sending one letter
via certified/express mail or via overnight delivery service (such as Federal Express or
UPS) with return receipt/delivery confirmation and one letter via regular mail.
When a borrower who has never had a TPP or permanent modification cures a delinquency but
later re-defaults by missing two or more payments, this is considered a new delinquency and the
servicer must re-screen the borrower for HAMP eligibility and satisfy the Reasonable Effort
requirement again. The Reasonable Effort requirement may be waived for borrowers who exhibit
a pattern of repetitive delinquency and reinstatement if the servicer has established a written
policy to identify such borrowers and applies that policy consistently for all similarly situated
borrowers. Evidence of such pattern must be documented in the mortgage file and/or servicing
system.
For borrowers who received a Chapter 7 bankruptcy discharge in a case involving the first lien
mortgage who did not reaffirm their first lien mortgage debt, a servicer is deemed to have made a
Reasonable Effort to solicit the borrower after sending two written notices to the last address of
record in addition to the two required written notices described above. The servicer is not required
to make the four telephone calls described above.
Any contact with eligible borrowers, whether by telephone, mail or otherwise, must:
 Advise borrowers that they may be eligible for HAMP;
 Clearly describe the Initial Package that the borrower is required to submit pursuant to
the requirements outlined in Section 4, and state what other information the servicer
needs to complete the HAMP analysis;
 Provide a toll-free telephone number through which the borrower can reach a servicer
representative; and
 Identify any unique requirements the servicer may have established for submission of an
Initial Package received later than 30 calendar days prior to a scheduled foreclosure sale
date.
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80All contact attempts must be documented in the servicing file. If the servicer has documentation
evidencing that it satisfied 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:
 Describe the income evidence required to be evaluated for HAMP;
 Provide the RMA (or other proprietary financial information form substantially similar in
content to the RMA and, if necessary, a Hardship Affidavit);
 Depending on the servicer’s Verification Policy, either, (i) include an Internal Revenue
Service (IRS) Form 4506T-EZ (or IRS Form 4506-T, if necessary) or (ii) if such form is
not required by the servicer’s Verification Policy, describe the requirement that the
borrower deliver a copy of the borrower’s tax return for the most recent tax year, including
all applicable schedules and forms; servicers may request, but not require, the
submission of both an IRS Form and a complete tax return for the most recent tax year;
and
 Include the form of the Dodd-Frank Certification.
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, at a minimum the RMA,
the servicer must resend the Initial Package communication and may elect to follow the
Incomplete Information Notice requirements set forth below in Section 2.3.3. Again, 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 second communication. If the borrower does not
respond by providing an Initial Package or, at a minimum, an RMA within the required time period
set forth in the second communication, the servicer may determine the borrower to be currently
ineligible for HAMP.
If Right Party Contact is established, but the borrower submits an RMA, but not the other
components of the Initial Package within the required time 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 currently ineligible for HAMP.
Servicers must acknowledge receipt of the Initial Package within 10 business days per the
requirements in Section 4.5 and determine within 30 calendar days whether to respond with an
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81Incomplete 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). Such response must be sent within
10 business days of such determination.
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 possession, the servicer determines that the
borrower does not meet the applicable eligibility criteria for HAMP as described in Section 1 or
the servicer determines that the borrower’s estimated monthly mortgage payment as described in
Section 6.1.2 is below (a) 20 percent of the borrower’s gross monthly income or (b) the low end of
the Servicer’s DTI Range for HAMP eligibility, whichever is lower. If Right Party Contact is
established and the borrower does not disclose financial information over the phone, but
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, per the requirements
outlined in Section 2.2.2. A servicer may not base its determination that a borrower does not
meet basic HAMP eligibility on the fact that the borrower chose not to provide financials orally.
Such decision must be documented in the applicable mortgage file and/or servicing system.
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 required financial documentation. A borrower has
been “evaluated” for HAMP using verified information on or after June 1, 2010 if the borrower has
submitted an RMA or 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 reason for default or explanation of 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.
When a servicer has had contact with a borrower in connection with HAMP but is not in receipt of
the Initial Package by December 31, 2015 or has determined it will be unable to complete a
permanent modification such that the Modification Effective Date is on or before September 30,
2016, the servicer must send a Borrower Notice informing the borrower that he or she cannot be
considered for HAMP and provide information about other loss mitigation options.
2.3.1 Content of Borrower Notices
The content of the Borrower Notices will vary depending on 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.
If a borrower or an authorized representative submits a written request related to principal
reduction, the servicer must, within 30 calendar days of receipt of the request, respond in writing.
The response, when applicable, must include the reason(s) that principal reduction was not
offered to the borrower.
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82The 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 www.HMPadmin.com. Use of the
model clauses is optional; however, they illustrate a level of specificity that is deemed to be in
compliance with language requirements of this Handbook.
All Borrower Notices must include the following detail:
 A toll-free number that allows the borrowers to reach a representative of the servicer
capable of providing specific details about the contents of the Borrower Notice and
reasons for a non-approval determination.
 The Homeowners HOPETM Hotline Number (888-995-HOPE), with an explanation that
the borrower can seek assistance at no charge from HUD-approved housing counselors
and can request assistance in understanding the Borrower Notice by asking for MHA
Help.
 Any information, disclosures or notices required by the borrower’s mortgage documents
and applicable federal, state and local law.
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:
 Include a description of other foreclosure alternatives for which the borrower may be
eligible, if any, including but not limited to other modification programs, short sale and/or
deed in lieu of foreclosure.
 Identify the steps the borrower must take in order to be considered for those options.
 If the servicer has already approved the borrower for a foreclosure alternative program,
information necessary to participate in or complete the alternative should be included.
 All Non-Approval Notices must include an e-mail address and mailing address for
communicating with the servicer if the borrower wishes to dispute the reasons for a non-
approval determination and to submit written evidence.
Whenever a non-government foreclosure prevention option is discussed, the notice should be
clear that the borrower was considered but is not eligible for HAMP.
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 the reason for non-approval is (1) loan
originated after January 1, 2009, not a first lien loan, or current unpaid principal balance above
the program limit, (2) loan paid off, or charged off and borrower released from liability for
repayment, (3) property condemned or has more than four dwelling units, (4) loan subject to
involuntary transfer to a non-participant, (5) offer not accepted by borrower / request withdrawn,
(6) the loan was previously modified under HAMP Tier 2, or (7) the borrower was not a natural
person or permitted trust.
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.
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83In addition, effective February 1, 2011, if the servicer has performed an NPV evaluation,
regardless of whether a negative NPV result was the actual reason for the non-approval of the
borrower, the Non-Approval Notice must list the NPV Data Input Fields and Values used in the
NPV evaluation as listed in Exhibit A. The purpose of providing this information is to allow a
borrower who is ineligible because the transaction is NPV negative the opportunity to correct
values that may impact the analysis of the borrower’s eligibility. Because the NPV Data Input
Fields and Values must be disclosed to a borrower declined for HAMP whenever an NPV
evaluation is performed, regardless of whether a negative NPV result was the reason for non-
approval, servicers are encouraged to assess all other borrower eligibility criteria before
performing an NPV evaluation in order to reduce instances in which NPV Data Input Fields and
Values must be disclosed when a negative NPV result is not the reason for non-approval. In fact,
if NPV Data Input Fields and Values are included in a Non-Approval Notice but the reason the for
the non-approval was not a negative NPV result, the Non-Approval Notice must include a
statement that the borrower is not entitled to dispute the NPV Data Input Fields and Values.
The offer of either a HAMP Tier 1 or HAMP Tier 2 TPP is considered a HAMP offer. Therefore, if
a borrower is evaluated, but determined to be ineligible for HAMP Tier 1, and is offered a HAMP
Tier 2 TPP, the servicer should not send a Non-Approval Notice and is not required to send NPV
Data Input Fields and Values to a borrower. However, if a borrower files an Escalated Case and
requests the NPV Input Fields and Values, the servicer must provide them.
If a loan is evaluated for both HAMP Tier 1 and HAMP Tier 2 but not approved for either Tier, the
servicer must send a Non-Approval Notice that refers to the HAMP Tier 2 denial reason and, if an
NPV evaluation was completed, must include all NPV Data Input Fields, even if a negative NPV
result was not the reason for denial.
A Non-Approval Notice must be mailed no later than 10 business days following the date of the
servicer’s determination that a TPP or a permanent HAMP modification will not be offered. Such
determination must be made within 30 calendar days of receipt of the Initial Package.
2.3.2.1 Non-Approval Notice-Negative NPV Result
When the borrower is not approved for a TPP because the transaction is NPV negative, the
borrower will have 30 calendar days from the date of the Non-Approval Notice to submit written
evidence to the servicer that one or more of the NPV input values is inaccurate. If the borrower
wishes to dispute more than one NPV input, the written evidence for each input being disputed
must be provided to the servicer at the same time. If the borrower identifies material inaccuracies
in the NPV input values, the servicer may not conduct a foreclosure sale until the inaccuracies
are reconciled.
If the evidence submitted by the borrower is valid and material to the NPV outcome, the servicer
must perform the NPV calculation with the corrected input values as set forth in Section 7.7.
Following the re-evaluation, the servicer must provide the updated NPV outcome and input
values to the borrower.
2.3.2.1.1 Dispute of Multiple NPV Data Inputs including the Property Value Input
In the event a borrower disputes the property value input as well as other NPV Data Input Fields
and Values, the servicer may elect to validate the other disputed NPV Data Input Fields and
Values and perform the NPV re-evaluation changing any other validated inputs while holding the
original property value constant. If this re-evaluation renders a positive NPV result, the servicer
may approve the borrower for a TPP without performing an NPV re-evaluation with a new
property value or obtaining a new appraisal. If this re-evaluation renders a negative NPV result,
the servicer must perform the preliminary NPV re-evaluation with the borrower’s estimate of
property value.
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842.3.2.1.2 Insufficient Evidence
If a borrower submits written evidence for some but not all of the NPV inputs that the borrower is
disputing, the servicer must notify the borrower promptly that all the necessary written evidence
has not been received and that it must be received within the 30 calendar day period provided for
borrower disputes of the Non-Approval Notice. This notification need not be in writing but must
be documented in the servicing system and/or mortgage file and be provided promptly and in
sufficient time for the borrower to comply with the 30 calendar day requirement. If in the servicer’s
business judgment the borrower is actively attempting to locate the missing evidence, the servicer
may extend the 30 calendar day dispute period to allow the borrower time to send the missing
evidence to the servicer. If the borrower fails to provide the remaining items within the original
30 calendar day period (as extended pursuant to the foregoing sentence, as applicable), the
servicer may perform the NPV evaluation with the corrected input values that are supported by
the borrower’s submitted evidence.
2.3.2.1.3 NPV Evaluation Assistance from MHA Help
Prior to disputing a non-approval with the servicer, the borrower may, as directed in the Non-
Approval Notice, request assistance from MHA Help to evaluate whether the borrower’s disputed
NPV inputs would change the NPV outcome from negative to positive. Using the disputed inputs
provided by the borrower, MHA Help will conduct a preliminary NPV re-evaluation and will provide
the borrower with the printed NPV result, which should be given by the borrower to the servicer
when requesting a formal re-evaluation by the servicer. If the borrower is represented by a trusted
advisor, that advisor may also request the preliminary NPV re-evaluation from HSC.
A borrower or trusted advisor acting on behalf of a borrower may only request one NPV re-
evaluation from MHA Help or HSC prior to contacting the servicer. If the re-evaluation performed
by the servicer, MHA Help or HSC using the disputed borrower inputs returns a negative NPV
result, the borrower is not eligible for additional appeals of other inputs.
Although the borrower may seek assistance from MHA Help or HSC, the borrower must still make
its written request to the servicer within 30 calendar days from the date of the Non-Approval
Notice.
2.3.2.1.4 Servicer Not Required to Perform NPV Re-Evaluation
The servicer is not required to perform an NPV re-evaluation when a negative NPV result was not
the reason for the non-approval, even if the NPV Data Input Fields and Values were included in
the Non-Approval Notice. Furthermore, a servicer is not required to perform an NPV re-
evaluation if the servicer, in conjunction with its review of the corrected NPV Data Input Fields
and Values, determines that the borrower does not qualify for a TPP on a basis other than a
negative NPV result (e.g., for HAMP Tier 1) if corrected income documentation submitted by the
borrower shows that the borrower’s current monthly mortgage payment is less than 31 percent of
the borrower’s monthly gross income). In such a case, the servicer must send a written
communication to the borrower explaining that, after a review of the corrected NPV inputs
submitted by the borrower, the borrower continues to be ineligible for HAMP and the reason for
the non-approval. Following receipt of the communication, the borrower is not entitled to an
additional 30 calendar day dispute period. Finally, if a borrower is evaluated for HAMP Tier 1 and
HAMP Tier 2, receives a HAMP Tier 2 modification and executes a HAMP Modification
Agreement, the servicer is not required to perform an NPV re-evaluation to determine whether the
borrower should have received a HAMP Tier 1 modification.
2.3.2.2 Non-Approval Notice—Payment Default During the Trial Period
This Non-Approval Notice informs the borrower that he or she failed to make one or more trial
period payments in a timely manner and, as a result, the borrower has defaulted on the TPP.
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85If, as a result of an evaluation conducted within 30 calendar days of a HAMP Tier 1 trial period
payment default, a borrower is determined to be eligible for a HAMP Tier 2 TPP, rather than
sending a Non-Approval Notice for default under the HAMP Tier 1 TPP, the servicer should send
written notice to the borrower that, due to the payment default on the HAMP Tier 1 TPP, the
servicer is offering the borrower a new HAMP Tier 2 TPP. If a servicer elects not to automatically
evaluate borrowers for HAMP Tier 2 following a HAMP Tier 1 TPP default, the required Non-
Approval Notice must describe all available loss mitigation options, including HAMP Tier 2, if
applicable.
2.3.2.3 Non-Approval Notice—Loan Paid Off or Reinstated
This Non-Approval Notice confirms that the subject loan was paid off or reinstated and must
provide the payoff or reinstatement date. If the loan was reinstated this notice must include a
statement that the borrower may contact the servicer to request reconsideration under HAMP if
they experience a subsequent financial hardship.
2.3.2.4 Non-Approval Notice—Withdrawal of Request or Non-Acceptance of Offer
This Non-Approval Notice confirms that the borrower either withdrew the request for
consideration for a TPP or HAMP modification or did not accept a TPP or a HAMP modification
offer. Failure to make the first trial period payment in a timely manner is considered non-
acceptance of the TPP.
2.3.2.5 Non-Approval Notice Not Cleared Alerts
If the borrower is in an active TPP and the servicer has independently determined based on its
own evaluation of an Alert received pursuant to Section 2.8 of Chapter I that a borrower has
misrepresented his or her identity, or that the property is not owner occupied, if required by
program rules, or the borrower or non-borrower occupant was convicted of a Disqualifying Crime,
the servicer must, within ten (10) business days of the due date specified on the Alert notice
provided to the borrower pursuant to Section 2.8.6 of Chapter I, or any extension thereof, send a
Non-Approval Notice consistent with the following:
 If the Alert was based on owner-occupancy and owner-occupancy is required by program
rules, the servicer will use language affiliated with reason code - Property Not Owner
Occupied, which must be similar to the following – “We are unable to offer you a Home
Affordable Modification because you do not live in the property as your primary
residence.”
 If the Alert was based on borrower identity, the servicer will use language affiliated with
reason code - Ineligible Borrower, which must be similar to the following – “We are
unable to offer you a Home Affordable Modification because we have been unable to
verify your identity.”
 If the Alert was based on potential Dodd-Frank Certification noncompliance by the
borrower the servicer will use language affiliated with reason code - Dodd-Frank
Certification such as that provided in the model clauses provided in Exhibit A.
In addition, the notice must explain that the borrower is not eligible to participate in any other
EESA funded housing program.
2.3.3 Incomplete Information Notice
If the servicer receives an RMA but not a complete Initial Package or receives a complete Initial
Package but needs additional documentation from the borrower to verify the borrower’s eligibility
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86and 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 the 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 currently 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.
2.3.4 Disputed Property Value Input
When a borrower is not approved for a TPP or permanent modification because the transaction is
NPV negative and the borrower believes that the property value input used by the servicer in the
NPV evaluation differs from the fair market value of the property as of the NPV Date, the
borrower may request an NPV re-evaluation. The borrower must, within 30 calendar days from
the date of the Non-Approval Notice, provide the servicer with a recent estimate of the property
value and a reasonable basis for that estimate at the same time that the borrower provides
evidence of all other disputed NPV value inputs. Upon receipt of the written request, the servicer
must perform a preliminary NPV re-evaluation using the borrower’s estimate of property value
(along with any other material disputed inputs). As long as the borrower provides any publicly
available evidence supporting the borrower’s estimate of property value (e.g., sales prices from
newspaper for sales of comparable homes, estimates from internet valuation sources, etc.), the
servicer must utilize the borrower’s evidence and perform the preliminary NPV re-evaluation
required, notwithstanding the servicer’s disagreement with the borrower’s estimate.
If the preliminary re-evaluation performed by the servicer (or MHA Help or HSC as noted above)
produces a positive NPV result, the servicer must offer the borrower the opportunity to request an
appraisal of the property; provided, however, if the servicer is willing to accept as accurate the
borrower’s estimate of the property value based on the borrower’s submitted evidence, the
servicer, subject to investor guidelines, is not required to offer the borrower the opportunity to
obtain an appraisal. If an appraisal is obtained, the appraisal will establish the fair market value of
the property as of the NPV Date and will be utilized to complete the final NPV re-evaluation. The
borrower must, no later than 15 calendar days from the date of notification that the preliminary
NPV result is positive, remit a $200 deposit against the full cost of the appraisal in a manner
acceptable to the servicer. The balance of the actual appraisal cost will be added to the
borrower’s total arrearage under the loan. If capitalization of the appraisal cost is prohibited by
investor guidelines or applicable law, the servicer is permitted to collect the costs from the
borrower in equal installments over a period of no less than 24 months and no greater than 60
months in addition to the borrower’s modified monthly mortgage payment. Servicers must
maintain evidence of the prohibition in the servicing system and/or mortgage file and provide it to
HSC or MHA Help as necessary to resolve any Escalated Case.The appraisal must be completed
in accordance with the Uniform Standards of Professional Appraisal Practice by an appraiser that
is not affiliated with the servicer and is licensed in the state where the property is located.
Servicers are not required to obtain a new appraisal if the original NPV property value input was
established by an appraisal performed in accordance with the standards listed above. The
servicer must provide a copy of such appraisal to the borrower.
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87Upon receipt of the appraisal, the servicer must perform a final NPV re-evaluation using the
appraised value and any other NPV input values materially disputed by the borrower. The
servicer must provide the final NPV outcome and input values to the borrower and, based on the
NPV outcome, proceed in accordance with program guidelines. If the re-evaluation with the new
appraised value results in a trial period plan, the balance of the actual appraisal cost will be
capitalized in conjunction with the permanent modification.
2.3.5 Borrower NPV Calculator
The Borrower NPV Calculator, which can be accessed at Check My NPV.com, allows borrowers
to learn about, interact with and better understand the purpose and role of the NPV model in
HAMP. Borrowers can use the NPV Calculator to evaluate their potential eligibility for HAMP. In
addition, the Borrower NPV Calculator allows borrowers to enter the NPV input values used by
the servicer and provided in the Non-Approval Notice to review the servicer’s NPV evaluation.
These inputs are set forth in the NPV Input Data Fields and Values chart set forth in Exhibit A.
However, because a borrower using the Borrower NPV Calculator may not use exactly the same
data used by the servicer, the Borrower NPV Calculator will only provide an estimated outcome.
3 Protections Against Unnecessary Foreclosure
3.1 Suspension of a Referral to Foreclosure
3.1.1 Certain Circumstances
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; provided, however, if a servicer is evaluating a borrower for HAMP Tier 2
(either automatically or upon a borrower’s request) after the failure of a HAMP Tier 1
TPP, the servicer cannot refer the loan to foreclosure or conduct a scheduled foreclosure
sale until such evaluation is completed and the borrower is determined to be ineligible for
HAMP Tier 2; 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-borrower 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; or
 The servicer has resolved the Escalated Case in accordance with Section 3.3 of Chapter
I; or
 The remaining non-borrower was unable to assume the note and re-apply for HAMP
during the period provided for by the servicer pursuant to Section 8.9.2.
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MHA Handbook v4.3
883.2 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 TPP
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
judgment 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 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 a 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/delivery
confirmation to either 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.
Notwithstanding the foregoing, if a borrower has defaulted on a HAMP Tier 1 TPP or lost good
standing on a HAMP Tier 1 permanent modification, a servicer must suspend a foreclosure sale
as necessary to evaluate a borrower’s loan for HAMP (either if done automatically by the servicer
or if the borrower submits a request prior to the Deadline) if any of the following conditions exist:
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MHA Handbook v4.3
89 the borrower received a HAMP Tier 1 permanent modification of such loan and lost good
standing and either (i) 12 months have passed since the effective date of the permanent
modification or (ii) the borrower has experienced a change of circumstance;
 the borrower defaulted on a HAMP Tier 1 TPP on such loan after making one or more
payments; or
 the borrower was previously evaluated for HAMP Tier 1 on such loan but was
determined to be ineligible.
Upon request from a borrower that received a HAMP Tier 1 TPP but failed to make the first trial
period payment by the last day of the month in which it was due, a servicer must suspend a
foreclosure sale as necessary to re-evaluate the borrower for HAMP if the borrower has
experienced a change in circumstance. A servicer is not required to suspend a foreclosure sale
when a request for HAMP Tier 1 or Tier 2 consideration is received after the Deadline.
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
When a borrower is simultaneously in foreclosure and is either being evaluated for HAMP or is in
a TPP, the servicer must provide the borrower with a written notification that explains, in clear
language, the concurrent modification and foreclosure processes and that states that even
though certain foreclosure activities may continue, the home will not be sold at a foreclosure sale
while the borrower is being considered for HAMP or while the borrower is making payments
under a TPP. For model language for this notification, refer to Exhibit B. Use of the model
language is optional; however, it illustrates the level of specificity that is deemed to be in
compliance with the language requirements of this Handbook.
3.4.2 Foreclosure Attorney/Trustee Communication
Servicers must develop and implement written policies and procedures to provide notification to
their foreclosure attorney/trustee regarding a borrower’s HAMP status, including whether the
borrower is potentially eligible for HAMP (and is subject to Section 2.2), and whether the borrower
is being evaluated for, or is currently in, a TPP. Servicers must ensure that their foreclosure
attorney/trustee adheres to all of the requirements of Section 3.1, Section 3.2 and Section 3.3
with respect to referral to foreclosure, stay of foreclosure actions and suspension of foreclosure
sales.
3.4.3 Certification Prior to Foreclosure Sale
Servicers must develop and implement written procedures applicable to all loans that are
potentially eligible for HAMP (and are subject to Section 2.2) that require the servicer to provide
to the foreclosure attorney/trustee a written certification that (i) one of the circumstances under
Section 3.1 exists, and (ii) all other available loss mitigation alternatives have been exhausted
and a non-foreclosure outcome could not be reached. This certification must be provided no
sooner than seven business days prior to the scheduled foreclosure sale date (the Deadline) or
any extension thereof. In addition, if the servicer is subject to Section 4 of Chapter I, the servicer
must consult the relationship manager and obtain affirmation via email or other writing that, to the
best of the relationship manager’s knowledge, all available loss mitigation alternatives have been
exhausted and a non-foreclosure outcome could not be reached.
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MHA Handbook v4.3
904 Request for Mortgage Assistance
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-borrowers. The Initial Package includes:
 RMA Form, including, for rental properties, the rental property certification (Rental
Property Certification),
 Either (i) IRS Form 4506-T or 4506T-EZ or (ii) a signed copy of the borrower’s tax return
for the most recent tax year, including all applicable schedules and forms (provided that
servicers may not reject an Initial Package that includes either the borrower’s complete
tax return for the most recent tax year or the IRS Form 4506-T or 4506T-EZ),
 Evidence of income, and
 Dodd-Frank Certification (either as part of the RMA form or as a stand alone document).
For all documents required by Treasury (other than for IRS Form 4506-T/4506T-EZ), electronic
submission and signatures are acceptable. Evidence of borrower submission must be provided
by postmark or other independent indicator such as a date and time stamp (electronic or
otherwise).
4.1 Request for Mortgage Assistance (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 the RMA must be
completed and executed by the borrower and, if applicable, any co-borrower. The RMA is
available on www.HMPadmin.com.
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 standalone Hardship Affidavit including a Dodd-Frank Certification and (if
applicable) a Rental Property Certification, which is available on www.HMPadmin.com. Servicers
may also incorporate all of the information on this standalone affidavit into their proprietary forms.
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 Hardship Affidavit and Rental Property Certification
4.1.1.1 Hardship 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 unable to
continue making full mortgage payments and describes one or more of the following types of
hardship:
 A reduction in or loss of income that was supporting the mortgage;
 A change in household financial circumstances;
 A recent or upcoming increase in the monthly mortgage payment;
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91 An increase in other expenses;
 A lack of sufficient cash reserves to maintain payment on the mortgage and cover basic
living expenses at the same time. Cash reserves include assets such as cash, savings,
money market funds, marketable stocks or bonds excluding retirement accounts and
assets that serve as an emergency fund. Reserves are generally considered to be equal
to three times the borrower’s monthly debt payments.
 Excessive monthly debt payments and overextension with creditors, e.g., the borrower
was required to use credit cards, a home equity loan, or other credit to make the
mortgage payment;
 Other reasons for hardship detailed by the borrower.
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.
4.1.1.2 Rental Property Certification
Included in the RMA and the stand alone Hardship Affidavit form is a Rental Property
Certification. Every borrower seeking a modification, on a loan secured by a rental property must
sign and complete the Rental Property Certification. In the Rental Property Certification, the
borrower certifies that (i) he or she intends to rent the property to a tenant or tenants for at least
five years following the Modification Effective Date and that he or she will make reasonable
efforts to rent the property on a year-round basis if the property is or becomes vacant during such
period; (ii) that the property is not his or her secondary residence and he or she has no intent to
use the property as a secondary residence for at least five years following the Modification
Effective Date; and (iii) he or she does not own more than five single family properties in addition
to his or her principal residence; provided, however, that the borrower may at any time occupy the
property as his or her principal residence, permit a legal dependent, parent or grandparent to
occupy the property as such party’s principal residence with no rent charged or collected, or sell
the property.
Servicers are not required to obtain third party verification of the borrower’s Rental Property
Certification when evaluating a borrower for HAMP, unless it is necessary to resolve
inconsistencies with other information provided by the borrower or is required by the investor or
the servicer’s internal underwriting policies. The servicer must use good business judgment in
reconciling any such inconsistencies and, in accordance with Section 5.5, should not modify a
mortgage loan if there is reasonable evidence that the borrower has made false or misleading
statements in connection with a modification request.
If, following the HAMP Tier 2 Modification Effective Date of a mortgage loan secured by a rental
property, it is determined that the borrower misrepresented or is non-compliant with
representations made in the Rental Property Certification, Treasury or its agents may enforce all
available rights and remedies against such borrower. The servicer will be held responsible for
compliance with its obligations under MHA program guidelines, but will not be held responsible
for the borrower’s misrepresentation or non-compliance with his or her Rental Property
Certification.
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-borrower, referred to as
Government Monitoring Data (GMD).
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92Treasury 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 Fair
Housing Act, 42 U.S.C. 3601 et seq., and other applicable fair 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 Fair Housing Act. HUD and Treasury
consider any agreements entered into between servicers and the Program Administrator on
behalf of 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 compliance
with [ECOA], this regulation, or other federal or state statutes 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 Mortgages; 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. 202.5(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.
4.1.2.1 Collection of GMD
Servicers should ensure that their servicing staff and managers understand the importance of
requesting that borrowers being evaluated for HAMP provide GMD and should provide servicing
staff with scripts and other job aids that help them explain to borrowers the importance of
providing this information.
When a borrower completes the RMA or Hardship Affidavit by mail or over the Internet, the
borrower will be able to read the disclosure contained just beneath the Information for
Government Monitoring Purposes section heading, determine whether he or she wishes to
furnish the GMD, and complete the remainder of the Information for Government Monitoring
Purposes section accordingly.
In a face-to-face interview or over the phone, the servicer should first read to the borrower the
disclosure contained just beneath the Information for Government Monitoring Purposes section
heading of the RMA or the Hardship Affidavit, explaining that the federal government requests
this monitoring information in order to monitor compliance with federal statutes that prohibit
lenders from discriminating against borrowers based on the borrower characteristics collected in
GMD. After reading the disclosure to the borrower, the servicer should ask the borrower whether
he or she desires to furnish the information. If the borrower elects to furnish GMD, the servicer
should read the race, ethnicity and sex categories and options from the Information for
Government Monitoring Purposes section, and check the boxes as directed by the borrower.
Written GMD takes precedence over verbal GMD regardless of the date obtained. In addition, if
the borrower has previously provided verbal GMD, but returns the RMA or Hardship Affidavit and
the borrower specifically checks the box that states he or she does not wish to furnish GMD, the
RMA or Hardship Affidavit will supersede the previously provided data. However, if the borrower
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93fails to provide GMD and does not check the box, the servicer should use the information
provided verbally.
4.1.2.2 Borrower Declines to Provide GMD
If a borrower chooses not to provide GMD, or any part of it, the servicer may not refuse to accept
an RMA or Hardship Affidavit. If the borrower completes the RMA or Hardship Affidavit in a face-
to-face setting and chooses not to furnish the GMD, he or she should check or direct the servicer
to check the "I do not wish to furnish this information" box within the Information for Government
Monitoring Purposes section of the RMA or Hardship Affidavit. If the borrower chooses not to
check the box, the servicer should note this fact on the form.
If the borrower completes the RMA or Hardship Affidavit by mail or over the Internet and chooses
not to furnish the data, he or she should check the “I do not wish to furnish this information” box
within the Information for Government Monitoring Purposes section of the RMA or Hardship
Affidavit. If the borrower chooses not to furnish the data or checks the box, the servicer should
indicate in the appropriate spaces within the Information for Government Monitoring Purposes
section that the RMA or Hardship Affidavit was received by mail, telephone, or Internet and note
the fact that the borrower chose not to furnish the GMD.
4.1.2.3 GMD from Observation or Origination
If a borrower declines to provide GMD, the servicer should attempt to provide the information
based on visual observation, information learned from the borrower or surname. The servicer
must note on the form that the information is based on servicer observations. Servicing staff
should be provided with training and job aids (e.g., desk references, scripts and, where feasible,
system prompts) to supply this information based on visual observation or surname.
Alternately, if the servicer has reasonable access to GMD supplied by the borrower at origination
and the borrower(s) remain the same, the servicer is required to provide that information.
4.2 IRS Form 4506-T or 4506T-EZ or Tax Return
Borrowers must provide with the Initial Package either (i) a signed and completed IRS Form
4506-T or 4506T-EZ (Request for Transcript of Tax Return) or (ii) a signed copy of the borrower’s
most recent tax return, including all applicable schedules and forms. As between the IRS Forms,
either form is acceptable, use of the IRS Form 4506T-EZ is encouraged because of its relative
simplicity. Both forms are posted on www.HMPadmin.com. Borrowers can locate and complete
a
version
of
IRS
Form
4506T-EZ
in
either
English
or
Spanish
on
www.MakingHomeAffordable.gov. Servicers must accept and submit the IRS Forms 4506-T and
4506T-EZ completed by the borrower in accordance with IRS requirements as set forth in the
instructions to the form, including all signature and filing requirements. Servicers must submit the
signed form expeditiously to the IRS for processing and may not require borrowers to re-execute
the form prior to its expiration.
The servicer’s Verification Policy may set forth a preference for either the borrower’s complete tax
return for the most recent tax year or the IRS Form 4506-T or 4506T-EZ; however, servicers may
not refuse to accept an Initial Package if the borrower submits the borrower’s complete tax return
for the most recent tax year or the IRS Form 4506-T or 4506T-EZ. Furthermore, a servicer may
request, but not require, a borrower to submit both a complete tax return for the most recent tax
year and the applicable IRS Form.
If the servicer does not receive a signed copy of the borrower’s most recent tax return and the
borrower has self-employment income or rental income or there are any inconsistencies in
borrower-provided information (e.g., information in the RMA) and income documentation, the
servicer must submit the borrower’s Form to the IRS for processing and receive the borrower’s
tax transcript.
Notwithstanding anything in this Section to the contrary, if there are
inconsistencies between borrower-provided information and the income documentation, the
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94servicer may require a borrower to execute an IRS Form 4506-T or 4506T-EZ and utilize the
borrower’s tax transcript to reconcile such inconsistencies.
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.
4.4 Reasonably Foreseeable or Imminent Default for Owner-Occupied
Property
A borrower who is an owner-occupant (as set forth in Section 1.1.2) of a property that is security
for a loan that is current or has only one payment due and unpaid by the end of the month in
which it is due (i.e., a borrower that is less than 60 days delinquent) 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. Such standards may, if consistent with investor
guidelines, include a determination that a borrower is at risk of imminent default and will be
evaluated for a HAMP modification if the borrower is at least 15 days delinquent, has documented
a financial hardship, and has represented that he or she does not have sufficient liquid assets to
make the monthly mortgage payment. The mortgage file and/or servicing system must contain
evidence of this determination.
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.
4.5 Acknowledgment of Initial Package
Within 10 business days 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 e-mail, the servicer may e-mail
the acknowledgment. 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.
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 and if the servicer has sufficient documentation to make
a determination, the servicer must evaluate the borrower’s eligibility for HAMP and either:
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95 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.
If the servicer receives either (i) an RMA but not an Initial Package or (ii) an Initial Package but
needs additional documentation from the borrower to verify the borrower’s eligibility and income,
the servicer must send the borrower an Incomplete Information Notice in accordance with the
guidance set forth in Section 2.3.3.
If the servicer cannot make a timely decision because it does not have documentation required
from a party other than the borrower, such as a taxing authority or home-owners’ association, the
borrower’s relationship manager, where applicable, or other servicer representative must contact
the borrower by mail, email or phone within 30 calendar days of receipt of the Initial Package to
describe the cause of the delay and provide a date, which shall be no more than 30 calendar
days thereafter, by which the servicer expects to complete the evaluation and issue the HAMP
decision. If by that later date, the servicer still has not received necessary third-party
documentation, the servicer must contact the borrower every 30 days with an updated status and
the expected date of resolution until a decision is reached. All such communications must be
documented in the mortgage file and/or servicing system.
4.7 Making Home Affordable Outreach and Borrower Intake Project
All SPA servicers that as of March 1, 2013 subscribed to the Hope Loan Port® (HLP) internet-
based document delivery portal must comply with the terms of this Section 4.7 in addition to any
other applicable requirements in this Handbook.
Participating housing counseling agencies will assist borrowers in assembling and executing the
required elements of an Initial Package; this intake initiative is referred to as the “MHA Outreach
and Borrower Intake Project”. Once the applicable required elements of an Initial Package are
assembled, the housing counseling agency will upload the Initial Package to HLP for electronic
delivery to the servicer. Any Initial Package submitted by a participating housing counseling
agency on a borrower’s behalf pursuant to this Section 4.7 shall, for purposes of MHA guidance,
be deemed to have been submitted by the borrower.
4.7.1 Initial Package Acceptance
HLP will notify the servicer each time an Initial Package has been submitted in conjunction with
the MHA Outreach and Borrower Intake Project, using a unique code (Borrower Intake Code).
Upon receipt of a notification that an Initial Package has been submitted, the servicer must
perform all processes associated with document receipt, borrower communication, and evaluation
within the required timeframes set forth in this Handbook. In addition, within 30 calendar days
from the notification that the servicer has received an Initial Package with a Borrower Intake
Code, the servicer must review the submission and accept or reject the package. This time
period applies to Initial Packages submitted for the first time and to re-submissions of Initial
Packages the servicer has previously rejected as incomplete as part of the MHA Outreach and
Borrower Intake Project. During this review period, the servicer must make the following
determinations:
 It services the loan;
 Either (i) the borrower has not already submitted an Initial Package that includes the
required elements, either directly to the servicer or through another counseling agency or
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96other third party; or (ii) the borrower has already been evaluated for HAMP and, under
the servicer’s policy governing reconsiderations, the borrower can be re-evaluated for
HAMP;
 The borrower meets the basic eligibility criteria for HAMP as defined in Section 1.1.1;
 If a foreclosure sale date has been scheduled, the Initial Package was received no later
than midnight of the seventh business day prior to the date of the foreclosure sale; and
 The Initial Package is complete, as defined by this Handbook.
If all of the conditions listed immediately above are met, the servicer must accept the package
through HLP by using the code used to denote a valid MHA Initial Package. Acceptance through
HLP communicates to the housing counseling agency that the servicer has received all elements
of the Initial Package, although additional documentation may be required before a decision on a
TPP is made by the servicer. Issuance of an acceptance through HLP does not constitute
servicer approval for any MHA option. In addition to the requirements under this Section 4.7,
servicers must still adhere to all other MHA guidance, including, but not limited to, acknowledging
and evaluating borrower documentation for a possible MHA loss mitigation option and assigning a
single point of contact. Upon completion of the underwriting determination, the servicer must
enter the appropriate termination status code into HLP.
4.7.2 Ineligible Package
If, during the 30 day review period described in Section 4.7.1, the servicer determines that (i) it
does not service the applicable loan; (ii) the borrower has already submitted an Initial Package
that includes the required elements (either directly to the servicer, through another housing
counseling agency or other third party); (iii) the borrower has already been evaluated for HAMP
and, under the servicer’s policy governing reconsiderations, the borrower is not eligible for re-
evaluation for HAMP; or (iv) the Initial Package was received after midnight of the seventh
business day prior to a scheduled foreclosure sale, the servicer must enter the appropriate
rejection code into HLP. No further action is required by the servicer on that HLP submission.
Borrowers or housing counseling agencies, on behalf of borrowers, who disagree with the
decision may escalate through the escalation process described in Section 3 of Chapter I of this
Handbook.
4.7.3 Ineligible Borrower
If, during the 30 day review period described in Section 4.7.1, the servicer determines that the
borrower does not meet the basic eligibility criteria for any MHA program as defined in Section
1.1.1, the servicer must enter the appropriate rejection code into HLP and the appropriate Trial
Not Approved/Not Accepted code into the HAMP Reporting Tool. The servicer must also follow
the guidance regarding Non-Approval Notices set forth in Section 2.3.2.
4.7.4 Incomplete Package
If the Initial Package received by the servicer through HLP is not complete or any document
therein has not been executed by the borrower as applicable, the servicer must, within the 30 day
review period described in Section 4.7.1, enter the appropriate rejection code into HLP.
Contemporaneously, the servicer, as appropriate, should send the borrower an “Incomplete
Information Notice” as provided in Section 2.3.3. If the Initial Package is resubmitted through
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97HLP and accepted, the counseling agency that submitted the accepted Initial Package can
receive compensation.
5 Verification
Servicers must develop and adhere to a written policy and procedures (Verification Policy) that
describe the basis on which the servicer will determine a borrower’s monthly gross income (or, in
the case of co-borrowers, the combined monthly gross income). The Verification Policy must:
 Be compliant with the requirements set forth in this Handbook;
 Identify what form of verification the servicer will require for various components of
borrower’s income (which verification cannot be based solely on the borrower’s stated
income);
 Reflect the business judgment employed by the servicer when modifying loans held in its
own portfolio;
 Be consistent with investor guidelines, when applicable; and
 Contain a level of detail similar to the underwriting guidelines published by Freddie Mac
and Fannie Mae.
The Verification Policy must include use of an income calculation worksheet that demonstrates
the analysis, assumptions and calculations used by the servicer to determine monthly gross
income. The completed worksheet, which may be electronic or in hard copy, must be retained in
the servicing system and/or mortgage file and made available to MHA-C upon request. A form of
an income calculation worksheet is available on www.HMPadmin.com. Use of this form by
servicers is optional; however, any alternative form used by the servicer must include a similar
level of detail.
Prior to offering a TPP or sending a Non-Approval Notice to the borrower, servicers must verify a
borrower’s eligibility for HAMP using the documentation provided in the Initial Package and any
other supplemental information provided by the borrower in a timely manner.
In the event a borrower fails a TPP for non-payment of the trial period payment, the servicer
must, prior to issuing a Non-Approval Notice in accordance with Section 2.3.2.2, re-calculate the
borrower’s income to ensure that the trial period payment was accurately determined based on
the income information originally provided by the borrower. This re-calculation of income must be
conducted by an employee not involved in the original income calculation. No new income
information or verification should be included in the re-calculation. Additionally, if the borrower
fails a HAMP Tier 1 TPP for non-payment, this re-calculation must be completed before any
consideration of the borrower for HAMP Tier 2.
If, as a result of the re-calculation, the servicer determines that the borrower’s trial period
payment exceeded by 10 percent or more the correct trial period payment, the servicer must
cancel the initial TPP using the cancellation code number 8 “Offer Not Accepted by Borrower /
Request Withdrawn” and offer the borrower a new TPP with the correct trial period payment. The
new written TPP Notice must include an explanation that the borrower is able to re-start the TPP
with a lower trial period payment based on a re-calculation of income. Should the borrower fail to
remit the new trial period payment on or before the first trial period payment due date, the
servicer must follow the guidelines set forth in Section 8.3. If as a result of the re-calculation the
servicer determines that the borrower’s trial period payment did not exceed by 10 percent or more
the correct trial period payment, the servicer must cancel the TPP in accordance with Section
2.3.2.
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98Servicers are not required to complete the income re-calculation when the borrower’s failure to
make timely trial period payments was the result of a significant change in the borrower’s
circumstances resulting in a reduction of income (e.g., unemployment, divorce). Servicers must
retain evidence in the servicing file documenting these changed circumstances. Such evidence
may include statements made by the borrower as documented in the servicing notes.
When applicable, servicers must complete the re-calculation within 30 calendar days of the trial
period payment default. Until the servicer completes the re-calculation, the servicer shall not
report the TPP default in the HAMP Reporting Tool.
5.1 Evidence of Income
Servicers must request that the borrower provide the income verification documentation listed
below but may, if consistent with investor guidelines and the servicer’s Verification Policy,
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 eligibility
for HAMP is complete and accurate.
The servicer’s Verification Policy should describe:
 Whether the servicer will follow the verification documentation guidelines described in
Section 5.1.11 and, if so, what income documentation will be required for the components
of income described in Section 5.1.11;
 Under what circumstances additional documentation will be required;
 How the servicer will reconcile discrepancies between the RMA, tax documents and
income documentation;
 How the servicer will calculate non-traditional income scenarios such as
underemployment, recent employment, overtime, seasonal or sporadic income; and
 Circumstances under which servicing personnel may exercise business judgment in
calculating the borrower income, and how and where the business judgment is to be
documented for the borrower’s account.
If the income of an individual borrower, co-borrower or non-borrower occupant has previously
been used as the basis for a modification under HAMP Tier 1, that individual may not be
considered for a subsequent modification under HAMP Tier 1 even if the individual’s principal
residence has changed.
If the income of an individual borrower, co-borrower or non-borrower occupant has previously
been used as the basis for six modifications under HAMP Tier 2 that individual may not be
considered for a subsequent modification under HAMP Tier 2.
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.
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995.1.1 Wage or Salary Income
Each wage earning borrower must provide copies of two recent pay stubs, not more than 90
calendar days old at time of submission, indicating year-to-date earnings.
A servicer may accept pay stubs that are not consecutive if, in the business judgment of the
servicer, it is evident that the borrower's income has been accurately established. A servicer may
also accept pay stubs that do not show year-to-date income, if, in its business judgment, and
based on all other documentation, the pay stubs indicate the borrower’s recurring monthly
income.
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.
The Verification Policy should describe how the servicer will:
 Calculate income based on the frequency of payments;
 Make adjustments when it is likely that sources of additional income (bonus,
commissions, etc.) are not likely to continue; and
 Utilize alternative forms of income documentation (IRS Forms 1099, 1040, W-2, and IRS
tax transcripts or letters from employers) when pay stubs are not available or sufficient or
do not show year-to-date income.
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 must include the
borrower’s net profit plus any salary or draw amounts that were paid to the borrower in addition to
making allowable adjustments used in analyzing the tax returns for the business, if applicable, to
decrease gross income (e.g. nonrecurring income) or to increase gross income (e.g. expenses,
depreciation and depletion).
If consistent with the Verification Policy, servicers may require up to four consecutive months of
bank statements as an alternative to obtaining a profit and loss statement or if, following receipt, it
is determined that the information in the profit and loss statement is insufficient.
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. The servicer’s Verification Policy
must describe whether and how the servicer will discount or not consider other earned income
when such income is not likely to continue.
5.1.4 Benefit Income
Benefit income includes, but is not limited to, social security, disability, survivor benefits, pension,
public assistance and adoption assistance. Government benefits granted under the
Supplemental Nutrition Assistance Program (i.e., food stamps) are considered to be a source of
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100income 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 the amount and frequency of
benefit income through either (i) letters, exhibits, a disability policy or benefits statement from the
provider or (ii) evidence of receipt of payment.
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. Alternatively, servicers may
evaluate unemployed borrowers for HAMP and can offer a TPP instead of an UP forbearance
plan if, in the servicer’s business judgment, HAMP is the better loss mitigation option. The
servicer must document in the servicing system and/or mortgage file the reason the option
selected was considered to be the best option for the borrower. See Chapter III, Home Affordable
Unemployment Program. See also Section 5.1.10 (excluding unemployment benefits from gross
income calculations under HAMP). If an unemployed borrower evaluated for HAMP is not offered
a TPP, the servicer must consider the borrower for UP. If an unemployed borrower is offered a
TPP, but requests UP forbearance instead, the servicer may, but is not required to, offer UP.
5.1.6 Rental Income
5.1.6.1 Modification of Loan Secured by Principal Residence
A borrower seeking to modify the mortgage loan on his or her principal residence who receives
rental income from another property 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 available to document rental income because the property was not
previously rented, servicers may accept a current lease agreement and bank statements or
evidence of damage deposits.
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 properties other than the borrower’s principal
residence, the income to be calculated for HAMP purposes 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.
5.1.6.2 Modification of Loan Secured by Rental Property
A borrower seeking to modify the mortgage loan on his or her rental property 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 available to document rental income because the property was not previously rented,
servicers may accept a current lease agreement and bank statements or evidence of damage
deposits. All income from any other rental property owned by the borrower must be documented
and included in the calculation of the borrower’s gross income.
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101The monthly net income or loss on a rental property to be calculated for HAMP Tier 2 purposes
should be 75 percent of the monthly gross rental income (to take into account potential costs
associated with management and vacancy loss), reduced by the post-modification monthly
mortgage payment (i.e., principal, interest, taxes, insurance and association fees, if applicable as
(PITIA) as well as escrow shortages subject to a repayment plan).
 Net rental income is added to the borrower’s monthly gross income from all other
sources.
 Net rental loss from the subject property is applied to the monthly mortgage payment of
the borrower’s principal residence.
If 75 percent of the monthly gross income of a rental property securing the mortgage loan being
evaluated for modification under HAMP Tier 2 is equal to or greater than the pre-modification
PITIA of the rental property, the servicer must verify and document the cause of the borrower’s
hardship as delinquency alone is not considered a hardship.
To be clear, when the Base NPV Model is verifying whether the post-modification DTI is not less
than 10 percent and not greater than 55 percent, the Base NPV Model will utilize the post-
modification net rental income/loss and post-modification housing expense.
5.1.7 Alimony, Separation Maintenance, and Child Support Income
Servicers may not require borrowers to use alimony, separation maintenance or child support
income to qualify for HAMP. However, if the borrower chooses to provide this income, it must be
documented with (i) copies of the divorce decree, separation agreement or other legal written
agreement filed with a court, 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 borrower 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 gross income; provided,
however, the foregoing limitation is not applicable as to rental income from a rental property that
is the security for the loan being evaluated for a HAMP Tier 2 modification. Servicers must
identify the specific sources and amount of a borrower’s passive or non-wage income and may
not assume that a portion of the borrower’s income is passive. Servicers must obtain income
documentation to verify passive or non-wage income when it equals or exceeds 20 percent of the
borrower’s total gross income.
5.1.9 Non-Borrower Household Income
For purposes of this Section, 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 (Tier 1 or Tier 2) qualification must come from a person who resides in the borrower’s
principal residence and supports the borrower’s ability to pay the mortgage on the subject
property. 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 borrower’s principal residence and provides
some support for the household expenses.
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102Servicers 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 household. 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. The servicer must verify the
occupancy of a non-borrower in the same manner it verifies the occupancy of a borrower under
Section 5.3 after obtaining written authorization from the non-borrower to obtain the non-
borrower’s credit report.
5.1.10 Excluded Income
The servicer must not consider the following items when verifying the borrower’s income:
 Income tax refunds;
 Non-borrower non-household income;
 Grants, including mortgage assistance payments;
 Severance payments;
 Unemployment benefits; and
 Payments from Non-MHA Unemployment Assistance programs.
5.1.11 Verification Policy Documentation
Notwithstanding the requirements of Section 5.1, as an alternative to those requirements relating
to verification documentation set forth in Sections 5.1.1 (Wage and Salary), 5.1.2 (Self-
Employment), 5.1.6 (Rental Income) and 5.1.7 (Alimony, Separation Maintenance and Child
Support) and subject to investor requirements, a servicer may elect to include in its Verification
Policy requirements to collect income verification documentation that aligns with verification
documentation relied on when modifying loans held in its own portfolio. If a servicer elects to
collect alternative documentation, the servicer must provide notice thereof to MHA-C in advance
of implementing the alternative documentation requirement(s) and must communicate its MHA
income documentation requirements to borrowers in a publically available manner. In no event
can a servicer’s requirements be more onerous than the documentation requirements set forth in
such Sections. Furthermore, as to such components of income, if the borrower submits
verification documentation described in such Sections rather than the verification documentation
set forth in the servicer’s Verification Policy, the servicer must accept the borrower’s
documentation. In no event may a Verification Policy state that a servicer can rely solely on
borrower’s stated income. Servicers electing to change their verification documentation pursuant
to this Section must still comply with all guidance in such Sections that does not relate solely to
verification documentation.
In addition to the foregoing, servicers electing to change their verification documentation pursuant
to this Section must comply with the following guidelines:
 As required by Section 4.3, all income documentation may not be more than 90 days old
as of the date the documentation is received by the servicer.
 For self-employment income, the servicer cannot require audited financial statements or
require any self-employed borrower to provide more than his or her most recent quarterly
or year-to-date profit and loss statement or, if a profit and loss statement is not required,
more than four consecutive months of bank statements.
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1035.2 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 filed) in lieu of
the RMA and, if applicable, 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).
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 whether 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 must use good business judgment in reconciling the inconsistency.
A servicer must 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. However, if an individual’s income, whether that individual is a borrower, co-
borrower or non-borrower occupant, has previously been used as the basis for a HAMP Tier 1
permanent modification, that individual may not be considered for a subsequent HAMP Tier 1
permanent modification even if the individual’s principal residence has changed.
5.4 Verifying Monthly Gross Expenses
Servicers are not required to verify the borrower’s monthly gross expenses as reported by the
borrower on the RMA.
A servicer should not consider expenses of non-borrower household members when calculating
monthly gross expenses.
5.5 Fraud
Servicers should not modify a mortgage loan if there 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.
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 the 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.
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
encounter 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.
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1046 Underwriting
Servicers must determine the borrower’s eligibility for a modification using information obtained in
the Initial Package and subsequently verified. Servicers are required to notify the borrower of the
eligibility determination within 10 business days of completion of such assessment.
6.1 Monthly Mortgage Payment Ratio
To qualify for HAMP Tier 1, verified income documentation must confirm that the borrower’s
monthly mortgage payment ratio prior to the modification is greater than 31 percent. For HAMP
Tier 1, 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 Tier 1 and the servicer must consider the borrower for HAMP Tier 2.
In the case of HAMP Tier 2, the borrower’s post-modification monthly mortgage payment ratio
(also called a debt-to-income ratio or DTI ratio) must be greater than or equal to ten percent and
less than or equal to 55 percent (Expanded Acceptable DTI Range). Notwithstanding the
foregoing, servicers may select a DTI range suitable for their portfolio (Servicer’s DTI Range),
provided that the low end of the Servicer’s DTI Range must be equal to or greater than ten
percent but not more than 25 percent DTI. The high end must be equal to or greater than 42
percent DTI but not more than 55 percent DTI. Servicers must use the same DTI range for all
loans that they service, whether held in portfolio or serviced for others.
By February 1, 2013, each servicer that elects a range other than the Expanded Acceptable DTI
Range must notify the Program Administrator of the Servicer’s DTI Range. In addition, servicers
must notify the Program Administrator of any change to the Servicer’s DTI Range no later than 15
calendar days prior to the change.
The Expanded Acceptable DTI Range will be used in the calculations of the NPV model
beginning February 1, 2013. The model will be available on the HAMP servicer web portal
accessible at www.HMPadmin.com. Servicers that establish a Servicer’s DTI Range that is
different than the Expanded Acceptable DTI Range and who do not recode the Base NPV Model
will have to determine outside of the Base NPV Model whether a proposed modification falls
within their established DTI range.
In HAMP Tier 2, the DTI ratio is the ratio of the borrower’s modified monthly mortgage payment to
the monthly gross income of all borrowers on the mortgage note. If the borrower is seeking to
modify a mortgage secured by a rental property, the DTI ratio is the ratio of the borrower’s total
housing expense to the monthly gross income of all borrowers on the mortgage note including
any net rental income from the rental property being modified as described in Section 6.2.
To qualify for HAMP Tier 2, verified income documentation must confirm that the borrower’s
monthly mortgage payment ratio prior to the modification is greater than the lowest end of the
Expanded Acceptable DTI Range, or the Servicer’s DTI Range if different. Accordingly, servicers
do not need to complete any modification waterfall or conduct an NPV analysis if, based on
verified income, a borrower’s pre-modification DTI is below the lowest end of the Expanded
Acceptable DTI Range, or the Servicer’s DTI Range if different, as the loan is ineligible for HAMP.
If a borrower being considered for HAMP Tier 2 has a modified DTI ratio that is outside the
Expanded Acceptable DTI Range, or the Servicer’s DTI Range, if different, the borrower is not
eligible for HAMP and the servicer must send the borrower a Non-Approval Notice (see Section
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1052.3.2) 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:
 Wages and salaries, overtime pay, commissions, fees, tips, bonuses, housing
allowances, and/or other compensation for personal services.
 Social Security payments, food stamps and adoption subsidies, including those received
by adults on behalf of minors or by minors intended for their own support.
 Monthly income from annuities, insurance policies, retirement funds, pensions and
disability or death benefits.
 Rental income and other miscellaneous sources of income.
If only net income is available, the servicer must multiply the net income amount by 1.25 (125
percent) to estimate the monthly gross income. All non-taxed income, including non-taxed social
security income, is considered net income. Rental income from a rental property securing a
mortgage loan being considered for a HAMP Tier 2 modification will be calculated as described in
Section 6.2.
6.1.2 Monthly Mortgage Payment
The monthly mortgage payment used in calculating any monthly mortgage payment ratio in either
HAMP Tier 1 or HAMP Tier 2 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 the borrower’s current
mortgage payment. For purposes of calculating the monthly mortgage payment of a subject
property (i.e., the property securing the loan being considered for a modification), servicers
should also include any escrow payment shortage amounts that are subject to a repayment plan.
Escrow shortage amounts that are subject to a repayment plan associated with a non-subject
property (i.e., a property that does not secure the loan being considered for a modification) should
not be considered. The monthly mortgage payment does not include mortgage insurance
premium payments or payments due to holders of subordinate liens.
6.1.2.1 Pending ARM Resets
With respect to borrowers with adjustable rate mortgage (ARM) loans, including ARM loans that
provide for a monthly payment option (e.g., specified minimum payment, interest only payment,
40, 30 and/or 15 year fully amortizing payment) (Pay Option Loans) and interest only ARM loans,
that have an interest rate reset scheduled within 120 days after the date of the evaluation (Reset
ARM), the monthly mortgage payment used to determine eligibility will be the borrower’s fully
amortizing payment. The borrower’s fully amortizing payment is to be determined by using the
remaining term of the mortgage, the current unpaid principal balance (before capitalization) and
the reset rate. The reset rate is to be calculated by applying the index or formula that is in effect
as of the date of the evaluation, even if the reset rate would not take effect until a future date
and/or be calculated using a future index (Reset Interest Rate).
For ARM loans, including Pay Option Loans that are ARM loans and interest only ARM loans,
that have an interest rate reset scheduled more than 120 days after the date of the evaluation,
the monthly mortgage payment and interest rate used to determine eligibility will be the
borrower’s current scheduled monthly mortgage payment (which, in the case of Pay Option Loans
that are ARM loans, means the minimum payment required under the loan documents regardless
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106of which payment the borrower elected to pay in the prior period) and the note interest rate in
effect at the time of evaluation.
If a borrower has an ARM or interest-only mortgage loan, the mortgage loan will convert to a fixed
interest rate, fully amortizing mortgage loan. For loans where servicemembers are protected by
the Servicemembers Civil Relief Act (SCRA) and temporary interest rate caps are imposed, the
servicer in evaluating the borrower for HAMP must use the full contractual rate (regardless of the
interest rate cap).
6.1.2.2 Reasonable Efforts to Obtain Association Fee Information
If a borrower has indicated that there are association fees, but has not been able to provide
written documentation to verify the fees, the servicer may rely on the information provided by the
borrower if the servicer has made reasonable efforts to obtain the association fee information in
writing.
6.1.2.3 Loan Secured by Property in a Leasehold Jurisdiction
If a loan is secured by a property in a leasehold jurisdiction such as Hawaii, lease rent payments
should be included in the monthly mortgage payment calculation.
6.2 Calculation of Monthly Gross Income and Total Housing Expenses for
Rental Properties
Prior to evaluating a borrower for HAMP Tier 2, the servicer must determine the borrower’s gross
monthly income and total housing expense. The NPV model will use such amount to determine
whether the proposed HAMP Tier 2 modification falls within the Expanded Acceptable DTI
Range. With respect to a loan secured by rental property, the servicer will add net income from
the subject rental property to the borrower’s gross income from all other sources (including rental
income from other rental properties as described in Section 5.1.6) to calculate monthly gross
income.
If the subject rental property has a net rental loss, the servicer will add the net loss to the monthly
PITIA of the borrower’s principal residence to determine the borrower’s total housing expense. If
there is no rental income from the subject rental property, the servicer will add the monthly post-
modification PITIA of the subject rental property to the PITIA on the borrower’s principal
residence to determine the total housing expense.
Servicers should follow the below guidelines when evaluating a borrower that is paying rent for a
property occupied but not owned by the borrower:
 If the borrower is paying rent for a property occupied but not owned by the borrower, and
the borrower is requesting modification of a loan secured by a separate rental property,
the full amount of the rent paid by the borrower must be included in the borrower’s total
housing expense.
 If there is a net rental loss from the subject rental property, the loss is added to the rent
paid on the property occupied, but not owned, by the borrower.
 If there is no rental income from the subject rental property, the monthly mortgage
payment of the subject rental property (i.e., principal, interest, taxes, insurance,
association dues, if applicable, and any escrow shortages that are subject to a repayment
plan) is added to the rent paid on the property occupied, but not owned, by the borrower.
 If there is net rental loss or no rental income from the subject rental property and the
borrower has no rental expense for the property he or she occupies but does not own,
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107the net rental loss or the monthly mortgage payment of the subject rental property, as
applicable, is the borrower’s total housing expense.

If there is net rental income from the subject rental property and the borrower has no
rental expense for the property he or she occupies but does not own, the borrower will be
ineligible for a HAMP modification because the borrower has no housing expense and
the monthly mortgage payment ratio will be zero.
In the event there is more than one borrower obligated on a mortgage secured by a rental
property, the income from all borrowers must be included in the gross monthly income calculation
and the monthly PITIA of the principal residences of all borrowers must be included in the total
housing expense calculation.
In the case of a displaced borrower under consideration for a HAMP Tier 1 modification of the
loan secured by the property from which the borrower has been displaced, the borrower may rent
out the property from which he or she is displaced. An amount equal to the monthly gross rent
charged by the borrower multiplied by 75 percent (to take into account potential costs associated
with management and vacancy loss) should be added to the borrower’s monthly gross income. If
a borrower is paying rent to lease a home in his or her new location and is requesting a
modification of the mortgage secured by the principal residence from which he or she was
displaced, such rent contributes to the borrower’s total housing expense. It should be included
with the association dues for purposes of both the NPV Model and HAMP Reporting Tool.
6.3 Standard Modification Waterfalls
Servicers initially must evaluate each loan secured by an owner-occupied property that meets the
eligibility requirements for HAMP Tier 1 using the HAMP Tier 1 standard modification waterfall
criteria. If the servicer can achieve the target mortgage payment ratio without excessive
forbearance, the servicer will input the HAMP Tier 1 standard modification waterfall criteria into
the NPV model. The NPV model will indicate whether the borrower is NPV positive for HAMP
Tier 1. Additionally, the NPV model will concurrently evaluate the loan for HAMP Tier 2 using the
HAMP Tier 2 standard modification waterfall, DTI and payment reduction requirements.
For all HAMP Tier 2 loans on which the servicer will offer a TPP, the servicer must run a stand-
alone HAMP Tier 2 modification waterfall outside of the Base NPV Model to determine the
monthly trial period payment. When calculating this amount, the servicer should calculate the
projected capitalized UPB by projecting the total non-interest arrearages and delinquent interest
that will accrue between the Data Collection Date and the anticipated permanent modification
effective date. The servicer should use the projected capitalized UPB to determine the HAMP
Tier 2 trial period payment. It is expected that the trial period P&I payment will be very close to
the permanent modification P&I payment. The amount of the re-calculated trial period payment
will not affect eligibility.
If an investor is not participating in HAMP or has restrictions in the applicable servicing or investor
agreement that make it unfeasible to complete the modification steps enumerated below (i.e., a
combination of restrictions related to rate reduction, term extension or forbearance, or a cap on
the percentage of loans in a securitization that may be modified), the servicer should identify this
fact prior to completing such modification steps or conducting the NPV analysis described in
Section 7. In such an instance, when indicating in the HAMP Reporting Tool the reason the
borrower was not offered a TPP, the servicer should use code number 5 – “Investor/Guarantor
not Participating”.
6.3.1 HAMP Tier 1 Standard Modification Waterfall
For loans that satisfy the eligibility requirements described in Sections 1.1.1 and 1.1.2 for HAMP
Tier 1 (and subject to the applicable limitations in Section 1.2), servicers must apply the
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108modification 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 Tier 1 only if the interest rate on the mortgage loan can
be reduced in accordance with Section 6.3.1.2 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 Tier 1
requirements and the servicer must evaluate the borrower for HAMP Tier 2.
6.3.1.1 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 mortgage, 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.
6.3.1.2 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 increments until the target monthly mortgage payment
ratio is achieved. Upon reaching the point where a further 0.125 percentage-point increment will
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109reduce the rate 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 the 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.
6.3.1.3 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 extension steps must be made in one-month increments.
6.3.1.4 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.
6.3.2 HAMP Tier 2 Standard Modification Waterfall
For loans that satisfy the eligibility requirements described in Section 1.1.1 and 1.1.3 for HAMP
Tier 2 (and subject to the applicable limitations in Section 1.2), using the inputs provided by the
servicer, the NPV model will apply the modification steps enumerated below in the stated order of
succession to determine the borrower’s modified monthly mortgage payment.
Servicers may not adjust the set HAMP Tier 2 parameters, except in those cases where an
investor restriction or applicable law requires them to do so. If a servicer wishes to change the
HAMP Tier 2 standard modification waterfall steps to offer the borrower more generous terms
(e.g., lower interest rate, greater forgiveness or forbearance amount), the servicer must document
its proposal and submit it through the formal waiver and exception process for consideration by
Treasury. If approved, the altered terms must be offered equally to all similarly situated
borrowers identified in the waiver request. If a borrower fails to qualify for a TPP under an
approved altered waterfall, the servicer must re-evaluate the borrower using the HAMP Tier 2
standard modification waterfall and, if that analysis is NPV positive, the servicer must offer the
borrower a HAMP Tier 2 TPP.
6.3.2.1 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
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110the TPP as well those servicing advances that are made for costs and expenses incurred in
performing servicing obligations consistent with the guidance described in Section 6.3.1.1.
6.3.2.2 Step 2—Interest Rate Adjustment
In the second step, the NPV model adjusts the interest rate to the current “Tier 2 Rate” which will
be a fixed rate based on the weekly PMMS Rate (defined in Section 9.3.6) for 30 year fixed rate
conforming loans, rounded up to the nearest 0.125 percent plus a risk adjustment expressed in
basis points (at the time of this printing, 50 basis points). Treasury will notify servicer of any
changes to the risk adjustment.
6.3.2.3 Step 3—Term Extension
In the third step, the NPV model extends the term and re-amortizes the mortgage to 480 months
from the “as of” date of the loan information (e.g., UPB, term) provided by the servicer. The "as
of" date used by the NPV model is the same as the "Data Collection Date.” Note when servicers
are drafting the Modification Agreement under HAMP Tier 2, they should set the maturity date in
the Modification Agreement to the date that is 480 months after the Modification Effective Date,
similar to the current manner in which the servicers set the maturity date in the Modification
Agreement for HAMP Tier 1.
6.3.2.4 Step 4—Principal Forbearance
If the loan’s pre-modification mark-to-market LTV ratio is greater than 115 percent, the NPV
model calculates principal forbearance in an amount equal to the lesser of (i) an amount that
would create a post-modification mark-to-market LTV ratio of 115 percent using the interest
bearing principal balance or (ii) an amount equal to 30 percent of the gross post-modified UPB of
the mortgage loan (inclusive of capitalized arrearages). The principal forbearance amount is non-
interest bearing and non-amortizing. Unlike HAMP Tier 1, there is no excessive forbearance limit
in HAMP Tier 2.
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.
6.3.3 HAMP Tier 2 Minimum Reduction in P&I Payment
After calculation of the modified payment terms under the HAMP Tier 2 standard modification
waterfall, the NPV model will calculate whether the modified principal and interest (P&I) payment
represents a reduction of at least 10 percent compared to the pre-modification monthly P&I
payment in effect at the time of consideration for HAMP Tier 2. Additionally, if the servicer is
considering a loan for HAMP Tier 2 that defaulted on a HAMP Tier 1 TPP, the servicer must verify
that the modified P&I payment under HAMP Tier 2 must be at least 10 percent less than the P&I
payment under the failed HAMP Tier 1 TPP.
If the modified P&I payment fails to satisfy such guidelines, as applicable, 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.
6.3.4 HAMP Tier 2 Post-Modification DTI
Using the payment terms determined by the HAMP Tier 2 standard modification waterfall, the
NPV model will calculate whether the post-modification DTI ratio is within the Expanded
Acceptable DTI Range. If the DTI is not within the Expanded Acceptable DTI Range, or the
Servicer’s DTI Range, if different, 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.
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1116.3.5 Principal Forgiveness
There is no requirement to forgive principal under HAMP. However, servicers may forgive
principal either up front, which does not qualify for PRA incentives, or on a deferred basis under
PRA Up front principal forgiveness may be granted on a standalone basis or before any step in
the standard modification waterfall process; however subsequent standard waterfall steps may
not be skipped.
With respect to HAMP Tier 1, if principal forgiven either up front or on a deferred basis under PRA
is sufficient to achieve the target monthly mortgage payment ratio 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 under HAMP Tier 1
Servicers, in accordance with investor guidelines, are not precluded from providing borrowers
with a more favorable modification than that required by HAMP Tier 1. Instances where the
servicer deviates from the HAMP Tier 1 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 the applicable standard modification waterfall terms. Examples of acceptable deviations
for HAMP Tier 1 are provided below.



Servicers may agree to a modification where the interest rate does not step up after five
years or where the interest rate is reduced to less than 2.0 percent.
Servicers may agree to a modification where additional principal forbearance is
substituted for extending the term as needed to achieve the target monthly mortgage
payment ratio of 31 percent.
Servicers may agree to a modification that reduces the borrower’s monthly mortgage
payment ratio below 31 percent.
6.4 Principal Reduction Alternative
Servicers must evaluate any mortgage loan that is being considered for HAMP with a mark-to-
market LTV ratio greater than 115 percent using both the applicable standard modification
waterfall (as described in Section 6.3.1 or 6.3.2, as applicable) and the applicable alternative
modification waterfall (as described in Section 6.4.3.1 or 6.4.3.2, as applicable) that includes
principal reduction as the required second step in the waterfall. When determining the loan’s UPB
for deciding whether to evaluate the loan under the applicable alternative waterfall, (i) for HAMP
Tier 1, servicers should include any amount that would be capitalized in accordance with Section
6.3.1.1 of this Chapter and (ii) for HAMP Tier 2, the Base NPV Model will not include the amount
capitalized in accordance with Section 6.3.2.1 of this Chapter. Although servicers are only
required to evaluate loans that are being considered for HAMP with a mark-to-market LTV ratio
greater than 115 percent for PRA, servicers may evaluate loans with a lower mark-to-market LTV
ratio using the applicable alternative modification waterfall.
The primary purpose of completing the alternative modification waterfall analysis is to
demonstrate whether reducing principal on a mortgage loan with a mark-to-market LTV ratio
greater than 115 percent will produce a positive NPV result. However, when making the
determination to reduce principal, servicers may, consistent with investor guidelines and
contractual obligations, reduce the UPB of a loan to an amount that results in a mark-to-market
LTV ratio that is greater or lesser than the 115 percent target ratio in the applicable alternative
modification waterfall. Because servicers have this discretion in offering principal reduction,
servicers must develop and adhere to a written policy for making principal reduction
determinations (PRA Policy) that treats all similarly situated loans in a consistent manner and in
compliance with Section 1.6 of Chapter I. If applicable, the PRA Policy must clearly identify if and
how the servicer will exercise the option to vary either alternative modification waterfall. Also, if
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112the servicer plans to enter into equity share arrangements, a copy of the arrangement must be
included in the PRA Policy.
For modifications that include PRA principal reduction, if the UPB established when determining
the terms of the permanent modification differs from the UPB used to determine the terms of the
TPP, the servicer must, in the permanent modification, grant as PRA principal reduction the
lesser of (i) the amount necessary to achieve the mark-to-market LTV generated by the TPP
terms or (ii) the amount necessary to achieve the target monthly mortgage payment ratio as
established in the TPP. At the time of establishing the permanent modification terms, additional
PRA principal reduction may be granted in the servicer’s discretion in accordance with investor
guidelines.
6.4.1 Reserved
6.4.2 Reserved
6.4.3 Alternative Modification Waterfalls
6.4.3.1 HAMP Tier 1 Alternative Modification Waterfall
Under the HAMP Tier 1 alternative modification waterfall, servicers use principal reduction
between Step 1—Capitalization and Step 2—Interest Rate Reduction of the HAMP Tier 1
standard modification waterfall. After the servicer has performed Step 1—Capitalization, the
servicer will perform the HAMP Tier 1 alternative modification waterfall as follows:
 Reduce the UPB by an amount necessary to achieve either (i) the target monthly
mortgage payment ratio or (ii)(a) a mark-to-market LTV ratio equal to 115 percent or (b) if
applicable, the mark-to-market LTV ratio described in the servicer’s PRA Policy,
whichever is reached first.
 If the UPB is reduced to create a mark-to-market LTV ratio of 115 percent (or, if
applicable, the mark-to-market LTV ratio as described in the servicer’s PRA Policy) and
the target monthly mortgage payment ratio has not been achieved (based on a fully
amortizing principal and interest payment over the remainder of the current loan term and
using the current mortgage interest rate), continue with the HAMP Tier 1 standard
modification waterfall steps of interest rate reduction, term extension and principal
forbearance, each as necessary, until the target monthly mortgage payment ratio is
achieved.
6.4.3.2 HAMP Tier 2 Alternative Modification Waterfall
Under the HAMP Tier 2 alternative modification waterfall, the NPV model will use principal
reduction in place of forbearance to reduce the UPB by an amount equal to the lesser of (i) an
amount that would create a post-modification mark-to-market LTV ratio of 115 percent using the
interest bearing principal balance or (ii) an amount equal to 30 percent of the gross post-modified
UPB of the mortgage loan (inclusive of capitalized arrearages).
6.4.4 Variation from the HAMP Tier 1 Alternative Modification Waterfall Steps
If principal is forgiven in an amount equal to or greater than five percent of the pre-modification
UPB (including any capitalized amounts as described in Section 6.3.1.1), servicers will have
flexibility in the application of subsequent steps in the HAMP Tier 1 alternative modification
waterfall to either:

Elect not to reduce the interest rate all the way to the two percent interest rate floor
before applying a term extension, provided that the servicer must fix the reduced interest
rate and treat it as the modified rate for purposes of the Interest Rate Cap; or
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113
Apply term extension before interest rate reduction, provided that, if the interest rate is
not reduced, the servicer must fix the existing interest rate and treat it as the modified
rate for purposes of the Interest Rate Cap.
6.4.5 Application of Deferred Principal Reduction
If the loan is modified pursuant to PRA, the principal reduction amount should be initially treated
as non-interest bearing principal forbearance (PRA Forbearance Amount). The PRA Forbearance
Amount is separate and exclusive of any other forbearance that may be offered in conjunction
with a permanent modification.
If the borrower is in good standing on the first, second and third anniversaries of the TPP
Effective Date, the servicer must reduce the UPB of the loan on each anniversary date in
installments equal to one-third of the initial PRA Forbearance Amount.
If a borrower is in good standing and pays the loan in full (i) at any time more than 30 calendar
days after the Modification Effective Date; (ii) after the PRA reporting and payment processes are
made available; and (iii) prior to application of the entire PRA Forbearance Amount, the borrower
shall immediately be fully vested in and entitled to the unapplied PRA Forbearance Amount as a
curtailment. When the servicer receives a payoff request on behalf of a borrower that meets these
requirements, the unapplied PRA Forbearance Amount must be deducted from the payoff
balance.
6.4.6 Equity Share Arrangements
Investors that enter into equity share arrangements with borrowers in conjunction with a PRA
modification will be eligible to receive the PRA investor incentive if the equity share arrangement
includes the following borrower protections:
 The borrower is not required to make any equity share payments until the loan is fully
satisfied and may not be assessed a pre-payment penalty;
 The agreement includes a reasonable method to credit the borrower for the cost of
capital improvements;
 The borrower is entitled to at least 50 percent of any increase in property value, after
credit for the capital improvements, between the date of the permanent modification and
the date the loan is fully satisfied;
 The investor is only entitled to recover the amount of principal reduction actually applied
to the loan balance less the PRA investor incentive; and
 A method for independently assessing the value of the property at time of loan
satisfaction that is acceptable to both the investor and the borrower. The assessment of
the property value at the date of the permanent modification must be the property value
obtained by the servicer in accordance with Section 6.8 as part of the evaluation of the
borrower for a HAMP modification.
6.5 Prohibitions on Modification Waterfall Steps
If a servicing agreement, investor guidelines or applicable law restricts or prohibits a modification
step in the standard or alternative modification waterfalls (HAMP Tier 1 or Tier 2) and the servicer
partially performs it or skips it, the modification may still qualify for HAMP. If the servicer is
subject to restrictions that make it unfeasible to complete the modification waterfall steps, the
servicer should identify this prior to performing the NPV evaluation and not perform an NPV
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114evaluation. Servicers must maintain evidence in the loan file documenting the nature of any
deviation from taking any sequential modification step in the modification waterfall and the fact
that the applicable servicing agreement, investor guideline or law restricted or prohibited fully
performing the modification waterfall step. The documentation must show that the servicer made
a reasonable effort to seek a waiver from the investor and whether that waiver was approved or
denied.
If an investor or applicable law has lesser restrictions (i.e., limits on capitalization, interest rate or
term extension), the servicer should attempt to complete the waterfall steps subject to such
restrictions as described below:
 If capitalization is not permitted, the servicer should, if allowable, forgive the amount that
would otherwise be capitalized or establish a non-interest bearing balloon payment (i.e.,
forbearance) due at maturity equal to the amount that would have been capitalized.
Negative amortization after the modification effective date is prohibited.
 If the note rate of the mortgage cannot be modified below a certain value, the servicer
should:

 With respect to HAMP Tier 1, adjust the rate to the greater of the restriction rate or the
rate required to achieve the target monthly mortgage payment.
 With respect to HAMP Tier 2, adjust the rate to the greater of the restricted rate or the
HAMP Tier 2 Rate.
If the note rate of the mortgage cannot be permanently modified, the servicer should
 With respect to HAMP Tier 1, adjust the rate to the rate required to achieve the target
monthly mortgage payment for the maximum period allowed by the investor or under
applicable law and then, as allowed by the investor or applicable law, step up the
note rate. Notwithstanding the foregoing, if the investor or applicable law prohibits the
servicer from permanently reducing the note rate or, in the case of HAMP Tier 1, from
reducing the rate for at least five years, such a restriction would make it infeasible to
complete the interest rate reduction step. In such cases, the servicer should skip the
rate reduction step or, in the case of HAMP Tier 2, utilize the applicable override in
the Base NPV Model and continue the evaluation using the note rate of interest.
 Subject to the foregoing, with respect to HAMP Tier 2, convert the note interest rate to
a fixed rate if permitted and move to the next waterfall step.
 If an adjustable rate cannot to be converted to a fixed rate, the loan is not eligible for
HAMP modification in either Tier.
 If a term extension is limited or not permitted the servicer should extend the term as far
as allowable and/or re-amortize the mortgage loan based upon the remaining term.
 If the current remaining term of the loan is greater than 480 months, the servicer should
skip the term extension step. 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.
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.
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MHA Handbook v4.3
1156.6 Principal Forbearance
6.6.1 Principal Forbearance Limits under HAMP Tier 1
With respect to both “positive” and “negative” NPV results, under HAMP Tier 1, 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 HAMP Tier 1 standard modification waterfall) or (ii) an
amount resulting in a modified interest-bearing balance that would create a current mark-to-
market LTV ratio equal to 100 percent. For purposes of calculating such principal forbearance
limit when applying the HAMP Tier 1 alternative modification waterfall, servicers may use the sum
of any PRA Forbearance Amount initially set aside as principal forbearance and any principal
forbearance created as a result of the final step of such modification waterfall.
For loans being considered for HAMP Tier 1, 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 Tier 1 modification and shall evaluate the borrower for a HAMP Tier 2
modification. However, servicers are permitted, in accordance with investor guidelines and
applicable law, to forbear the principal in excess of the amounts described above in order to
achieve the target monthly mortgage payment of 31 percent for both NPV-positive and NPV-
negative loans.
6.6.2 Accounting Treatment of Principal Forbearance
Except under the 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:
(i) The servicer must report to the trustee or securities administrator any forborne principal
as a realized loss;
(ii) The trustee or securities administrator must allocate any such reported forborne principal
as a realized loss to the trust 3 ; and
(iii) The servicer must act consistent with the presumption that such allocation has occurred,
and may conclusively rely that it has.
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 loss mitigation plan guidelines issued by Treasury under the
Emergency Economic Stabilization Act of 2008 (EESA) shall constitute standard industry practice
3
The reported forborne principal should be allocated as a realized loss such that, for purposes of
calculating distributions to security holders, such forborne amount is no longer outstanding under
the amortization schedule applicable to the related mortgage loan.
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MHA Handbook v4.3
116for purposes of all Federal and State laws. The qualified loss mitigation plan guidelines 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 statement.
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) is the 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 same 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
http://www.hud.gov/offices/hsg/sfh/hcc/fc or by calling the toll-free housing counseling telephone
referral service at 1-800-569-4287. Servicers must retain in the mortgage file and or servicing
system 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.
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),
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MHA Handbook v4.3
117provided that the AVM renders a reliable confidence score, a broker’s price opinion (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. Servicers should follow
regulatory and investor guidance when selecting the appropriate valuation method to determine
the mark-to-market value of the property and use this value for both the NPV model and the PRA
mark-to-market LTV ratio calculation.
Treasury does not provide any reimbursement for property valuations. Servicers should review
investor guidelines to determine the applicable property valuation reimbursement policy.
7 Net Present Value (NPV) Testing
All loans that meet the applicable HAMP eligibility criteria in Section 1 must be evaluated using a
standardized NPV test that compares the NPV result for a modification to the NPV result for no
modification. The standardized NPV test will automatically be run contemporaneously for both
HAMP Tier 1 and Tier 2, to the extent a borrower meets the eligibility requirements for HAMP Tier
1 under Sections 1.1.1 and Sections 1.1.2 (subject to the applicable limitations in Section 1.2).
Prior to performing an NPV analysis on all loans, servicers must complete the escrow analysis
and use the information derived from that analysis to calculate the UPB as of the “Data Collection
Date” (i.e., the date on which the “Unpaid Principal Balance” and other data used in the NPV
analysis was collected). When running NPV to evaluate borrowers for HAMP Tier 1 and Tier 2,
servicers should not project UPB to a future date, but should use the current UPB amount as of
the Data Collection Date.
 Using the applicable standard modification waterfall, if the NPV result for the modification
scenario is greater than the NPV result for no modification, the result is deemed
“positive”. If the NPV result for no modification is greater than the NPV result for the
modification scenario using the applicable standard modification waterfall, the
modification result is deemed “negative”.
 If there is a positive NPV result under the HAMP Tier 1 standard modification waterfall,
the servicer must offer the HAMP Tier 1 TPP regardless of the HAMP Tier 2 NPV result.
 If there is a negative NPV result under the HAMP Tier 1 standard modification waterfall
and the investor has authorized a different threshold, or the modification has excessive
forbearance and the investor has authorized the service to exceed the forbearance limit,
the servicer may offer the HAMP Tier 1 TPP.
 If the borrower is not offered a HAMP Tier 1 TPP and is NPV positive under the HAMP
Tier 2 standard modification waterfall, the servicer must offer the HAMP Tier 2 TPP.
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118 If there is a negative NPV result under the HAMP Tier 2 standard modification waterfall,
the servicer may, based on investor guidance, offer the HAMP Tier 2 TPP.
 Servicers must develop written policies identifying the circumstances under which they
would offer a modification and the conditions under which modifications of each HAMP
Tier would be offered for cases where NPV results are negative for both HAMP Tier 1
and HAMP Tier 2 and the servicer elects, based on investor guidance, to offer a TPP
under either HAMP Tier 1 or Tier 2 (provided other eligibility requirements are met).
Servicers must apply these policies consistently to all borrowers.
 With respect to loans with a mark-to-market LTV ratio greater than 115 percent, if the
NPV result for the proposed modification generated by applying the applicable alternative
modification waterfall is positive, servicers are encouraged, but are not required, to
perform a loan modification utilizing PRA, even in instances where the NPV result from
the applicable standard modification waterfall is negative or is less positive than the NPV
result generated by application of the applicable alternative modification waterfall.
If a modification is not pursued when (i) under both HAMP Tier 1 and Tier 2, the NPV results were
“negative” or (ii) the borrower was considered only for HAMP Tier 2 and the NPV result was
“negative,” the servicer must send a Non-Approval Notice and consider the borrower for other
foreclosure prevention options, including alternative modification programs and HAFA.
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.
As of June 1, 2012, for properties that are considered under both HAMP Tier 1 and HAMP Tier 2,
the Base NPV Model will provide results for each Tier with PRA and without PRA. For properties
that are considered only under HAMP Tier 2, the Base NPV Model will provide results with and
without PRA only for HAMP Tier 2. In addition to the evaluation using the Base NPV Model,
servicers may conduct other evaluations to determine the level of principal reduction that is in the
best interest of investors. However, servicers must only submit the results of each applicable
standard modification waterfall and each applicable alternative modification waterfall evaluations
completed with the NPV model to the HAMP Reporting Tool.
7.1 Base NPV Model
Participating servicers can access the MHA Base NPV Model (Base NPV Model) software tool on
www.HMPadmin.com. The Base NPV Model Documentation and an NPV Model Overview
document are also available on www.HMPadmin.com 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.
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 and 7.7.
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MHA Handbook v4.3
1197.3 Re-coding of Base NPV Model
Subject to the requirements described in this Handbook, any servicer, regardless of the size of
their servicing book, has the option to re-code the Base NPV Model for implementation in their
own systems. Re-coded 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 www.HMPadmin.com, and will be periodically updated.
7.3.1 Compliance for Re-coded NPV Models
MHA-C will monitor implementation of the re-coded NPV model. Servicers electing to implement
the NPV model on their own systems must successfully pass 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 results for the entire dataset of sample modifications must be consistent with
the corresponding Base NPV Model results, within a defined threshold of acceptable variance.
NPV compliance testing will be conducted on an ongoing basis for the life of HAMP, and will be
triggered both by changes to the 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.
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.
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.
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
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.
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MHA Handbook v4.3
1207.6.1 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 TPP eligibility. Detailed versioning requirements
are included in the Base NPV Model Documentation, which is available on www.HMPadmin.com,
and in other NPV Versioning Requirements documentation.
The first time the servicer evaluates a loan through the NPV model is the “NPV Date.” This date
must remain constant for all subsequent NPV runs. The only exception to this rule is loans that
were evaluated under an NPV model before June 1, 2012 that are being re-evaluated for HAMP
Tier 2. For those loans, the servicer should use the first date that the loan is evaluated after June
1, 2012 as the “NPV Date”. Any subsequent re-running of the loan through the NPV model must
use such date, as the “NPV Date.”
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:


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


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

Association Dues/Fees before Modification
Monthly Hazard and Flood Insurance
Monthly Real Estate Taxes
Monthly Gross Income
Unpaid Principal Balance after Modification (interest-bearing UPB)
Principal Forbearance Amount
Interest Rate after Modification
Amortization Term after Modification
Principal and Interest Payment after Modification
Inputs that may not change regardless of their evolution since the trial's initiation include:









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
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Unpaid Principal Balance before Modification
Borrower Credit Score and Co-Borrower Credit Score
Property Value
Interest Rate before Modification
Term before Modification
Monthly Principal and Interest Payments before Modification
Months Past Due
ARM Reset Rate and ARM Reset Date
Data Collection Date
Imminent Default Status
NPV Run Date
Advances/Escrow
Discount Rate Risk (spread of discount rate over PMMS rate)
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
reduction, term extension, and forbearance amount, may change as the borrower reported inputs
are adjusted.
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121In the portal version of the Base NPV Model located on www.HMPadmin.com, 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.
7.7 NPV Requirements for Disputed Inputs
When servicers re-evaluate NPV results based on a borrower’s written evidence of disputed
variables, servicers must conduct the NPV test using the same major version of the NPV model
that was used to test the loan for TPP eligibility. Detailed versioning requirements are included in
the Base NPV Model Documentation, which is available on www.HMPadmin.com, and in other
NPV Versioning Requirements documentation.
All NPV inputs should remain constant when the borrower is re-evaluated, except those inputs
that are determined to be materially inaccurate based on the borrower's written evidence. The
values must be as of the NPV Date.
7.8 NPV Inputs for Unavailable or Low Credit Scores
In performing an NPV evaluation, in the case of two borrowers where a co-borrower has an
available credit score and the other co-borrower does not have an available credit score, the
servicer must use the credit score that is available. In the case of a single borrower who does not
have an available credit score or where both co-borrowers do not have available credit scores,
the servicer must use 557 as the proxy credit score. If a borrower has a credit score, but it is
below 250, the servicer should input 250 as the proxy credit score when performing the NPV
evaluation.
8 Trial Period Plans
Following underwriting, NPV evaluation and a determination, based on verified income, that a
borrower qualifies for HAMP, servicers will place the borrower in a trial period plan (TPP).
The trial period is three months in duration (or longer if necessary to comply with applicable
contractual obligations) and governed by terms set forth in the TPP Notice. Borrowers who make
all trial period payments timely and who satisfy all other trial period requirements will be offered a
permanent modification.
Servicers should service mortgage loans during the TPP in the same manner as they would
service a loan in forbearance.
8.1 Trial Period Plan Notice
The TPP Notice describes the terms and conditions of the trial period and sets forth the required
payment due dates. Borrowers are not required to sign or return the TPP Notice. Servicers
should retain a copy of the TPP Notice in the borrower file and note the date that it was sent to
the borrower.
8.2 Effective Date
A borrower’s trial period starts on the TPP Effective Date, as indicated in the TPP Notice. If the
servicer transmits the TPP Notice to the borrower on or before the 15th day of a calendar month,
then the servicer should establish the first day of the next month as the TPP Effective Date. If the
servicer transmits the TPP Notice to the borrower after the 15th day of a calendar month, the
servicer may use either (i) the first day of the month after the next month as the TPP Effective
Date; or (ii) the first day of the next month so long as the borrower consents to commencing the
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122TPP earlier. The date that the first trial period payment is due under the terms of the TPP Notice
must be the same date as the TPP Effective Date.
For example, if the servicer completes the TPP Notice and transmits it to the borrower on June
2nd, the servicer should use July 1st as the TPP Notice Effective Date. If the servicer completes
the TPP Notice and transmits it to the borrower on June 27th, the servicer has the option of using
July 1st or August 1st as the TPP Effective Date.
8.3 Trial Period Payments
Under HAMP Tier 1, the borrower’s monthly trial period payment must be set at the target
monthly mortgage payment ratio by applying the HAMP Tier 1 standard modification waterfall as
set forth in Section 6.3.1. Under HAMP Tier 2, the borrower’s monthly trial period payment will be
set by the NPV model by applying the HAMP Tier 2 standard modification waterfall as set forth in
Section 6.3.2.
The servicer’s receipt of the first payment due under the TPP Notice on or before the last day of
the month in which the first payment is due (TPP Offer Deadline) is evidence of the borrower’s
acceptance of the TPP Notice and its terms and conditions. If the first trial period payment is not
received on or near the first payment due date, servicers should contact the borrower and
encourage submission of the first payment prior to the TPP Offer Deadline. Servicers may not
impose any stricter standard for payments due under HAMP than are applied in the servicer’s
other loss mitigation programs.
Borrowers who do not make current trial period payments are considered to have failed the trial
period for that loan. For TPPs with effective dates on or after June 1, 2010, “current” is defined
as the borrower having made each trial period payment by the last day of the month in which it is
due. For TPPs with effective dates before June 1, 2010, “current” is defined as the borrower
having made all trial period payments by the last day of the final month of the trial period.
A borrower that fails to make current trial period payments for a HAMP Tier 2 TPP is not eligible
for a HAMP Tier 2 permanent modification of that loan. A borrower that fails to make current trial
period payments for a HAMP Tier 1 TPP is not eligible for a HAMP Tier 1 permanent modification
of that loan, but the loan may be eligible for HAMP Tier 2 if the modified P&I payment under
HAMP Tier 2 is at least 10% less than the P&I payment under the HAMP Tier 1 TPP and the
other HAMP Tier 2 eligibility and underwriting criteria are satisfied.
8.4 Application of Trial Period Payments
Trial period payments must be applied in accordance with the terms of the existing loan
documents. A servicer should not change a borrower’s scheduled loan terms in its servicing
system and/or mortgage file during the trial period.
If permitted by the applicable loan documents, servicers may accept and hold as "unapplied
funds" (held in a T&I custodial account) amounts received which do not constitute a full monthly,
contractual principal, interest, tax and insurance (PITI) payment. However, when the total of the
reduced payments held as "unapplied funds" is equal to a full PITI payment, the servicer is
required to apply all full payments to the mortgage loan.
Any unapplied funds remaining at the end of the trial payment period that do not constitute a full
PITI payment should be applied to reduce any amounts that would otherwise be capitalized onto
the principal balance.
The borrower may make scheduled payments earlier than expected; however, the payments will
not result in acceleration of the modification effective date.
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123Servicers are encouraged to require automated payment methods, such as automatic payment
drafting. If automatic payment drafting is required, it must be used by all HAMP borrowers,
unless a borrower opts out.
If the borrower makes a payment that is greater than his or her trial period payment (e.g., the
existing contractual monthly payment rather than the trial period payment), the servicer must
review investor guidelines to determine if the borrower remains eligible for HAMP and, if making
the contractual payment could jeopardize eligibility, notify the borrower in writing that making
payments in excess of the trial period payment may jeopardize the borrower’s eligibility for a
HAMP modification.
If the borrower fails to make current payments during the trial period or is otherwise determined to
be ineligible for a permanent modification, the servicer should apply any unapplied trial period
payments in accordance with the terms of the existing loan documents. The payments applied to
date during the trial period remain unchanged. In no event should the servicer return the funds to
the borrower.
8.5 Borrower in Bankruptcy
Borrowers who are currently in a TPP and subsequently file for bankruptcy may not be denied a
permanent modification on the basis of the bankruptcy filing.
The servicer and its counsel must work with the borrower or borrower’s counsel to obtain any
court and/or trustee approvals required in accordance with local court rules and procedures.
Servicers should extend the TPP as necessary to accommodate delays in obtaining court
approvals or receiving a full remittance of the borrower’s trial period payments when they are
made to a trustee, but they are not required to extend the trial period beyond two months,
resulting in a total five-month trial period. In the event of a trial period extension, the borrower
shall make a trial period payment for each month of the trial period including any extension
month.
8.6 Borrower in Bankruptcy—Waiver of Trial Period Plan
At the discretion of the servicer, borrowers in an active Chapter 13 bankruptcy who are
determined to be eligible for HAMP may be converted to a permanent modification without
completing a TPP if:
 The borrower makes all post-petition payments on his or her first lien mortgage loan due
prior to the effective date of the Home Affordable Modification Agreement (Modification
Agreement), and at least three of those payments are equal to or greater than the
proposed modified payment;
 The modification is approved by the bankruptcy court, if required; and
 The TPP waiver is permitted by the applicable investor guidelines.
If payments under a bankruptcy plan are used in lieu of a trial period in accordance with these
guidelines, the servicer and borrower are eligible to accrue “pay for success” and “pay for
performance” incentives for the length of a standard HAMP trial period.
Servicers will report the bankruptcy in lieu of trial payments (at least three) on the trial set-up
record using the Trial Plan Type Code to identify the loan as a Bankruptcy in Lieu of Trial.
When a borrower in an active Chapter 13 bankruptcy is in a trial period plan and the borrower has
made post-petition payments on the first lien mortgage in the amount required by the TPP, a
servicer must not object to confirmation of a borrower's Chapter 13 plan, move for relief from the
Chapter II: HAMP
MHA Handbook v4.3
124automatic bankruptcy stay, or move for dismissal of the Chapter 13 case on the basis that the
borrower paid only the amounts due under the trial period plan, as opposed to the non-modified
mortgage payments.
8.7 Alternative Loss Mitigation Options
When a borrower is determined to be ineligible for a permanent modification, the servicer must
work with the borrower to attempt to cure the delinquency. If a cure is not possible, the servicer is
required to consider the borrower for all other available loss mitigation options, including but not
limited to refinance, forbearance, non-HAMP modifications and, to the extent a borrower does not
qualify for a home retention alternative, HAFA (short sales or DILs) in accordance with Chapter
IV. As stated in Section 2.3.2, available loss mitigation options should be described in the Non-
Approval Notice.
If a borrower in a prolonged TPP (a TPP lasting longer than three months (or four months if the
borrower was in imminent default)) who has made each trial period payment by the last day of the
month in which it was due is subsequently determined to be ineligible for a permanent
modification, the servicer is required to consider the borrower for all other available loss mitigation
options, including, but not limited to, non-HAMP modifications and HAFA. Such consideration
may not be conditioned on a lump sum borrower contribution for unpaid interest and fees that
accrued during the prolonged TPP.
8.8 Consideration of Non-Borrowers Following Death and Divorce
Non-borrowers who inherit or are awarded sole title to a property may be considered for HAMP
even if the borrower who previously owned the property was not already in a TPP. Such
titleholders may be considered for HAMP if they meet all applicable eligibility criteria. In this case,
servicers should collect an Initial Package from the non-borrower who now owns the property and
evaluate the request as if he or she was the borrower. The servicer should process the
assumption and loan modification contemporaneously if the titleholder is eligible for HAMP and
investor guidelines and applicable law permit an assumption of the loan. In connection with this
assumption and loan modification, servicers are reminded that they must comply with disclosure
obligations under applicable law, including, without limitation, the Truth in Lending Act.
8.9 Remaining Co-Borrowers and Remaining Non-Borrowers Following
Death and Divorce during TPP
8.9.1 Remaining Co-Borrowers
If during a TPP, the servicer learns that a co-borrower occupant has inherited sole title to the
property upon the death of another co-borrower or was awarded sole title to the property through
a divorce decree or other action, the servicer must notify the remaining co-borrower occupant of
the availability of the following options, subject to investor guidelines: (1) continuation of the
existing TPP and conversion to a permanent modification; (2) termination of the existing TPP and
immediate evaluation for a new TPP based solely on the income of the remaining co-borrower
occupant; or (3) termination of the TPP immediately followed by consideration of any other loss
mitigation options that may be available.
If during a TPP, the servicer learns that a co-borrower non-occupant has inherited sole title to the
property upon the death of another co-borrower or was awarded sole title to the property through
a divorce decree or other action, the servicer must notify the remaining co-borrower non-occupant
of the availability of the same options extended to co-borrower occupants, except that, as to
option 1, the co-borrower non-occupant is only permitted to continue a HAMP Tier 2 TPP and
convert to a permanent modification, because non-occupants are not eligible for HAMP Tier 1.
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MHA Handbook v4.3
125This notice must be provided in writing within 10 business days after the servicer learns of the
death or award of title. If the remaining co-borrower selects either option 2 or 3, the servicer must
inform the co-borrower in writing that there is not assurance that he or she will qualify for HAMP
or, in the case of option 3, any other loss mitigation options based on any re-evaluation. In the
event of the death of a co-borrower, the servicer should, when permitted under prevailing law,
allow the personal representative of the estate to sign the HAMP modification documents.
8.9.2 Remaining Non-Borrowers
If, during a TPP, a servicer learns that a non-borrower occupant or non-borrower non-occupant
has inherited sole title to the property upon the death of the borrower or was awarded sole title to
the property through a divorce decree or other court action, the servicer must send written notice
to the new titleholder describing the requirements for assuming the note, subject to applicable law
and investor guidelines, and the impact of a potential assumption on the TPP and the borrower’s
continued eligibility for assistance under MHA. Based on the amount of time required to complete
the assumption, the servicer may extend the existing TPP, as appropriate under HAMP guidance,
or terminate the existing TPP and place the loan in a forbearance plan for a period the servicer
deems sufficient to both complete the assumption and re-evaluate the new titleholder for HAMP.
Servicers may not initiate or continue foreclosure proceedings during the period provided for the
new titleholder to attempt to assume the note and re-apply for HAMP.
If assumption is not permissible under applicable law or investor guidelines, or the titleholder
does not meet HAMP eligibility criteria, the servicer must terminate the TPP and send written
notice to the remaining non-borrower occupant of the termination and information about other
loss mitigation options available. In all cases, subject to applicable law and investor guidelines,
the relevant notice must be provided in writing within 10 business days after the servicer learns of
the death and inheritance or divorce and award of title. The servicer must document any
assumption prohibitions, conditions and time extensions in the mortgage file and/or servicing
system.
8.9.3 Reporting and Continued Eligibility
When an existing TPP is terminated based on death or divorce of a borrower or co-borrower,
servicers should promptly remove the loan from the HAMP Reporting Tool using Trial Fallout
reason code number 8, Offer Not Accepted by Borrower/Offer Withdrawn. The remaining co-
borrower or non-borrower occupant who assumes an MHA eligible loan following the death or
divorce of a borrower or co-borrower is not prohibited from participating in any MHA program.
9 Permanent Modification
A borrower in a TPP may receive a permanent modification as long as the servicer has received
all required trial period payments timely and all other required documentation from the borrower,
including a fully executed Modification Agreement. Servicers should not modify a mortgage loan
if there is reasonable evidence indicating the borrower submitted information that is false or
misleading or if the borrower otherwise engaged in fraud in connection with the modification. If
an owner or tenant occupied property securing a loan in a TPP is temporarily uninhabitable due
to damage caused by fire, flood, wind, etc., the borrower may receive a permanent modification
so long as it is clear that the borrower intends to repair and intends to occupy (or have the tenant
occupy) the property and there are insurance proceeds or other funds available to complete the
work.
9.1 Modification Agreement
A servicer should prepare the Modification Agreement early enough in the trial period to allow
sufficient processing time so that the modification becomes effective on the first day of the month
following the final trial period month. Each borrower that receives a HAMP permanent
modification must be informed by the servicer of the borrower’s potential eligibility for a 2MP
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MHA Handbook v4.3
126modification. The Modification Agreement Cover Letter, which is available on
www.HMPadmin.com, contains model clauses. The use of the model clauses is optional;
however, they illustrate a level of specificity that is deemed to be in compliance with language
requirements of 2MP.
All documentation must be signed by an authorized representative of the servicer and reflect the
actual date of signature by the servicer’s representative. The borrower is not required to have the
Modification Agreement notarized unless otherwise required by the investor.
The borrower’s permanent modification will become effective as of the Modification Effective Date
identified in the Modification Agreement when: (i) the borrower has satisfied all of the
requirements of the TPP Notice, (ii) the borrower and the servicer have executed the Modification
Agreement, (iii) the servicer has returned a fully executed copy of the Modification Agreement to
the borrower, and (iv) the Modification Effective Date provided in the Modification Agreement has
occurred. The servicer must execute and return a copy of the fully executed modification
agreement to the borrower promptly, but no later than 30 calendar days after receipt of the
agreement executed by the borrower, and the borrower’s compliance with all conditions set forth
in the trial period plan notice and Section 1 of the modification agreement.
The loan may be modified and the effective date of the modification does not need to be changed
if the executed Modification Agreement is received from the borrower by the last day of the month
in which the modification becomes effective. However, a servicer may not submit an official loan
set up record to the HAMP system of record to report the permanent modification until the
servicer has obtained a fully executed Modification Agreement.
9.2 Effective Date Option—Interim Month
In the event the borrower does not make the final trial period payment on or before the due date
set forth in the TPP Notice (but does make the final trial period payment before the end of the
month in which it is due), then the servicer may, at its option, complete the Modification
Agreement such that the modification becomes effective on the first day of the second month
following the final trial period month. If the servicer elects this option, the borrower will not be
required to make an additional trial period payment during the month (interim month) in between
the final trial period month and the month in which the modification becomes effective. For
example, if the last trial period month is March the borrower would not be required to make any
payment during April, and the modification would become effective, and the first payment would
be due, on May 1st. Neither the borrower nor the servicer will be entitled to accrue incentive
compensation for the interim month if the borrower does not make a trial period payment during
the interim month.
The servicer must modify the Modification Agreement Cover Letter, which is available on
www.HMPadmin.com, to inform the borrower about the impact of delaying the modification
effective date by one month, including (i) the impact of the delay on implementation of the
modified interest rate; (ii) the increase in the delinquent interest capitalized, and (iii) the loss of
one month’s accrual of the incentive payment if the borrower does not make an additional trial
period payment.
A servicer must treat all borrowers the same in applying this option by developing and
implementing a written policy indicating the date by which the final trial period payment must be
submitted (cutoff date) before the servicer applies this option. The cutoff date must be after the
due date for the final trial period payment as set forth in the TPP Notice.
Chapter II: HAMP
MHA Handbook v4.3
1279.3 Conditions of Modification
9.3.1 First Lien Position
For all mortgage loans that are modified under HAMP, the servicer will follow investor guidance to
ensure that the modified mortgage loan retains its first lien position and is fully enforceable. The
servicer must work with the borrower to obtain approvals, including subordination agreements, if
required by investor guidance. Servicers should extend the TPP as necessary to accommodate
delays in obtaining approvals, but they are not required to extend the TPP beyond two months,
resulting in a total five-month TPP. In the event of a TPP extension, the borrower shall make a
TPP payment for each month of the TPP including any extension month.
9.3.2 Late Fees
All late charges, penalties, stop-payment fees, or similar fees must be waived upon the borrower
receiving a permanent modification.
9.3.3 Administrative Costs
Servicers may not charge the borrower to cover the administrative processing costs incurred in
connection with HAMP. The servicer pays and will not be reimbursed for any actual out-of-pocket
expenses, including, but not limited to, any required notary fees, recordation fees, title costs,
property valuation fees, credit report fees, or other allowable and documented expenses.
9.3.4 Interest Paid in Arrears
If interest on the loan is paid in arrears, servicers must ensure that the modified interest rate and
modified principal balance are considered effective as of the first day of the month prior to the
month in which the modification effective date occurs.
9.3.5 Monthly Statements
For modifications that include principal forbearance, servicers are encouraged to include the
amount of the gross UPB on the borrower’s monthly payment statement. In addition, the
borrower should receive information on a monthly basis regarding the accrual of “pay for
performance” principal balance reduction payments.
9.3.6 Interest Rate Cap and Interest Rate Lock Date for HAMP Tier 1 Modifications
The Interest Rate Cap used for determining the final interest rate for a permanent modification
under HAMP Tier 1 is the Freddie Mac Primary Mortgage Market Survey (PMMS) Rate for 30-
year fixed rate conforming loans, rounded to the nearest 0.125 percent, as of the date that the
Modification Agreement is prepared. The PMMS Rate is the conventional mortgage rate
published in the Federal Reserve’s H.15 bulletin. The weekly PMMS Rate is available on the
Freddie Mac home page at www.freddiemac.com.
For HAMP Tier 1 loans, servicers should implement the new PMMS Rate to be effective at 12:01
AM ET on the day following publication of the rate. The rate is normally published mid-day
Thursdays and should therefore be updated at 12:01 AM ET on Friday morning. If the rate is
published on another day such as Wednesday, as has occurred when Thursday was a holiday,
the rate should be updated at 12:01 AM on the day following publication.
The Interest Rate Lock Date for a modification under HAMP Tier 1 is the date that the Interest
Rate Cap for a modified mortgage loan is determined. For trial set up reporting, the servicer
should report the date that it selected the PMMS Rate to determine eligibility for HAMP when
establishing the interest rate terms in the HAMP Tier 1 standard waterfall process for the trial
period payment under the HAMP Tier 1 TPP.
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MHA Handbook v4.3
1289.3.7 Escrow Accounts
All of the borrower’s monthly payments must include a monthly escrow amount unless prohibited
by applicable law. The servicer must assume full responsibility for administering the borrower’s
escrow deposit account in accordance with the mortgage documents and all applicable laws and
regulations.
Servicers are not required to escrow for the payment of condominium association fees, subject to
investor guidelines. A servicer must determine the monthly payment associated with the
condominium association fees to calculate the borrower’s monthly mortgage payment and
evaluate the borrower for HAMP eligibility.
Once an escrow account is established, the borrower must continue to make monthly escrow
payments. However, if the borrower fails the trial period, a servicer may waive the requirement to
make monthly escrow payments, subject to any limitations imposed by applicable law and any
investor or other contractual requirements. These requirements include those servicer
obligations to advance tax, insurance and other third-party payments to protect the investor’s first
lien position.
9.3.7.1 Escrow Analysis
Servicers must perform an escrow analysis for all borrowers, including borrowers who do not
currently escrow for property taxes and hazard insurance, to determine the exact escrow
payments prior to establishment of the trial period payment. When performing an escrow
analysis, servicers must take into consideration tax and insurance premiums that may come due
during the trial period.
9.3.7.2 Escrow Advances
Servicers should capitalize any escrow advance that has been or will be paid to a third party
before the modification effective date. If capitalization is prohibited by applicable law, the servicer
should direct the borrower to repay the advance in accordance with investor guidelines, the
underlying security instrument and all applicable laws, rules and regulations. Servicers may not
have the borrower execute a note for any escrow advance.
9.3.7.3 Escrow Shortages
In the event the initial escrow analysis identifies an escrow shortage – a deficiency in the escrow
deposits needed to pay all future tax and insurance payments – the servicer must take steps to
eliminate the shortage. Any existing escrow shortage currently being paid by the borrower should
be included in the borrower’s monthly mortgage payment.
9.3.7.4 Non-Escrowed Loans
If the mortgage loan being considered for HAMP is a non-escrowed mortgage loan, the servicer
must establish an escrow deposit account prior to the beginning of the trial period. Servicers who
do not have this capacity must implement an escrow process within six months of signing the
SPA. However, the servicer must ensure that the trial payments include escrow amounts and
must place the escrow funds into a separate account identified for escrow deposits.
9.3.7.5 Standard Escrow Provisions
If the existing loan documents do not include standard escrow provisions, servicers will adjust
loan documents by replacing Section 4.D. of the Modification Agreement with the industry
standard escrow account provisions that are comparable to the escrow account provisions found
in the Fannie Mae and Freddie Mac uniform instruments.
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MHA Handbook v4.3
1299.3.7.6 Escrow Changes
When there are changes in a borrower’s tax and insurance premium payments during the trial
period, but after a verified approval, the servicer does not need to re-evaluate the borrower for
HAMP eligibility and obtain a new NPV result. However, the servicer must provide written notice
to the borrower, in addition to any escrow notification required by RESPA that explains the impact
of the new escrow payment on borrower’s monthly payment set forth in the TPP Notice.
9.3.7.7 Prohibitions on Modifications that Increase Principal and Interest under HAMP
Tier 1
HAMP Tier 1 seeks to lower a borrower’s monthly mortgage payment through waterfall steps that
use principal and interest payment reductions to achieve the target monthly mortgage payment
ratio. However, in some cases, all or most of the payment reduction is comprised of a reduction in
required escrow payments, and the principal and interest component under the proposed
modification could be greater than the borrower’s current principal and interest component. A
HAMP Tier 1 modification with a post-modification principal and interest component that is greater
than the pre-modification principal and interest component is prohibited under HAMP Tier 1.
Any loans being evaluated for HAMP Tier 1 or currently in a HAMP Tier 1 TPP with a post-
modification principal and interest component greater than the pre-modification principal and
interest component must be re-run through the HAMP Tier 1 standard modification waterfall and,
if applicable, the HAMP Tier 1 alternative modification waterfall while keeping the post-
modification principal and interest component equal to the pre-modification principal and interest
component. The servicer must perform a new NPV evaluation using the revised modification
terms generated by keeping the proposed principal and interest component equal to the
borrower’s current principal and interest component. All other NPV inputs should remain constant
when the borrower is retested in this situation.
9.3.8 Mortgages with No Due-on-Sale Provision
When a mortgage is not subject to a due-on-sale provision and the borrower receives a HAMP
modification, the borrower agrees that HAMP will cancel the assumability feature of that
mortgage.
9.3.9 Reserved
9.3.10 Mortgage Insurer Approval
If applicable, a servicer must obtain mortgage insurer approval for each HAMP modification.
Servicers should consult the applicable mortgage insurance provider for specific processes
related to the reporting of modified terms, payment of premiums, payment of claims, and other
operational matters in connection with mortgage loans modified under HAMP.
9.4 Re-default and Loss of Good Standing
If a borrower defaults on a loan modification executed under HAMP (delinquent by the equivalent
of three full monthly payments at the end of the month in which the last of the three delinquent
payments was due), the loan is no longer considered to be in “good standing.” Once lost, good
standing cannot be restored even if the borrower subsequently cures the default. A loan that is
not in good standing is not eligible to receive borrower, servicer or investor incentives and
reimbursements and these payments will no longer accrue for that loan. A loan permanently
modified under HAMP Tier 2 that loses good standing is not eligible for another HAMP
modification of that loan. A loan permanently modified under HAMP Tier 1 that loses good
standing may be eligible to receive a HAMP Tier 2 modification on the earlier of (i) the date is 12
months after the HAMP Tier 1 Modification Effective Date or (ii) following a change in
circumstance.
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MHA Handbook v4.3
130Absent a change in circumstance, a servicer is not required to re-evaluate a loan for HAMP Tier 1
if the loan was evaluated for HAMP Tier 1 prior to June 1, 2012 and determined to be ineligible.
However, upon receipt of a request from the borrower whose loan was evaluated for HAMP Tier 1
prior to June 1, 2012 and determined to be ineligible, the servicer is required to evaluate that loan
for HAMP Tier 2 without requiring the borrower to demonstrate a change in circumstance.
Servicers must have an internal written policy which defines what they consider a change in
circumstance, which policy must be consistently applied for all similarly situated borrowers.
A servicer may not re-modify a loan that has received a HAMP permanent modification until either
(i) the loan has lost good standing or (ii) more than five years has passed since the effective date
of the permanent modification. Notwithstanding this prohibition, a servicer may apply a principal
curtailment at any time following a HAMP modification. Additionally, servicers may not refer a
loan with a HAMP permanent modification to foreclosure until the loan has lost good standing.
In the event a borrower defaults on the modified loan, the servicer must work with the borrower to
cure the modified loan. If this is not possible the servicer must- evaluate the borrower for any
other loss mitigation alternatives, e.g., HAFA, prior to commencing foreclosure proceedings. In
any event, a servicer cannot refer a HAMP-modified first lien to foreclosure until the loan loses
good standing under HAMP.
9.5 Re-Consideration of Borrowers
9.5.1 Delayed Conversion
In situations where an eligible borrower successfully completed the trial period (including
providing the required documentation and making the required payments) and should have been
converted to a permanent modification, but for reasons beyond his or her control was not timely
converted to a permanent modification, the servicer must promptly make a determination as to
whether the borrower is eligible for a permanent HAMP modification.
If the borrower is eligible, then the servicer must offer the borrower a permanent HAMP
modification as soon as possible, but in no event later than 60 days after discovering the error,
including, but not limited to, discovery through notification from MHA-C, the servicer’s own
procedures, or notice provided by the borrower.
The permanent HAMP modification offered must put the borrower in the same position as he or
she would have been if the servicer converted the borrower to a permanent modification in
accordance with the program requirements. A borrower in this situation remains eligible for a
permanent HAMP modification regardless of whether the borrower failed to make trial period
payments following the successful completion of the trial period.
In order to achieve this result, the servicer should take the following steps:
 The Modification Effective Date is the date the modification would have become effective
if the servicer had converted the borrower in a timely fashion.
 If it is a HAMP Tier1 permanent modification the applicable Interest Rate Cap is the first
PMMS Rate, rounded to the nearest 0.125 percent, issued in the month prior to the
Modification Effective Date.
o

For example, for a HAMP Tier 1 permanent modification with a Modification
Effective Date of June 1, 2010, the Interest Rate Cap should be 5.00 percent,
which is the PMMS Rate issued in May 2010 (the PMMS archives are available
at www.freddiemac.com/pmms/docs/30-yr historics.xls).
If it is a HAMP Tier 2 permanent modification, the interest rate would be the Tier 2 Rate
used in the original NPV evaluation.
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MHA Handbook v4.3
131 The initial UPB of the modification should be the UPB of the loan as of the Modification
Effective Date, plus all accrued but unpaid amounts allowed to be capitalized under
HAMP as of the Modification Effective Date.
 Any payments made by the borrower after the Modification Effective Date until the time of
conversion should be applied retroactively in accordance with the modified terms;
however, any shortfalls between the actual payments made by the borrower after the
Modification Effective Date (including any missed payments) and payments that are due
under the modified terms until the time of conversion must be advanced by the servicer,
capitalized and deferred as a non-interest bearing amount that is due and payable by the
borrower at the time of payoff, maturity or transfer. The servicer may collect this amount
subject to such restrictions as the investor may establish including, but not limited to,
restrictions on collecting this amount in the event of a short payoff or other disposition of
the loan.
 If due to a shortfall in payments, amounts are deferred, the servicer must amend the
Modification Agreement in accordance with the Document Summary for the Modification
Agreement.
 The servicer must take the necessary steps to correct any credit reporting for the
borrower since the Modification Effective Date.
9.5.2 Incorrect Denial of TPP
If a servicer determines, as a result of an escalation, through the servicer’s internal quality control
process, or through an MHA-C review, that a borrower was incorrectly denied a TPP, the servicer
must offer the borrower a TPP under the applicable Tier based on the status of the borrower and
the loan at the time of the borrower’s initial evaluation and must, to the greatest extent possible,
put the borrower in the same position as he or she would have been if the servicer had offered
the borrower the TPP under the applicable Tier in accordance with MHA guidelines. A servicer
may not back date the TPP to satisfy this requirement. If a servicer is unable to put the borrower
in the same position as he or she would have been if the servicer had offered the borrower the
TPP under the applicable Tier in accordance with MHA guidelines, the servicer must document
the reasons for such inability in the mortgage file and/or servicing system.
9.6 Principal Curtailments Following Modification
If a principal curtailment is received from or on behalf of the borrower on a loan that has a
principal forbearance, servicers are instructed to apply the principal curtailment to the interest
bearing UPB. If, however, the principal curtailment amount is greater than or equal to the interest
bearing UPB, then the curtailment should be first be applied to the principal forbearance portion.
If the curtailment satisfies the principal forbearance portion, any remaining funds should then be
applied to the interest bearing UPB. This eliminates the possibility of a curtailment paying off (and
satisfying) the interest-bearing portion of the UPB, which would cause the entire loan to become
due and payable and force the borrower to pay off the principal forbearance portion of the loan
balance as a balloon payment.
9.7 Borrower Notice of Interest Rate Step-Ups
Servicers must provide notice to borrowers of any interest rate step-ups that will occur as the
HAMP Tier 1 modifications reach the end of their initial five-year terms. Servicers must provide
notice to HAMP borrowers at least 120 calendar days, but no more than 240 calendar days,
before the first payment is due at the first adjusted level. Each subsequent notice must be sent at
least 60 calendar days, but no more than 120 calendar days, before the first payment is due at
each subsequent adjusted level. All notices must include:
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MHA Handbook v4.3
132 A statement, similar to what was provided in the trial period plan, that (i) pursuant to the
terms of the modification agreement, at the end of the fifth year, the interest rate will
increase by 1% per year until it reaches a cap, which was the market rate of interest
being charged by mortgage lenders on the day the modification agreement was prepared
(the Freddie Mac Primary Mortgage Market Survey ® rate for 30-year fixed-rate
conforming mortgages), (ii) once the interest rate reaches the cap, it will be fixed for the
remaining life of the loan, and (iii) the monthly payment includes an escrow for property
taxes, hazard insurance and other escrowed expenses, which, if they increase, will
increase the monthly payment as well;
 The amount and effective date of the interest rate increase and the amount and due date
of the borrower’s first increased monthly payment at the new adjusted level;
 A table with the payment schedule, similar to the table included in Section 3.C of the
borrower’s modification agreement, which outlines the future interest rates, and monthly
payment amounts (identifying principal and interest, and escrows) and the dates that
these are effective;
 An explanation of how the new payment is determined; and
 A telephone number at the servicer for the borrower to call if they have questions or
concerns about their new payments, and the telephone number for the HOPETM Hotline,
in accordance with Section 2.3.1.
10 HAMP Documents
Servicers are strongly encouraged to use the HAMP documents available on
www.HMPadmin.com. A single set of model modification documents is provided for all loans
regardless of investor. These documents may need to be customized for certain situations that
are unique to a particular investor’s loan program. Should a servicer decide to revise HAMP
documents or draft its own HAMP documents, it must obtain prior written approval from the
Program Administrator with the exception of the circumstances for document revisions set forth
below. To obtain approval, servicers should contact their Servicer Integration Team lead.
10.1 Amending HAMP Documents
Servicers must amend the Modification Agreement and TPP Notice as necessary to comply with
applicable federal, state and local law. Servicers may, and in some instances must, make the
applicable changes to the Modification Agreement as set forth in the Document Summary
available on www.HMPadmin.com. In addition, servicers may amend HAMP documents as
follows without prior written approval.
Event
Non-uniform
documents Detail
The servicer may revise non-uniform HAMP documents in accordance with
investor requirements, regulations or local real estate practice and may
customize the forms with servicer specific logos.
Bankruptcy If the borrower previously received a Chapter 7 bankruptcy discharge but did
not reaffirm the mortgage debt under applicable law, the following language
must be inserted in Section 1 of the Modification Agreement: “I was
discharged in a Chapter 7 bankruptcy proceeding subsequent to the
execution of the Loan Documents. Based on this representation, Lender
agrees that I will not have personal liability on the debt pursuant to this
Agreement.”
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MHA Handbook v4.3
133Event
Automated
payment
method Detail
The servicer may include language in the TPP Notice providing instructions
for borrowers who elect to use an automated payment method to make the
trial period payments.
Prepayment or
assumption
provisions The servicer may insert conditional language in the Modification Agreement
to avoid having to review each set of original loan documents to determine if
they contain prepayment or assumption provisions to retain first lien position,
require subordination agreements and/or title policy endorsements. No
prepayment penalties may be assessed in connection with modifications
under HAMP. If any provision in the note or in any addendum or
amendment to the note allows for the assessment of a penalty for full or
partial prepayment of the note, such provision must be waived.
Conditional
Prepayment
language for
Modification
Agreement If the servicer is subject to a PSA or other servicing contract that requires
payment by the servicer of a material sum to investors if any applicable
prepayment penalties are waived, and servicers must use reasonable efforts
to eliminate the PSA provision requiring payment by the servicer if the
prepayment penalty is waived.
However, if the servicer is unable to eliminate the PSA provision, the servicer
is not required to waive the prepayment penalty as part of the modification,
provided that the prepayment penalty must be waived with respect to any
borrower “pay for performance” principal balance reduction payments that are
applied to the borrower’s mortgage loan. In such a case, servicers should
replace Section 4.I. of the Modification Agreement with the following
language:
“That, as of the Modification Effective Date, any provision in the Note, as
amended, for the assessment of a penalty for full or partial prepayment of the
Note must be waived with respect to any borrower “pay for performance”
principal balance reduction payments that are applied to the Loan.”
10.2 Principal Reduction Alternative Documents
The documents for PRA are the same as those required under HAMP. However, the TPP Notice,
the Modification Agreement Cover Letter, the Modification Agreement and the Modification
Agreement document summary were modified to include language regarding the deferred
principal reduction terms. This language is set forth in the revised documents that are available
on www.HMPadmin.com. The language in one or more of these documents includes:
 An explanation of how the deferred principal reduction will be applied to the loan;
 A statement that the principal reduction amount will be reported to the IRS in the year in
which the curtailment is applied; and
 Advice to the borrower to seek guidance from a tax professional to determine any
potential tax consequences.
In addition, the TPP Notice and the Modification Agreement Cover Letter must explain that the
borrower may decline any offered principal reduction and include a phone number the borrower
may use to decline the offer.
Servicers that offered permanent modifications utilizing PRA prior to issuance of the revised
documents must have modified the Modification Agreement to include the deferred principal
reduction terms .
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13411 Treasury Reporting Requirements
Servicers are required to provide loan level data reporting to the Program Administrator detailing
the process of the evaluation, TPP, modification, and servicing of a loan modified under HAMP.
This data must be accurate, complete, and in agreement with the servicer’s records. The loan
level reporting requirements, timing, loan attributes and detailed guidelines for submitting data
files are posted on www.HMPadmin.com. Servicers are required to submit four separate data
files summarized below using the HAMP Reporting Tool.
11.1 Trial Period Reporting Requirements
Services must report a TPP loan setup to the HAMP Reporting Tool no later than the fourth
business day of the month immediately following the month in which the TPP Effective Date
occurs.
11.2 Loan Setup Reporting Requirements
A one-time loan set up is required to establish the permanent modification in the HAMP Reporting
Tool. The file layout is the same as that used to submit loans for processing during the trial
period.
Servicers are required to input loan set up attributes no later than the fourth business day of the
month in which the modification is effective. For example, if a modification is effective as of
September 1st, the servicer must enter loan set up attributes in the HAMP Reporting Tool no later
than the fourth business day of September. Modifications reported outside of this specified
timeframe will be accepted. However, late reporting may adversely impact monthly cumulative
modification totals. The HAMP Reporting Tool validates that permanent modification terms are
consistent with program requirements and uses the data to calculate the borrower, servicer and
investor incentives. The set up file will reflect the status of the loan after the final trial period
payment is applied. The set up file will contain data for the current reporting period, including the
prior month balances.
A servicer may not submit an official loan set up record to the Program Administrator to report the
permanent modification until the servicer has obtained a fully executed Modification Agreement.
11.3 Official Monthly Reporting
Once a permanent modification has been set up, servicers must begin reporting activity on a
monthly basis. The Official Monthly Report (OMR) is due by the fourth business day each month
for any permanent modification with a Modification Effective Date at least one month prior. For
example, if the Modification Effective Date is July, the first loan activity report is due by the fourth
business day of August for July activity. The monthly reporting attributes are posted on
www.HMPadmin.com.
The Program Administrator will work with servicers during each reporting cycle to resolve any
edits that arise in the OMR reporting process. Servicers have until the eighth (8 th ) business day
of the month to clear up any edits and to report a final OMR to the Program Administrator. For
specific dates, servicers should refer to the Operational Reporting calendar, which is located on
www.HMPadmin.com.
The HAMP Reporting Tool validates that the borrower payment has been made as expected and
that the last paid installment date is current before accruing the appropriate monthly
compensation due.
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13511.4 Additional Data Requirements Reporting
Servicers must collect and report the additional data set forth in the HAMP Additional Data
Requirements Data Dictionary available on www.HMPadmin.com for all (i) permanent
modifications with effective dates on or after December 1, 2009, (ii) TPPs with effective dates on
or after December 1, 2009, and (iii) mortgage loans evaluated for HAMP (as defined in Section
2.3) on or after December 1, 2009. This information is used by Treasury to assess program
effectiveness and ensure servicer compliance with program requirements. The additional data
must be reported in the HAMP Reporting Tool no later than the fourth business day of each
month following the month in which the data were collected.
11.4.1 Reason Codes
Servicers must report a Trial Not Accepted/Not Approved reason code for each loan that is
evaluated (as defined in Section 2.3) and not offered a TPP or does not accept a TPP. Similarly,
servicers must report a Trial Fallout reason code for each loan that falls out of or withdraws from
a trial period or completes the trial period but does not result in a permanent modification. A list
of reason codes is available in the HAMP Additional Data Requirements Data Dictionary posted
on www.HMPadmin.com. When more than one reason under the Trial Not Approved/Not
Accepted reason codes or Trial Fallout reason codes is applicable, the servicer must report the
prevalent reason for the non-approval, non-acceptance or fallout. For borrowers that are
evaluated under HAMP Tier 1 and HAMP Tier 2, the following guidelines must be followed:
 If a borrower is evaluated for HAMP Tier 1, does not receive a HAMP Tier 1 offer but
receives a HAMP Tier 2 offer, the servicer must report a reason code for the HAMP Tier
1 evaluation.
 If a borrower is evaluated for HAMP Tier 1 and HAMP Tier 2 and does not receive an
offer under either Tier, the servicer must report a Trial Not Accepted/Not Approved
reason code for each of the HAMP Tier 1 and HAMP Tier 2 evaluations.
11.4.2 Coding Property Condition for the HAMP Reporting Tool
If a servicer does not have the property condition from an appraisal or BPO, the servicer should
enter “3” (Fair) in the HAMP Reporting Tool, provided the property meets HAMP eligibility
requirements. When a servicer enters “3” because they do not have a property condition from an
appraisal or a BPO:
 The “property condition” field in the HAMP Reporting Tool may not be relied on by the
servicer as a justification or presumption that the loan qualifies for HAMP and that any
subsequent payout based on the information in the HAMP Reporting Tool does not
constitute a waiver on the part of the investor and/or Treasury, who reserves all rights to
seek reimbursement of an improper payout or repurchase of the loan in the event the
property does not meet HAMP eligibility requirements; and
 The “property condition” field in the HAMP Reporting Tool may not be relied on by the
investor as grounds for repurchase of the loan due to a breach of a representation and
warranty related to the property condition.
11.5 Principal Reduction Alternative Reporting
The HAMP Data Dictionary and the HAMP Additional Data Requirements Data Dictionary have
been revised to reflect new and modified edits for PRA and have been posted on
www.HMPadmin.com.
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13611.5.1 Interim Period Reporting
The time period between June 3, 2010 and the date the PRA reporting and payment processes is
referred to in this Handbook as the Interim Period. Servicers that offer permanent modifications
with PRA during the Interim Period will be required to report the transaction to the HAMP
Reporting Tool. Any PRA principal reduction on Interim Period loans should be reported in the
existing principal write-down field. Servicers should not, however, reduce the UPB by the amount
of any PRA principal reduction in the HAMP Reporting Tool for Interim Period loans (though
servicers should reduce the UPB by any principal reduction that is not related to PRA). When the
PRA reporting and payment processes are implemented, servicers must submit a correction
transaction that will move the PRA principal reduction to a new PRA-specific principal forgiveness
field. During the Interim Period, servicers must collect and retain PRA-specific information so that
the necessary data can be reported when the processes become available.
11.5.2 Reserved
11.6 Escalated Cases Reporting
11.6.1 Summary Reporting
Servicers that are required to provide monthly summary-level data to the Program Administrator
via the HAMP Monthly Servicer Survey must include weekly summary-level data for all Escalated
Cases. The data must be accurate, complete, and in agreement with the servicer’s records, are
subject to review by MHA-C, and may be included in public reports made available by Treasury.
11.6.2 Reporting During Borrower Dispute Period
Servicers may not cancel a loan from the HAMP Reporting Tool or report a “Trial Not
Approved/Not Accepted” reason code within the 30 calendar days after the date of a Non-
Approval Notice or any longer period required to review and resolve an Escalated Case. In
addition, servicers should continue to report the status of the loan in accordance with HAMP
reporting guidelines outlined in Section 12 and on www.HMPadmin.com.
11.7 Reporting Requirements for HAMP Modified Loans Repurchased from
GSEs
A GSE may require a SPA servicer to repurchase or buy back a mortgage loan under certain
circumstances. The guidance in this section and in Section 13.4 applies with respect to loans
that a SPA servicer is required to repurchase from a GSE either during a trial period plan or after
being permanently modified under HAMP (each a HAMP Modified Loan). The HAMP Reporting
Tool has been modified to allow SPA servicers to (i) report HAMP Modified Loans that have been
repurchased and change the investor codes as needed and (ii) report whether such loans were
repurchased during the TPP or after conversion to a permanent modification.
With respect to a HAMP Modified Loan that is in a trial period plan as of the effective date of the
repurchase, the servicer has the ability to report the loan as repurchased and to change the
investor code. With respect to a HAMP Modified Loan that has been permanently modified as of
the effective date of the repurchase, the servicer should cancel the permanent modification in the
HAMP Reporting Tool. This will cause the modification to revert to trial status in the HAMP
Reporting Tool so the servicer can report the loan as repurchased and change the investor code.
The servicer should then re-board the loan in the HAMP Reporting Tool as a permanent
modification subject to the guidance below and in Section 13.4.
Within 60 calendar days from the HAMP Reporting Tool’s April 1, 2013 implementation, servicers
should begin steps to cancel and change the investor codes in the HAMP Reporting Tool for all
HAMP Modified Loans that the servicer repurchased on or before April 1, 2013. With respect to
HAMP Modified Loans repurchased after April 1, 2013, the servicer must begin steps to cancel
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137and change the investor code in the HAMP Reporting Tool no later than the fourth (4 th ) business
day of the month after the date of the repurchase. Steps to cancel and change the investor code
will vary depending on the status of the modification at time of repurchase and the current state of
the loan in the HAMP Reporting Tool. Once a repurchase is completed in the servicer’s system,
servicers should follow normal monthly reporting timelines to complete repurchase reporting in
the HAMP Reporting Tool.
12 External Reporting Requirements
12.1 Reporting to Mortgage Insurers
Servicers must comply with reporting required by the mortgage insurer for loans modified under
HAMP and consult with the mortgage insurer for specific processes related to the reporting of
modified terms, payment of premiums, payment of claims, and other operational matters in
connection with mortgage HAMP modified loans.
Servicers are required to report permanent HAMP modifications and the terms of those
modifications to the appropriate mortgage insurers, if applicable, within 30 days following the end
of the trial period and in accordance with procedures that currently exist or may be agreed to
between the servicers and the mortgage insurers.
Servicers must collect the mortgage insurance premium in addition to the borrower’s modified
payment and ensure that any existing mortgage insurance is maintained. Among other things, the
servicer must ensure that the mortgage insurance premium is paid. In addition, servicers must
adapt their systems to ensure the proper reporting of modified loan terms and avoid impairing
coverage for any existing mortgage insurance. For example, in the event that the modification
includes principal forbearance, servicers must continue to pay the correct mortgage insurance
premiums based on the gross UPB, including any principal forbearance amount and include the
gross UPB in their delinquency reporting to the mortgage insurer. Servicers should ensure any
principal forbearance does not erroneously trigger automatic mortgage insurance cancellation or
termination.
12.2 Credit Bureau Reporting
Servicers should report a “full file” status report to the credit reporting agencies for each loan
under HAMP in accordance with the Fair Credit Reporting Act as well as other applicable laws
and credit bureau requirements as provided by the Consumer Data Industry Association (CDIA).
“Full-file” reporting means that the servicer must describe the exact status of each mortgage it is
servicing as of the last business day of each month.
12.2.1 Trial Period Reporting
If the borrower was current with payments prior to the trial period and he or she makes each trial
period payment on time, servicers must report the borrower as current (Account Status 11) during
the trial period and report Special Comment Code ‘AC’ (Paying under a partial or modified
payment agreement). The servicer must also report the modification when it is completed.
If the borrower was delinquent (at least 30 days past the due date) prior to the trial period and the
reduced payments do not bring the account current, servicers must report the Account Status
Code that reflects the appropriate level of delinquency following the usual and customary
reporting standards. The servicer reports the modification when it is completed as well. The
servicer should also report Special Comment Code ‘AC’ (Paying under a partial or modified
payment agreement).
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13812.2.2 Post Modification Reporting
Following modification of a loan under HAMP, servicers should use Special Comment Code ‘CN’
(Loan modified under a federal government plan) to identify loans being paid under a modified
payment agreement as described in the guidance below provided by CDIA.
 Servicers should continue to report one trade line under the original Account Number.
 Date Opened = the date the account was originally opened
 Original Loan Amount = the original amount of the loan, including the Balloon Payment
Amount, if applicable. If the principal balance increases due to capitalization of delinquent
amounts due under the loan, the Original Loan Amount should be increased to reflect the
modified principal balance
 Terms Duration = the modified terms
 Scheduled Monthly Payment Amount = the new amount as per the modified agreement
 Current Balance = the principal balance (including the Balloon Payment Amount, if
applicable), plus the interest and escrow due during the current reporting period
 Account Status Code = the appropriate code based on the new terms of the loan
 Special Comment Code = CN
 K4 Segment = used to report the Balloon Payment information, if applicable
 Specialized Payment Indicator = 01 (Balloon Payment)
 Payment Due Date = the date the balloon payment is due, which is equal to maturity of
the amortizing portion of the loan. Note: The payoff date can be used in this field
 Payment Amount = the Balloon Payment Amount in whole dollars only
Servicers should ensure that all borrowers who receive a permanent modification are reported
using the ‘CN’ Special Comment Code and not the ‘AC’ Special Comment Code. If the
Modification Effective Date has passed, the servicer is not required to make corrections to prior
months if the AC code was previously reported. Special Comment Code AC is not "sticky",
meaning that it does not persist on the credit file.
12.2.3 Principal Reduction Alternative Reporting
For loans modified using PRA, when each installment of the PRA Forbearance Amount is applied
to the UPB of the loan, the servicer should update the credit repositories with the current balance
owed and amend the K4 segment to reflect the reduced UPB.
The "due date" in the K4 Segment should reflect the scheduled maturity date of the permanent
modification. However, if the Principal Forbearance Amount no longer applies after the portion of
the loan is forgiven, the servicer should no longer report the K4 Segment.
13 Incentive Compensation
Borrowers, servicers and investors are eligible for incentive compensation under HAMP. The
Program Administrator will make incentive payments to the servicer via an automated clearing
house (ACH) transaction in a consolidated fashion and will provide detailed loan-level accounting
for incentives on a monthly basis. Upon receipt of such incentive compensation, each servicer
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139must promptly, but not later than 30 calendar days after receipt, apply or remit, as applicable, all
borrower and investor compensation with respect to any modified loan, including with respect to
any PRA-modified loan. Treasury is not providing guidance on how funds are to be passed
through to security holders of securitization trusts. However, MHA-C will monitor to ensure that
cost share reduction payments are remitted to security holders and borrower pay for performance
incentive payments are applied to borrower accounts in accordance with program guidelines.
With respect to payment of any incentive that is predicated on a six percent reduction in the
borrower’s monthly mortgage payment, the reduction will be calculated by comparing the pre-
modification PITIA payment and the borrower’s post-modification PITIA under HAMP.
No incentives of any kind will be paid if:
 The servicer has not executed the SPA;
 The servicer has reached its Program Participation Cap, as discussed in Section 1.5 of
Chapter I;
 The borrower does not qualify for, or otherwise enter into, a permanent modification; or
 The loan has not been reported to the Program Administrator through the HAMP
Reporting Tool.
13.1 Servicer Incentive Compensation
A servicer will be entitled to the completed modification incentive once the borrower enters into a
permanent modification, provided that the servicer has reported to the Program Administrator any
required servicer or loan set up data. The completed modification incentive will be paid to the
servicer in the month that the permanent modification becomes effective.
13.1.1 Completed Modification Incentive
A servicer will receive compensation in accordance with the following chart for each completed
modification under HAMP.
No. of days delinquent at TPP Effective Date
Less than or equal to 120 days delinquent (150 days from Last Paid
Installment (LPI))
121 days or more delinquent to and including 210 days delinquent (151 to
240 days from LPI), or – 210
Greater than 210 days delinquent (greater than 240 days from LPI)
Incentive Amount
$1,600
$1,200
$ 400
13.1.2 Prohibition on Special Collection Measures
Other than utilizing a servicer’s standard collection efforts, servicers may not, during or prior to
consideration of a borrower for HAMP or as a condition of HAMP eligibility, take additional
collection measures in order to reduce the delinquency period prior to approval of a TPP. These
additional efforts include but are not limited to short term repayment plans, requiring borrowers to
make past due payments, or bringing a loan less delinquent through capitalization, deferral or
forgiveness of payments. MHA–C will perform testing of loan payment histories to ensure that
such activities do not occur.
13.1.3 “Pay for Success” Incentive under HAMP Tier 1
If a particular borrower’s monthly mortgage payment is reduced through HAMP Tier 1 by six
percent or more, a servicer will also receive an annual “pay for success” payment for a period of
three years. The fee will be equal to the lesser of:
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140 $1,000 ($83.33/month); or
 One-half of the reduction in the borrower’s annualized monthly payment.
The “pay for success” payment will be payable annually for each of the first three years after the
anniversary of the month in which the HAMP Tier 1 TPP Effective Date occurred as long as the
loan is in good standing and has not been paid in full at the time the incentive is paid.
If the loan ceases to be in good standing or is paid in full, the servicer will forfeit any incentive
payments that have accrued but are unpaid and will cease to be eligible for any further incentive
payments after that time, even if the borrower subsequently cures his or her delinquency.
The “pay for success” payment is not payable for a HAMP Tier 2 permanent modification.
13.2 Borrower Incentive Compensation under HAMP Tier 1
Borrowers whose monthly mortgage payment is reduced through HAMP Tier 1 by six percent or
more and who make timely monthly payments will earn an annual “pay for performance” principal
balance reduction payment equal to the lesser of:
 $1,000 ($83.33/month); or
 One-half of the reduction in the borrower’s annualized monthly payment for each month a
timely payment is made.
The “pay for performance” principal balance reduction payment will accrue for each month in
which the borrower makes current payments. The payment will be payable annually for each of
the first five years after the anniversary of the month in which the HAMP Tier 1 TPP Effective
Date occurred as long as the loan is in good standing and has not been paid in full at the time the
incentive is paid.
For example, if the borrower is current and makes 10 out of 12 payments on time, he or she will
be credited for 10/12 of the annual incentive payment as long as the loan is in good standing at
the time the annual incentive is paid. A borrower whose loan is delinquent on a rolling 30- or 60-
day basis will not accrue annual incentive payments.
This payment will be paid to the mortgage servicer to be applied first towards reducing the
interest bearing UPB on the mortgage loan and then to any principal forbearance amount (if
applicable). Any applicable prepayment penalties on partial principal prepayments made by the
government must be waived. In the event the borrower is delinquent, but still in good standing,
the borrower’s incentive should continue to be applied as a curtailment to the interest-bearing
UPB.
If the loan ceases to be in good standing or is paid in full, the borrower will forfeit any incentive
payments that have accrued but are unpaid and will cease to be eligible for any further incentive
payments after that time, even if the borrower subsequently cures his or her delinquency. With
respect to PRA, if a borrower loses good standing before the entire PRA Forbearance Amount
has been applied as principal reduction to the UPB, the unapplied PRA Forbearance Amount
shall remain as non-interest bearing principal forbearance for the remaining life of the loan.
“Pay for performance” principal balance reduction payments are excluded from gross income for
tax reporting purposes.
A borrower that received a HAMP Tier 2 permanent modification is not eligible for pay for
performance principal balance reduction payments.
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14113.3 Investor Incentive Compensation
An investor will be entitled to the payment reduction cost share and, if applicable, the PRA
investor incentive and the current borrower incentive, once the borrower enters into a permanent
modification.
13.3.1 Payment Reduction Cost Share
For modifications under HAMP Tier 1, investors are entitled to payment reduction cost share
compensation equal to one-half of the dollar difference between the borrower’s monthly payment
(principal and interest only) under the modification calculated at 31 percent of the borrower’s
monthly gross income and the lesser of:
 What the borrower’s monthly payment (principal and interest only) would be at a 38
percent monthly mortgage payment ratio; or
 The borrower’s pre-modification monthly payment (principal and interest only).
For modifications under HAMP Tier 2, investors are entitled to payment reduction cost share
compensation equal to one-half of (i) the dollar difference between the borrower’s post-
modification principal and interest payment under HAMP Tier 2 and the borrower’s pre-
modification principal and interest payment or (ii) 15 percent of the borrower’s pre-modification
principal and interest payment, whichever is lower.
Payment reduction cost share compensation is paid monthly beginning the month following the
month of the effective date of the permanent HAMP modification so long as the loan is in good
standing. This compensation will be provided for up to five years or until the loan is paid off,
whichever is earlier.
13.3.2 Current Borrower Incentive
If a borrower was current under the original mortgage loan secured by a property that is owner-
occupied as set forth in Section 1.1.2 and the borrower’s monthly PITIA was reduced by at least
six percent, an investor will receive an additional compensation amount of $1,500 for completing
the permanent modification. Pursuant to Section 8.2, when the TPP Notice is transmitted to the
borrower after the 15th day of a calendar month, which calls for a TPP Effective Date as of the
first day of the month after the next month, such incentive is paid only if borrowers either (i) make
their contractual payment in the intervening month prior to the effective date of the trial period; or
(ii) agree to commence their trial period on the first day of next month. Servicers should remind
their current borrowers in writing that they must make all contractual payments due under the
terms of their original loan documents until the TPP Effective Date.
Investors are not entitled to receive Current Borrower Incentives on HAMP Tier 2 modified loans
secured by rental properties.
13.3.3 Home Price Decline Protection (HPDP) Incentives
The HPDP initiative provides investors with additional incentives for modifications of loans on
properties located in areas where home prices have recently declined and where investors are
concerned that price declines may persist. HPDP incentive payments are linked to the rate of
recent home price decline in a local housing market, as well as the UPB and mark-to-market LTV
ratio of the mortgage loan.
HPDP incentive payments will be made only with respect to modifications with TPP Effective
Dates and NPV Dates (as defined in Section 13.3.3.1) on or after September 1, 2009. HPDP
incentives are conditional upon at least a six percent reduction in the borrower’s monthly PITIA
payment.
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14213.3.3.1 HPDP Calculation
The HPDP incentive payments are calculated based upon the following three characteristics
(outlined further in Exhibit C) of the mortgage loan receiving a modification:
 An estimate of the cumulative projected home price decline over the next year, as
measured by changes in the home price index over the previous two quarters in the
applicable local market (MSA or non-MSA region) in which the related mortgaged
property is located;
 The UPB of the mortgage loan prior to modification; and
 The mark-to-market LTV of the mortgage loan based on the UPB of the mortgage loan
prior to modification.
The Program Administrator will determine the potential HPDP incentive payable for a modification
as of the date the NPV Model initially is run by the servicer to evaluate the borrower’s eligibility to
receive a HAMP offer (NPV Date). The NPV Date for determining the potential HPDP incentive
payment is the same date that the servicer must report in the NPV Date data field as part of the
trial period set up file for the mortgage loan.
The HPDP incentive payment is an input in the Base NPV Model. The Base NPV Model
accesses the proper HPDP incentive payment for each NPV calculation, so servicers that use the
Base NPV Model will not need to take any action with respect to the HPDP incentive payment.
Servicers that integrate the Base NPV model into their systems or customize the NPV model in
accordance with HAMP requirements are responsible for ensuring that they incorporate the
required HPDP determination functionality into their version of the NPV model. The HPDP
incentive payment amount used for a mortgage loan in the NPV model on the NPV Date used to
determine the borrower’s HAMP eligibility should be used in any subsequent runs of the NPV
model for that mortgage loan.
Specific details regarding the use of the HPDP incentive payment in the NPV model are in the
model documentation of the Base NPV Model.
An example of the HPDP calculation is provided in Exhibit D.
13.3.3.2 HPDP Accrual and Payments
The potential HPDP incentive payable for a modification will accrue over a two-year period. An
investor will accrue 1/24th of the total HPDP incentive payment for every month in which the
borrower remains in good standing. The accrued HPDP incentive payments to the investor will
include payments for each trial period month. However, if the trial period is not completed
successfully, no HPDP incentives will be paid to an investor. HPDP incentive payments will cease
to accrue once a borrower loses good standing under HAMP or is paid in full. However, investors
will be entitled to all accrued, but unpaid HPDP incentive payments.
Payments of accrued HPDP incentives will be made on an annual basis on each of the first
anniversary and the second anniversary of the TPP Effective Date. Accrued but unpaid HPDP
incentive payments are payable on the HAMP incentive payment date in the month in which the
loss of good standing or payment in full is reported to the Treasury system of record.
13.3.4 Principal Reduction Alternative Investor Incentive Payments
Investors will qualify for PRA investor incentive payments for reductions creating a mark-to-
market LTV ratio as low as 105 percent, even if the pre-modification mark-to-market LTV ratio is
greater than 105 percent but less than or equal to 115 percent, or with respect to HAMP Tier 1
modifications, the reduction results in a monthly mortgage payment ratio below the 31 percent
target. Servicers are not precluded from reducing principal below a 105 percent mark-to-market
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143LTV ratio; however, PRA investor incentives will not be paid on the portion of any principal
reduction that reduces the mark-to-market LTV ratio below 105 percent. Additionally, pursuant to
Section 13.3.1, Investor Payment Reduction Cost Share Incentives will only be paid based on
modification terms that reflect the target monthly mortgage payment ratio under HAMP Tier 1 or
that fall within the acceptable post-modification mortgage payment ratio range for HAMP Tier 2.
PRA investor incentives will only be paid in conjunction with principal reduction that is deferred
over three years in accordance with the requirements of Section 6.4.5.
13.3.4.1 Principal Reduction Incentive Schedule
PRA Compensation
Per Dollar of UPB Forgiven in Mark-to-Market LTV Ratio Range
(Loans Less than or Equal to Six Months Past Due)
105% to <115%
115% to 140%
>140%
0.63
0.45
0.30
With respect to loans that were less than or equal to six months past due at all times during the
12-month period prior to the NPV Date, investors will be entitled to receive $0.63 per dollar of
principal reduction equal to or greater than 105 percent and less than 115 percent mark-to-market
LTV ratio; $0.45 per dollar of principal reduction equal to or greater than 115 percent and less
than or equal to 140 percent mark-to-market LTV ratio; and $0.30 per dollar of principal reduction
in excess of 140 percent mark-to-market LTV ratio.
With respect to loans that were more than six months past due at any time during the 12-month
period prior to the NPV Date, irrespective of mark-to-market LTV ratio range, investors will be
paid $0.18 per dollar of principal reduction and will not be eligible for incentives in the above
extinguishment schedule. PRA investor incentive payments will be earned by investors in the
month in which the applicable principal reduction amount is actually applied to reduce the
borrower’s UPB as set forth in Section 6.4.5.
13.3.4.2 Interim Period Incentive Compensation
Loans with a pre-modification mark-to-market LTV greater than 105 percent that are permanently
modified under HAMP during the Interim Period and include PRA principal reduction may be
eligible for PRA investor incentives in compliance with Section 13.3.4.1 so long as:
 The loan remains in good standing as defined in Section 9.4 on the implementation date
of the PRA reporting and payment processes by the Program Administrator;
 The modification otherwise complies with HAMP requirements;
 The modification terms are accurately entered into the HAMP Reporting Tool at the time
of modification in compliance with the guidance set forth in Section 13.3.4; and
 When the PRA reporting and payment processes become available, a correction
transaction is submitted moving the PRA principal reduction to the new PRA specific
principal forgiveness field and all additional PRA specific data retained by the servicer is
reported to the HAMP Reporting Tool.
Servicers providing principal reduction during the Interim Period will not be required to perform an
alternative NPV evaluation for loans modified prior to the PRA Effective Date. Notwithstanding the
foregoing, Interim Period loans that are fully satisfied prior to implementation of the PRA reporting
and payment processes are not eligible for PRA investor incentives.
Chapter II: HAMP
MHA Handbook v4.3
14413.4 Incentives Impact on HAMP Modified Loans Repurchased from GSEs
Incentives will only be paid with respect to modifications that comply with the eligibility,
underwriting or other requirements set forth in this Handbook. This includes, but is not limited to,
compliance with the Dodd Frank Act and Treasury’s requirement for delivery of the Dodd-Frank
Certification requirement pursuant to Section 1.7 of Chapter I. Therefore servicers must obtain a
Dodd-Frank Certification for each HAMP Modified Loan repurchased from a GSE unless the trial
or permanent modification, or an offer for such trial or permanent modification, was outstanding
as of the effective date of the Dodd-Frank Certification requirement. If the servicer cannot
confirm whether a repurchased loan was a trial or permanent modification, or subject to an offer
for such trial or permanent modification, as of the effective date of the Dodd-Frank Certification
requirement, the servicer must obtain the Dodd-Frank Certification before boarding or re-boarding
the loan as a modification of a non-GSE loan in the HAMP Reporting Tool.
Servicers must, within 30 days of the repurchase date, send a Dodd-Frank Certification to all
requisite parties with a request to sign and return the Dodd- Frank Certification as a condition of
receipt of pay-for-performance incentives. Servicers should allow borrowers no less than 30
calendars days to return a Dodd-Frank Certification from the date of the initial request. If the
completed Dodd-Frank Certification is not received by the specified date, a second notice should
be sent, allowing the borrower at least 15 additional calendar days from the date of the second
notice to return the certification. If the Dodd-Frank Certification is still not received by that date,
the servicer may discontinue document collection efforts and cancel the loan in the HAMP
Reporting Tool due to Dodd-Frank non-compliance. Completed Dodd- Frank Certification(s) must
be obtained from all requisite parties prior to re-boarding loans repurchased from a GSE. If the
Dodd-Frank Certification is required and not obtained, no incentives will be paid. Servicers must
retain evidence of efforts to obtain Dodd-Frank Certifications.
In the event that a HAMP Modified Loan repurchased from a GSE is cancelled in the HAMP
Reporting Tool due to Dodd-Frank Certification non-compliance and the borrower subsequently
provides the Dodd-Frank Certification, the servicer may, at its discretion reinstate the trial or
permanent modification in the HAMP Reporting Tool. Servicers who wish to exercise this
discretion must establish a policy identifying any conditions (e.g., timing of receipt of Dodd-Frank
Certification, delinquency status) and ensure that it is applied consistently to all similarly situated
borrowers.
Trials or modifications that are cancelled due to Dodd-Frank Certification non-compliance are not
eligible for another HAMP modification in the same tier. A borrower who was cancelled from Tier
1 could potentially be eligible for Tier 2; a borrower cancelled from Tier 2 is not eligible for another
HAMP modification, but may later be considered for HAFA.
13.4.1 Loans in a Trial Period Plan as of the Effective Date of the Repurchase
HAMP Modified Loans that were in an active TPP as of the effective date of the repurchase are
eligible for all applicable investor, servicer and borrower incentives, including incentives accrued
from the effective date of the TPP. All incentives will be paid in accordance with Treasury
guidance.
13.4.2 Loans Permanently Modified as of the Effective Date of the Repurchase
HAMP Modified Loans that were permanently modified and in good standing as of the effective
date of the repurchase are eligible for all applicable servicer and borrower incentives, including
incentives that accrued prior to re-boarding the repurchased loan in the HAMP Reporting Tool
and incentives earned afterwards. Any loan originally reported in the HAMP Reporting Tool as a
GSE permanent modification and subsequently repurchased and re-boarded with a new non-
GSE investor is not eligible for investor incentives.
Chapter II: HAMP
MHA Handbook v4.3
14513.4.3 Loans Permanently Modified but are No Longer in Good Standing
HAMP Modified Loans that lose good standing or are paid off prior to the effective date of the
repurchase may not be re-boarded and are not eligible for any MHA incentives.
Chapter II: HAMP
MHA Handbook v4.3
146CHAPTER III: HOME AFFORDABLE UNEMPLOYMENT PROGRA
Chapter III
Home Affordable Unemployment
Program (UP)
Chapter III: UP
MHA Handbook v4.3
1471 Introduction
The Home Affordable Unemployment Program (UP) provides servicers the flexibility to provide
assistance to borrowers whose hardship is related to unemployment. Servicers that are
participating in HAMP with respect to Non-GSE Mortgages must follow the guidance set forth in
this Chapter, subject to investor and regulator guidelines, when borrowers seeking assistance are
unemployed.
MHA-C will incorporate an evaluation of UP implementation, processes, and controls into its
servicer reviews. Servicers should refer to Section 2 of Chapter I.
2 Eligibility
2.1 UP Eligibility Requirements
A borrower or co-borrower who is unemployed and requests assistance under HAMP must be
evaluated for and, if qualified, must receive an offer for an UP forbearance plan. Servicers may
evaluate unemployed borrowers for HAMP and can offer a HAMP TPP instead of an UP
forbearance plan if, in the servicer’s business judgment, HAMP is the better loss mitigation option
for the borrower. The servicer must document in the servicing system and/or mortgage file why
the option selected was considered to be the best option for the borrower. If an unemployed
borrower evaluated for HAMP is not offered a TPP, the servicer must consider the borrower for
UP.
The UP eligibility criteria are as follows:
First Lien
The mortgage loan is a first lien mortgage loan originated on or before
January 1, 2009. This includes mortgages secured by:
 Cooperative shares,
 Condominium units, and
 Manufactured housing (the first lien mortgage loan must secure the
manufactured home and the land, both of which must be classified as
real property under applicable state law).
The reference to “originated on or before” refers to the date on which the loan
was first originated (i.e., not the date a loan may have been modified
previously).
Unpaid
principal
balance limits
Owner-
occupied,
single family
property
Chapter III: UP
The current UPB of the mortgage loan prior to capitalization is not greater
than:
 1 Unit $729,750
 2 Units $934,200
 3 Units $1,129,250
 4 Units $1,403,400
The mortgage loan is secured by a one- to four-unit property, one unit of
which i owner-occupied as set forth in Section 1.1.2 of Chapter II. In addition,
servicers may, but are not required to grant UP assistance to a borrower
whose loan is secured by a rental property (as defined in Section 1.1.3 of
Chapter II).
MHA Handbook v4.3
148Not
condemned The property securing the mortgage loan is not condemned nor is it in such
poor physical condition that it is uninhabitable even if not condemned.
Servicers must retain in the mortgage file and/or servicing system all
evidence related to the basis for the determination of an uninhabitable
condition.
Delinquent or
in imminent
default The mortgage loan is delinquent or default is reasonably foreseeable.
Hardship The borrower has documented a financial hardship and represented that he
or she does not have sufficient liquid assets to make the monthly mortgage
payments. Servicer may accept unemployment as evidence of hardship.
Program cut-
off date The borrower has submitted a request (phone, mail, fax or e-mail) for UP on
or before December 31, 2015. Written evidence of the request must be
documented by postmark or other independent indicator, such as a date and
time stamp (electronic or otherwise), evidencing submission by the program
cut-off date.
2.2 Additional Factors Impacting UP Eligibility
Monthly
mortgage
payment ratio Servicers are required to consider a borrower for UP assistance regardless of
the borrower’s monthly mortgage payment ratio.
Unemployed
non-borrower Servicers are not required to offer an UP forbearance plan if a household
member that is not a borrower becomes unemployed, even if that income
contributed to the mortgage payment.
Unemployed at
date of UP
request The borrower is unemployed at the date of the request.
Receipt of
unemployment
benefits Borrowers who received unemployment benefits within the six month period
prior to requesting UP assistance but whose benefits have expired at the time
of the UP request must be considered for an UP forbearance plan if the
borrower remains unemployed.
Upon receipt of a request from an unemployed borrower who was previously
denied an UP forbearance plan because at the time of the request the
borrower would not be in receipt of unemployment benefits in the month of the
forbearance period effective date but had received unemployment benefits
within the six-month period prior to requesting UP, the servicer must re-
evaluate the borrower for an UP forbearance plan.
Total
Delinquency
Chapter III: UP
Servicers are not required to offer an UP forbearance plan on a loan where
the delinquency, at the time of the UP request, exceeds 12 months of the
borrower’s scheduled monthly mortgage payment (which includes taxes and
insurance for those loans where such expenses are escrowed).
MHA Handbook v4.3
149Prior
Unemployment
Mortgage
Assistance –
borrower in or
completed a
UP forbearance
plan Upon receipt of a request from a borrower who completed an UP forbearance
plan prior to October 1, 2011 or is currently performing in an UP forbearance
plan as of October 1, 2011, and who continues to meet the UP eligibility
requirements, the servicer must evaluate that borrower for additional
forbearance for a period that extends the unemployment assistance to a
minimum of 12 months. Unemployment assistance may include UP and/or
Non-MHA Unemployment Assistance.
Prior
Unemployment
Mortgage
Assistance –
borrower
denied UP
forbearance
plan Upon receipt of a request from a borrower who was previously denied an UP
forbearance plan prior to October 1, 2011 because the first mortgage lien was
seriously delinquent at the time of the request or the borrower was not in
receipt of unemployment benefits for a period of up to three months prior to
the effective date of the UP forbearance plan, the servicer must re-evaluate
the borrower for an UP forbearance plan for a minimum of 12 months of
unemployment assistance that includes any prior Non-MHA Unemployment
Assistance.
Borrower is a
natural person The borrower must be a natural person. Mortgage loans made to, or secured
by properties owned by, corporations, partnerships, limited liability companies
or other business entities are not eligible for assistance under UP.
2.3 Eligibility of HAMP Borrowers
HAMP
Ineligible A borrower with a loan that was previously determined to be ineligible for a
HAMP modification may request consideration for an UP forbearance plan if
the borrower meets the UP eligibility requirements.
Loan in an
Active Trial
Period Plan A borrower whose loan is currently in a HAMP (Tier 1 or Tier 2) TPP and who
becomes unemployed may seek consideration for the loan under UP
regardless of whether the borrower had a payment default. A loan may not
simultaneously be in a HAMP TPP and an UP forbearance plan.
A servicer may not require an unemployed borrower in a TPP to convert to an
UP forbearance plan.
Loan in a
HAMP
permanent
modification
A borrower in a HAMP permanent modification that is in good standing is not
eligible for an UP forbearance plan. A borrower in a HAMP permanent
modification that has lost good standing is eligible for an UP forbearance plan.
A borrower that has obtained employment during or after an UP forbearance
plan or Non-MHA Unemployment Assistance, but still has a financial hardship
and otherwise meets HAMP eligibility criteria, must be considered for HAMP
(Tier 1 and/or Tier 2) prior to consideration of other loss mitigation alternatives.
2.4 Borrower Not Eligible for UP
Unemployed borrowers who do not meet the eligibility criteria for an UP forbearance plan should
be evaluated for other proprietary forbearance programs similar to UP. Borrowers that are not
offered any type of forbearance plan related to unemployment must be evaluated for HAMP,
excluding from monthly gross income unemployment benefits and any other temporary sources of
income related to unemployment, such as severance payments. If the borrower is not eligible for
HAMP, the servicer must send the borrower a Non-Approval Notice in accordance with Section
2.3.2 of Chapter II.
Chapter III: UP
MHA Handbook v4.3
1502.5 Borrower Declines UP
If a borrower who is eligible for UP declines an offer for an UP forbearance plan, the servicer is
not required to offer the borrower a modification under HAMP; provided, however, the servicer
may (but is not required to), in accordance with investor guidelines, offer to evaluate the borrower
for HAMP. The servicer must notify the borrower that, if they are eligible for an UP forbearance
plan but they do not accept it, they may not be considered for a modification under HAMP while
they are eligible for an UP forbearance plan. The borrower may request reconsideration under
HAMP at a future time if the requirements of the “Continued Eligibility” guidance set forth in
Section 1.2 of Chapter II are met.
3 Protections Against Unnecessary Foreclosure
3.1 Suspension of a Referral to Foreclosure or Foreclosure Sale
Servicers may not refer any loan to foreclosure or conduct a scheduled foreclosure sale in the
following circumstances:
 After a borrower makes a request for UP consideration and while the borrower is being
evaluated for UP;
 After the servicer mails the Forbearance Plan Notice (FPN) as described in Section 4.3;
 During the initial UP forbearance plan or any extension thereof; and
 Following the UP forbearance plan while the borrower is being evaluated for or
participating in HAMP or HAFA.
 Until the servicer has resolved the Escalated Case in accordance with Section 3 of
Chapter I.
In addition, servicers must follow the solicitation and foreclosure provisions in Section 2.2 and
Section 3.4 of Chapter II, respectively.
3.2 Deadline for UP Consideration
Servicers are not required to consider a borrower for UP if the request is received after midnight
on the seventh business day prior to a scheduled foreclosure sale.
3.3 Simultaneous Forbearance Plan and Foreclosure Explanation
When a borrower’s mortgage has already been referred to foreclosure prior to the UP evaluation,
the servicer must provide the borrower with a written notification that explains, in clear language,
the concurrent forbearance and foreclosure processes and states that even though certain
foreclosure activities may continue, the home will not be sold at a foreclosure sale while the
borrower is being considered for UP or while the borrower is making payments under his or her
UP forbearance plan. Model language for this notification is available on www.HMPadmin.com.
Use of the model language is optional; however, it illustrates the level of specificity that is deemed
to be in compliance with the language requirements of the MHA Program.
Chapter III: UP
MHA Handbook v4.3
1514 UP Forbearance Plans
4.1 Request for UP Forbearance
A request for UP consideration may be made by phone, mail, fax or e-mail. Servicers must
document the date of the UP request in the mortgage file and/or servicing system. Evidence of
borrower submission must be provided by postmark or other independent indicator such as a
date and time stamp (electronic or otherwise) evidencing submission by the borrower on or
before December 31, 2015. Once the borrower requests consideration for UP, the servicer must
send the borrower a written notice within 10 business days confirming the receipt of the request
and providing a list of the required documentation, including unemployment benefit information.
The due date for the required documentation may not be less than 15 calendar days from the
date of the servicer communication. The servicer must indicate in the mortgage file and/or
servicing system when it determines all required documentation has been received.
After receiving the borrower’s required documentation, the servicer must determine the
borrower’s eligibility for UP within 30 calendar days, including the determination that the borrower
has met the hardship requirement in Section 2.1. The servicer must mail an FPN or a Non-
Approval Notice to the borrower within 10 business days following the date of the servicer’s
determination.
4.2 UP Forbearance Plan Terms
4.2.1 Duration
The minimum UP forbearance period is the lesser of 12 months or upon notification that the
borrower has become re-employed. Servicers should establish procedures for tracking borrowers’
employment status and include any applicable borrower instructions in the FPN, as described
below. There is no maximum forbearance period; however, servicers are not required to offer
forbearance for a term that would cause the dollar amount of the borrower’s delinquency to
exceed 12 months of the borrower’s scheduled monthly mortgage payment (which includes taxes
and insurance for those loans where such expenses are escrowed).
4.2.2 Extension
Servicers may extend the minimum forbearance period in increments at the servicer’s discretion.
Any borrower eligibility review or recertification documentation requirements that may apply after
the initial forbearance period are at the servicer’s discretion. Borrowers in an active UP
forbearance plan as of October 1, 2011, must, prior to the expiration that plan, be considered for
an extension of UP for a minimum of 12 months of unemployment assistance, including UP and
Non-MHA Unemployment Assistance.
4.2.3 Monthly Payments
The borrower’s monthly mortgage payment must be reduced to an amount that is no more than
31 percent of the borrower’s monthly gross income (as defined in Section 6.1.1 of Chapter II). In
determining monthly gross income, the servicer may rely on stated income provided by the
borrower or may require documentation of income. At the discretion of the servicer, the
borrower’s monthly mortgage payments may be suspended in full. The payment amount, if any,
will be determined by the servicer in accordance with investor and regulator guidelines and
applicable laws and regulations. Servicers must have written procedures for determining when a
payment will be required during an UP forbearance plan and how the payment amount will be
determined, and must consistently apply those procedures.
Chapter III: UP
MHA Handbook v4.3
1524.2.4 Late Fees
Late charges may accrue while the servicer is determining borrower eligibility for an UP
forbearance plan and during the forbearance period. However, a servicer must not collect late
charges from the borrower during the forbearance period. Additionally, all accrued and unpaid
late charges must be waived in the event the borrower receives a permanent HAMP modification.
4.2.5 Termination of UP Forbearance
The UP forbearance plan will continue to its end point unless one of the following conditions
occurs:






The borrower abandons the property, unless the vacancy is approved by the servicer;
The borrower advises the servicer that he/she is no longer going to seek employment;
The borrower does not honor the terms of the UP forbearance plan;
The borrower is re-employed;
The borrower is evaluated for HAMP and qualifies for a TPP; or
At the servicer’s discretion, the dollar amount of the borrower’s total delinquency exceeds
12 months of the borrower’s scheduled monthly mortgage payments (which includes
taxes and insurance for those loans where such expenses are escrowed).
4.3 Forbearance Plan Notice (FPN)
As described above in Section 4.1, after receiving the borrower’s required documentation, the
servicer is required to determine the borrower’s eligibility for UP and send the borrower either an
FPN or a Non-Approval Notice. For existing UP forbearance plans, at least 30 days prior to the
expiration date, the servicer is required to determine if an extension will be provided and mail an
FPN, as applicable, within 10 business days following the determination. A Non-Approval Notice
is not required when an extension is not granted.
If a borrower is eligible for UP or any extension thereof, the servicer must send the borrower an
FPN that describes the terms and conditions of the initial UP forbearance plan or extension and,
which at a minimum must include the following:
 Duration of the forbearance plan along with the Forbearance Period Effective Date and
the expiration date;
 Periodic payment amount, if any, and an explanation of how payments made during the
forbearance period will be applied to the borrower’s account;
 Statement that the UP forbearance is a temporary change to the loan terms and there is
no guarantee that the borrower will be eligible for a modification at the end of the
forbearance period;
 Estimate of the accrued but unpaid balance that will be due at the end of the UP
forbearance period if the borrower makes required forbearance plan payments on a
timely basis;
 Brief explanation regarding what will occur when the borrower is re-employed or when
the forbearance plan expires;
 Borrower’s responsibility to provide updates to his or her employment status during the
forbearance plan, if applicable; and
 Statement that the UP forbearance plan may adversely impact the borrower’s credit
rating.
Chapter III: UP
MHA Handbook v4.3
153Borrowers are not required to sign or return the FPN. However, servicers may require the
borrower to execute and return a written forbearance plan agreement if required by investor
guidelines. Servicers should retain a copy of the FPN in the applicable mortgage file and/or
servicing system and note the date that it was sent to the borrower.
If a borrower is determined to be ineligible for forbearance, servicers must communicate this
determination to the borrower by sending a Non-Approval Notice that includes the primary reason
for ineligibility. The notice must also describe other foreclosure alternatives for which the
borrower may be eligible, if any, including but not limited to HAMP, other home retention
programs, HAFA or other short sale or deed-in-lieu programs, and identify the steps the borrower
must take in order to be considered for those options. Servicers may use the applicable non-
approval model clause provided in Exhibit A. Use of the model clauses is optional; however, they
illustrate a level of specificity that is deemed to be in compliance with the language requirements
of this Handbook.
4.4 Commencement and Timing of Payments
A borrower’s UP forbearance plan starts on the Forbearance Period Effective Date. If the
servicer transmits the FPN to the borrower on or before the 15th day of a calendar month, then
the servicer should insert the first day of the next month as the Forbearance Period Effective
Date. If the servicer transmits the FPN to the borrower after the 15th day of a calendar month,
the servicer may, as an alternative, use the first day of the month after the next month as the
Forbearance Period Effective Date. Servicers who elect this alternative must do so consistently
for all borrowers in accordance with written policies and procedures. This determination should be
based on the date that the FPN is sent to the borrower.
If the servicer requires a reduced monthly payment, the servicer must receive the borrower’s
reduced payment on or before the last day of the month in which it is due. If the borrower fails to
make timely payments, the UP forbearance plan may be canceled. Servicers are instructed to
use good business judgment in determining whether UP forbearance payments were received
timely or if mitigating circumstances caused the payment to be late. Exceptions should be
documented by the servicer.
4.5 Transition from HAMP to UP Forbearance
As described herein, a borrower may transition from either a TPP or permanent HAMP
modification to UP forbearance. In this event, the servicer may not impose a waiting period
before commencement of the forbearance plan by requiring the borrower to be in receipt of
unemployment benefit for a longer period than required by UP. If the borrower is determined to
again be eligible for HAMP, the borrower will be required to submit complete and updated HAMP
documentation (including the RMA, the Dodd-Frank Certification and updated proof of income),
but will not be required to re-submit IRS Form 4506T-EZ if the servicer has already obtained a tax
transcript for the most recent tax year or the borrower’s tax return for the most recent tax year,
including all applicable schedules and forms.
4.5.1 Transition from TPP to UP Forbearance
Upon receipt of a request for consideration for an UP forbearance plan by an unemployed
borrower in a TPP and the determination that the borrower is eligible for UP, the servicer must
cancel the TPP and send the borrower an FPN in accordance with Section 4.3.
4.5.2 Transition from Permanent HAMP Modification to UP Forbearanc e
Upon receipt of a request for consideration for an UP forbearance plan by an unemployed
borrower in a permanent HAMP (Tier 1 or Tier 2) modification who has lost good standing and the
determination that the borrower is eligible for UP, the servicer must (for mortgage loans secured
Chapter III: UP
MHA Handbook v4.3
154by owner-occupied properties, or may (for rental properties) consider the loan for an FPN in
accordance with Section 4.3.
The servicer may not impose a waiting period before commencement of the forbearance plan by
requiring the borrower to be in receipt of unemployment benefits for a longer period than required
by UP. If the borrower is determined to again be eligible for HAMP, the borrower must complete
a new TPP for such loan. To determine eligibility for HAMP, the borrower will be required to
submit complete and updated HAMP documentation (including the RMA, Hardship Affidavit, the
Dodd-Frank Certification, Rental Property Certification, if applicable, and updated proof of
income), but will not be required to re-submit IRS Form 4506T-EZ if the servicer has already
obtained a tax transcript for the most recent tax year
4.6 Interaction of FDD Forbearance Plans with UP
If a borrower is unemployed when requesting an FDD forbearance plan and is eligible for both an
FDD forbearance plan and an UP forbearance plan, or is currently in an UP forbearance plan, the
servicer may utilize both forbearance plans consecutively. The first three months of forbearance
should be considered part of the FDD forbearance plan. If the borrower is still unemployed at the
end of the FDD forbearance period, the borrower must be moved to an UP forbearance plan or,
at the borrower’s request, be considered for HAFA.
4.7 Application of UP Payments
Payments made during an UP forbearance plan must be applied in accordance with the terms of
the existing loan documents. A servicer should not change a borrower’s scheduled loan terms in
its servicing system and/or mortgage file during an UP forbearance plan.
If permitted by the applicable loan documents, servicers may accept and hold as "unapplied
funds" (held in a T&I custodial account) amounts received which do not constitute a full monthly,
contractual PITI payment. However, when the total of the reduced payments held as "unapplied
funds" is equal to a full PITI payment, the servicer is required to apply all full payments to the
mortgage loan.
Any unapplied funds remaining at the end of the UP forbearance plan that do not constitute a full
PITI payment should be applied to reduce any amounts that would otherwise be capitalized onto
the principal balance.
4.8 Treatment of Accrued Principal, Interest and Fees for HAMP Ineligible
Borrowers
At the expiration of an UP forbearance plan, if a borrower is subsequently determined to be
ineligible for HAMP, the servicer is required to consider the borrower for all other available loss
mitigation options, including, but not limited to non-HAMP modifications. Such consideration may
not be conditioned on a lump sum borrower contribution for unpaid interest and fees that accrued
during the forbearance. Further, payments due under any payment plan or modification must be
based on the borrower’s income and ability to repay. Servicers may consider alternatives
including, but not limited to, (i) capitalizing the arrearages and re-amortizing the new balance into
a non-HAMP modification or (ii) maintaining the current scheduled payment by extending the loan
term by the equivalent of the months of delinquency. In either event, the payments due under a
non-HAMP modification must be based on an assessment of the borrower’s income and ability to
repay.
Chapter III: UP
MHA Handbook v4.3
1555 Transition from Forbearance to HAMP
5.1 HAMP Eligibility after UP Forbearance
Borrowers should be considered for a HAMP Tier 1 or Tier 2 modification following re-
employment or expiration of the forbearance period as described in Section 5.2 as follows:
 A borrower who, while making timely payments in a prior HAMP Tier 1 TPP became
unemployed and requested UP forbearance, is eligible for re-consideration for HAMP Tier
1 on that mortgage loan.
 A borrower who experienced a payment default in a prior HAMP Tier 1 TPP or who lost
good standing in a prior HAMP Tier 1 permanent modification is eligible for consideration
for HAMP Tier 2 on that mortgage loan.
 A borrower who, while making timely payments in a prior HAMP Tier 2 TPP became
unemployed and requested UP forbearance, is eligible for re-consideration for HAMP Tier
2 on that mortgage loan.
 A borrower who experienced a payment default in a prior HAMP Tier 2 TPP or who lost
good standing in a prior HAMP Tier 2 permanent modification is not eligible for re-
consideration for HAMP and should be considered for other available loss mitigation
options including HAFA on that mortgage loan.
5.2 Consideration of HAMP Eligible Borrowers after Forbearance
At the earlier of 30 days following notification that the borrower has found employment or 30 days
prior to expiration of the forbearance period, the servicer must provide a HAMP-eligible borrower
with an Initial Package of HAMP documents and, upon receipt of an Initial Package (as defined in
Section 4 of Chapter II) from the borrower, must evaluate the borrower for HAMP. Both the
borrower and the servicer must adhere to the timing and notice requirements in Section 4.5 and
Section 4.6 of Chapter II. The servicer may extend the forbearance period by a maximum of 30
days as needed to allow the borrower time to submit the needed documentation. A borrower that
has obtained employment during or after an UP forbearance plan or Non-MHA Unemployment
Assistance, but still has a financial hardship and otherwise meets HAMP eligibility criteria, must
be considered for HAMP (Tier 1 and/or Tier 2) prior to consideration of other loss mitigation
alternatives.
If the borrower is determined to be ineligible for HAMP or other home retention options, the
borrower must be considered for other foreclosure alternatives, such as HAFA or other short sale
and deed-in-lieu programs.
When evaluating a borrower for HAMP and calculating the borrower’s total monthly mortgage
payment ratio prior to the modification, the borrower’s monthly gross income must include the
new employment income as verified by an offer letter, first pay stub or other documentation
consistent with the judgment employed by servicers when modifying mortgage loans held in their
own portfolio. Any missed payments prior to and during the UP forbearance plan should be
capitalized as part of the standard HAMP modification process.
While servicers must consider borrowers for UP eligibility through the December 31, 2015
program cut-off date, borrowers in UP who do not meet the HAMP, 2MP or HAFA program cut-off
dates described in the respective Chapters II, IV and V of this Handbook will not be eligible for
those programs and, upon re-employment or the expiration of the UP forbearance period, must
be considered for other available loss mitigation options.
Chapter III: UP
MHA Handbook v4.3
1566 Reporting Requirements
6.1 Treasury Reporting
All UP forbearance plan data submitted by the servicer must be accurate, complete, timely, and
agree with the servicer’s records.
6.1.1 Summary Reporting
During the UP forbearance plan, servicers are required to provide monthly UP forbearance plan
summary level data to the Program Administrator. A list of the required summary level data,
which may be updated periodically, is available on www.HMPadmin.com.
6.1.2 System Reporting
Servicers will also be required to provide loan level reporting at the following key transition
milestones:
 Exit from TPP to an UP forbearance plan – Servicers are required to submit applicable
data pursuant to Section 11.4.1 of Chapter II including a Trial Fallout reason code
indicating that the borrower is entering into an UP forbearance plan.
 Exit from permanent HAMP to an UP forbearance plan – Servicers are required to submit
an official monthly report reflecting the loss of good standing.
 Transition from an UP forbearance plan to TPP – If the borrower transitions from an UP
forbearance plan into a TPP, servicers are required to submit a HAMP trial set up
transaction with attributes indicating that the borrower had an UP forbearance plan.
All UP forbearance plan reporting requirements have been posted on the servicer web portal at
www.HMPadmin.com.
6.2 Credit Bureau Reporting
The servicer should continue to report a “full-file” status report to the credit repositories for each
loan in an UP forbearance plan in accordance with the Fair Credit Reporting Act and credit
bureau requirements as provided by the CDIA.
Chapter III: UP
MHA Handbook v4.3
157CHAPTER IV: HOME AFFORDABLE FORECLOSURE ALTERNATIVES PROGRAM
Chapter IV
Home Affordable Foreclosure
Alternatives Program (HAFA)
Chapter III: UP
MHA Handbook v4.3
1581 Introduction
The Home Affordable Foreclosure Alternatives (HAFA) Program provides financial incentives to
encourage investors, servicers and borrowers to utilize a short sale or DIL as an alternative to
foreclosure. HAMP servicers must follow the guidance set forth in this Chapter to determine the
extent to which short sales or DILs will be offered.
2 Eligibility
A loan is eligible for HAFA if the servicer verifies that all of the following criteria are met:
First lien
The mortgage loan is a first lien mortgage loan originated on or before
January 1, 2009. This includes mortgages secured by:
 Cooperative shares,
 Condominium units, and
 Manufactured housing (the first lien mortgage loan must be secured
by the manufactured home and the land, both of which must be
classified as real property under applicable state law).
The reference to “originated on or before” refers to the date on which the loan
was first originated (i.e., not the date a loan may have been modified
previously).
Delinquent or in
imminent
default,
foreclosure or
bankruptcy The mortgage loan is delinquent or default is reasonably foreseeable. Loans
currently in foreclosure or bankruptcy are eligible.
Single family
property The mortgage loan is secured by a one- to four-unit property.
Not condemned The property securing the mortgage loan is not condemned.
Unpaid principal
balance limits The current UPB of the mortgage loan not including arrearages is not greater
than:
Financial
hardship
Chapter IV: HAFA
 1 Unit $729,750
 2 Units $934,200
 3 Units $1,129,250
 4 Units $1,403,400
A borrower has documented a financial hardship, evidenced by a signed
Hardship Affidavit or RMA, wherein the borrower has represented that he or
she does not have sufficient liquid assets to make the monthly mortgage
payments. An example of such hardship includes a servicemember citing a
“Permanent Change of Station” order as the basis for his or her financial
hardship when requesting HAFA even if such servicemember’s income has
not been decreased, so long as the servicemember does not have sufficient
liquid assets to make his or her monthly mortgage payments.
MHA Handbook v4.3
159Program cut-off
date The borrower has submitted a request (phone, mail, fax or e-mail) for
consideration for a short sale or deed in lieu (DIL) or, before pre-approval of a
HAFA short sale, written request for approval of an executed sales contract on
or before December 31, 2015 and the transaction closing date is on or before
September 30, 2016. Written evidence of the request must be documented by
postmark or other independent indicator, such as a date and time stamp
(electronic or otherwise), evidencing submission by the program cut-off date.
Borrower is a
natural person The borrower must be a natural person. Mortgage loans made to, or secured
by properties owned by, corporations, partnerships, limited liability companies
or other business entities are not eligible for assistance under HAMP.
3 HAFA Consideration
Servicers may not solicit a borrower for HAFA until the borrower has been evaluated for HAMP in
accordance with the requirements of Chapter II or has declined the offer of HAMP consideration.
Borrowers that meet the eligibility criteria for HAMP but who are not offered a TPP, do not
successfully complete a TPP, default on a permanent HAMP modification or decline the offer of
HAMP consideration should first be considered for other loan modification or retention programs
offered by the servicer prior to being evaluated for HAFA. There is no occupancy requirement for
HAFA and no limit on the number of properties owned by a borrower that may be approved under
HAFA.
3.1 HAFA Policy
Each participating servicer must develop a written policy, consistent with investor guidelines, that
describes the basis on which the servicer will offer HAFA to borrowers (HAFA Policy). A
servicer’s HAFA Policy must: (i) identify the circumstances under which the servicer will require
monthly mortgage payments and how that payment will be determined, in accordance with
applicable laws, rules and regulations; (ii) describe the basis on which the minimum acceptable
net proceeds will be determined; (iii) describe how subordinate lien holders will be paid, whether
by percentage of the UPB of their loan or some other determination; (iv) describe if and when the
servicer will require income documentation; (v) if servicer has a program with an option for deed-
for-lease or an opportunity for the borrower to repurchase the property at some future time,
describe such program and conditions; (vi) describe if and when a borrower that was determined
to be ineligible for HAFA prior to February 1, 2011 will be re-evaluated; (vii) identify the
procedures the servicer will follow to periodically re-evaluate property value and to reconcile
discrepancies between the servicer’s independent assessment of value and market value data
provided by a borrower or the borrower’s real estate broker; (viii) if relocation assistance will be
requested in accordance with Sections 6.2.5 and 12.1, identify the evidentiary materials that the
servicer will accept to validate that the property is occupied by the borrower, or in the case of a
rental property (as defined in Section 1.1.3 of Chapter II), a tenant or other non-borrower
occupant who will be required to vacate as a condition of the HAFA transaction; and (ix) may
incorporate such factors as:
 The severity of the loss involved;
 Local market conditions,
 The timing of pending foreclosure actions;
 Borrower motivation and cooperation;
 Customary transactional costs of short sales and DILs; and
 The amounts that may be required to release any subordinate liens on the property.
Chapter IV: HAFA
MHA Handbook v4.3
160The date and outcome of the HAFA consideration must be documented in the servicer’s file.
3.2 HAFA Matrix
Each servicer must complete and post to its website a matrix that identifies the servicer’s unique
HAFA eligibility criteria and program rules (HAFA Matrix). The HAFA Matrix must also include the
servicer’s process for re-evaluation of property value as more fully described in Section 6.1.2 as
well as requirements for receipt of relocation assistance as described in Section 6.2.5. A template
of the HAFA Matrix is located on www.HMPadmin.com. The topics and language in the template
HAFA Matrix are provided only as an example of what a servicer might include as an aspect of its
HAFA Policy that is unique. Each servicer must draft the language in its HAFA Matrix to be
consistent with its HAFA Policy and any specific investor requirements or prohibitions.
In addition to posting its HAFA Matrix to its website, each servicer must provide the Program
Administrator with the web address where the completed matrix can be located. Treasury will
identify to the public the web location of each servicer’s HAFA Matrix on
www.MakingHomeAffordable.gov.
Each servicer must keep the information in its HAFA Matrix up to date, including any changes in
the servicer’s HAFA Policy. If the web address where its HAFA Matrix can be located is going to
be changed, a servicer is required to notify the Program Administrator of the new web address
five business days prior to the change and provide a re-direct from the old web address to the
new web address.
3.3 Consideration of Borrowers for HAFA
Servicers must consider possible HAMP-eligible borrowers for HAFA within 30 calendar days of
the date the borrower:
 Does not qualify for a TPP (HAMP Tier 1 or Tier 2);
 Does not successfully complete a TPP and is not being evaluated for another
modification (i.e., HAMP Tier 2 or proprietary modification); or
 Loses good standing on a HAMP modification as long as the borrower is not being
evaluated for another modification (i.e., HAMP Tier 2 or proprietary modification).
If a borrower who is requesting (whether such request is in response to a servicer’s solicitation
under the first paragraph of Section 4 or initiated by the borrower) pre-approval for a HAFA short
sale or DIL has previously submitted an executed Hardship Affidavit or RMA, the servicer must
within 30 calendar days of such request consider the borrower for HAFA and provide written (i)
approval for HAFA, and the terms of a pre-approved HAFA short sale or DIL (ii) if the borrower is
not eligible for a HAFA pre-approved short sale or DIL, notification of other short sale or DIL
options the borrower may be eligible for, if any, or (iii) non-approval of any short sale or DIL.
For a borrower that requests (whether in response to a servicer’s solicitation under the first
paragraph of Section 4 or initiated by the borrower) a short sale or DIL but has not previously
executed a Hardship Affidavit or RMA and has a “Pre-Determined Hardship” (i.e., is delinquent on
his or her mortgage by 90 days or more and has a FICO score below 620), the servicer must
within 30 calendar days of receiving the request consider the borrower for HAFA and provide
written (i) approval for HAFA, and the terms of a pre-approved HAFA short sale or DIL (ii) if the
borrower is not eligible for a HAFA pre-approved short sale or DIL, notification of other short sale
or DIL options the borrower may be eligible for, if any, or (iii) non-approval of any short sale or
DIL. If a borrower is approved for a HAFA short sale or DIL, a Hardship Affidavit must be
delivered to the borrower with instructions that it must be executed prior to and as a condition of
the closing of the HAFA short sale or DIL transaction. If the servicer is unable to respond within
Chapter IV: HAFA
MHA Handbook v4.3
161the 30-calendar day period, the servicer must send a written status notice to the borrower on or
before the 30th calendar day, with written updates every 15 calendar days thereafter, until the
servicer is able to provide either an SSN or DIL Agreement, as applicable, or written notification
that the borrower is eligible for a proprietary short sale or deed in lieu (if the borrower is not
eligible under HAFA) or will not be offered a short sale or DIL under HAFA.
If a borrower that requests (whether in response to a servicer’s solicitation under the first
paragraph of Section 4 or initiated by the borrower) a short sale or DIL and has not previously
executed a Hardship Affidavit, and does not satisfy the Pre-Determined Hardship parameters, the
servicer must acknowledge the request and respond to the borrower’s request as set forth in
Section 4.1.
In all cases, evidence of a borrower’s request must be provided by postmark or other
independent indicator such as a date and time stamp (electronic or otherwise) evidencing
submission by the borrower on or before December 31, 2015.
Borrowers in active Chapter 7 or Chapter 13 bankruptcy cases must be considered for HAFA if
the borrower, borrower’s counsel or bankruptcy trustee submits a request to the servicer. With the
borrower’s permission, a bankruptcy trustee may contact the servicer to request a short sale or
DIL under HAFA. Servicers are not required to solicit these borrowers proactively for HAFA. The
servicer and its counsel must work with the borrower or borrower’s counsel to obtain any court
and/or trustee approvals required in accordance with local court rules and procedures. Servicers
should extend HAFA timeframes as necessary to accommodate delays in obtaining court
approvals or receiving any periodic payment when they are made to a trustee.
Unless prohibited by investor guidelines, servicers should utilize HAFA, rather than a proprietary
short sale or DIL option, in all cases where a short sale or DIL is approved by the servicer and the
transaction otherwise meets the guidance provided in this Chapter IV.
4 Communication and Borrower Notices
If the servicer determines that a borrower is eligible for a HAFA offer based on its HAFA Policy
and the guidance provided in this Chapter, and the borrower did not initiate the request for a short
sale or DIL, the servicer must proactively notify the borrower in writing of the availability of HAFA
and allow the borrower 14 calendar days from the date of the notification to contact the servicer
by verbal or written communication and request consideration under HAFA. If the borrower fails to
contact the servicer or at any time indicates that he or she is not interested in HAFA, the servicer
has no further obligation to solicit the borrower for HAFA.
When a borrower, who was not previously evaluated for HAMP, requests a short sale or DIL, the
servicer must evaluate the borrower for HAFA based on its HAFA Policy and the guidance
provided in this Chapter. If, as part of this evaluation, the servicer determines that the borrower
also meets the HAMP eligibility requirements, the servicer must notify the borrower verbally or in
writing of the availability of HAMP and allow the borrower 14 calendar days from the date of the
notification to contact the servicer by verbal or written communication and request consideration
for HAMP. This notification may be given simultaneously with the servicer’s consideration of the
borrower for HAFA. If the borrower does not wish to be considered for HAMP, the servicer is not
required to send the borrower a Non-Approval Notice under Section 2.3.2 of Chapter II. The
foregoing 14 calendar-day response period is only intended to establish a minimum requirement
on a servicer’s obligation to consider a borrower for HAFA. Servicers may still consider a
borrower for HAFA whether or not that borrower responds to the HAFA solicitation within the 14
calendar-day response period.
Chapter IV: HAFA
MHA Handbook v4.3
1624.1 Consideration of Borrowers without a Hardship Affidavit or Pre-
Determined Hardship
If a borrower requests (whether in response to a servicer’s solicitation under the first paragraph of
Section 4 or initiated by the borrower) a short sale or DIL and has not previously executed a
Hardship Affidavit, and does not satisfy the Pre-Determined Hardship parameters, the servicer
must, within 10 business days following receipt of either a request for a short sale or DIL or a
request for approval of an executed short sales contract before the servicer has pre-approved a
HAFA short sale, send written confirmation to the borrower acknowledging the request. The
acknowledgment must include a copy of the Hardship Affidavit or, if applicable, RMA, a
description of the servicer’s HAFA evaluation process and a timeline for decision, which must be
no later than 30 calendar days from the servicer’s receipt of the Hardship Affidavit and, if
applicable, RMA. If the servicer is unable to respond within the 30-calendar day period, the
servicer must send a written status notice to the borrower on or before the 30th calendar day,
with written updates every 15 calendar days thereafter, until the servicer is able to provide either
a SSN or DIL Agreement, as applicable, or written notification that the borrower is eligible for a
proprietary short sale or deed in lieu (if the borrower is not eligible under HAFA) or will not be
offered a short sale or DIL under HAFA.
4.2 Notice for Borrowers not Eligible for HAFA
When a HAFA short sale or DIL is not available, the servicer must communicate this decision in
writing to any borrower that requested consideration or inform the borrower of the borrower’s
eligibility for a proprietary short sale or DIL alternative. If no short sale or DIL is available, the
notice must explain why a short sale or DIL under HAFA cannot be offered, provide a toll free
telephone number that the customer may call to discuss the decision and otherwise comply with
the notice requirements set forth in Section 2 of Chapter II.
In addition, if the borrower is in a pending HAFA transaction and the servicer has independently
determined based on its own evaluation of an Alert received pursuant to Section 2.8 of Chapter I
that a borrower has misrepresented his or her identity or the borrower was convicted of a
Disqualifying Crime, the servicer must, within ten (10) business days of the due date specified on
the Alert notice provided to the borrower pursuant to Section 2.8.6 of Chapter I, or any extension
thereof, send a notice of ineligibility consistent with the notice requirements of Section 2.3.2.5 of
Chapter II.
If the borrower is in a pending HAFA transaction and the Alert was based on potential Dodd-
Frank Certification noncompliance by a non-borrower occupant, the servicer will not send a notice
of ineligibility but must notify the borrower in writing using language similar to the following – “We
are unable to offer a HAFA relocation assistance incentive to a person who does not meet the
requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act.”
5 Protections Against Unnecessary Foreclosure
Pursuant to the servicer’s HAFA Policy, every potentially eligible borrower must be considered for
HAFA before the borrower’s loan is referred to foreclosure or the servicer allows a pending
foreclosure sale to be conducted. At the servicer’s discretion, the servicer may initiate
foreclosure or continue with an existing foreclosure proceeding during the HAFA process, but
may not complete a foreclosure sale:
 While determining the borrower’s eligibility and qualification for HAFA.
 Until a date that is 5 business days after the date that the servicer sends the notice under
Section 4.2 that a HAFA short sale or DIL is not available.
 While the terms of a pre-approved HAFA short sale are effective .
Chapter IV: HAFA
MHA Handbook v4.3
163 Pending transfer of property ownership based on an approved sales contract.
 Pending transfer of property ownership via a DIL by the date specified by the servicer in
the DIL Agreement or other written DIL notification or agreement.
 Until the servicer has resolved the Escalated Case in accordance with Section 3 of
Chapter I.
6 HAFA Evaluation and Conditions
6.1 HAFA Evaluation
Once the servicer has determined that a borrower is eligible for a HAFA offer based on its HAFA
Policy and the guidance provided in this Chapter, the servicer must complete the following
actions prior to issuing a writing detailing the pre-approved terms of a HAFA short sale or DIL.
The writing detailing the pre-approved terms of the HAFA short sale is referred to herein as a
Short Sale Notice (SSN) and servicers may use the form SSN posted on www.HMPadmin.com or
other written communication, provided that all the information contained in Section 7.4 is included
in such communication. Servicers may use the form DIL Agreement posted on
www.HMPadmin.com or their own written communication of the terms of a DIL as provided in
their respective HAFA Policy, provided that all the information contained in Section 9.2 is included
in such written communication.
6.1.1 Documentation Requirements and Borrower Financial Information
If a borrower’s hardship information is documented and verified as part of the HAMP evaluation
and the servicer is in possession of a signed Hardship Affidavit or RMA, no additional financial or
hardship assessment is required under HAFA. However, in accordance with a servicer’s HAFA
Policy, the servicer may request updated financial information to evaluate the borrower.
When a borrower who was not previously evaluated for HAMP requests a short sale or DIL, the
servicer must determine the basic eligibility of the borrower as set forth in Section 2 and must
obtain a completed Hardship Affidavit or, if required by the servicer’s HAFA Policy, an RMA to
verify that the borrower has experienced a hardship. The requirements for delivery of such
document(s) are described above in Section 3.3 (for a borrower with a Pre-Determined Hardship)
and Section 4.1(for a borrower without a Pre-Determined Hardship).
If the borrower is requesting relocation incentive compensation in accordance with Section 6.2.5,
the servicer must require the borrower to provide evidence of occupancy and when applicable, a
Dodd-Frank Certification(s) from occupants (which in the case of a non-borrower occupant must
be in the form of the “Non-Borrower Occupant Certificate” posted on www.HMPadmin.com). The
servicer is not required to:
 Obtain an IRS Form 4506-T or 4506T-EZ or complete tax return for the most recent year,
unless it is necessary to verify the borrower’s income;
 Conduct any further validation of hardship if a borrower meets the Pre-Determined
Hardship criteria described in Section 4.1;
 Evaluate the mortgage loan using the NPV test; or
 Apply the standard or alternative modification waterfalls set forth in Section 6.3 and
Section 6.4 of Chapter II, respectively.
Chapter IV: HAFA
MHA Handbook v4.3
1646.1.2 Property Valuation
The servicer must, independent of the borrower and any other parties to the transaction, assess
the current value of the property in accordance with the investor’s guidelines. Each servicer’s
HAFA Policy must include the procedures it will follow to periodically re-evaluate property value
and to reconcile discrepancies between the servicer’s independent assessment of value and
market value data provided by the borrower or the borrower’s real estate broker. To the extent
the new value determination is less than the value determination used in the SSN, the servicer
must notify the borrower and/or the borrower’s real estate broker either in writing or verbally of the
new value determination, and confirm the new list price or acceptable sale proceeds based on the
new value determination. Servicers must document the new value determination in their
servicing system and/or the mortgage file together with the updated list price or acceptable sale
proceeds, and the communication(s) to the borrower about such changes. While the servicer is
not required to amend the SSN to reflect the new list price or acceptable sale proceeds, the
servicer must honor the new value determination. Servicers are reminded, however, that in
accordance with Section 7.1, after delivering the pre-approved terms of the short sale to the
borrower, the servicer may not increase the minimum acceptable net proceeds required until the
expiration date of such terms is reached.
6.1.3 Expected Recovery Analysis
Although not a HAFA requirement, it is expected that servicers will, in accordance with investor
guidelines, perform a financial analysis to determine if a short sale or DIL is in the best interest of
the investor, guarantor and/or mortgage insurer. The results of any analysis must be retained in
the servicing system and/or mortgage file. The Base NPV Model does not project investor cash
flows from either a short sale or DIL and should be used only to evaluate a loan for HAMP.
6.1.4 Title Review
The servicer must review readily available information provided by the borrower, the borrower’s
credit report, the loan file or other sources to identify subordinate liens and other claims on title to
determine if the borrower will be able to deliver clear, marketable title to a prospective purchaser
or the investor. Although not required by HAFA, the servicer may order a title search or
preliminary title report.
6.2 HAFA Conditions
6.2.1 Mortgage Insurer Approval
For loans that have mortgage insurance coverage, the servicer/investor must obtain mortgage
insurer approval for HAFA foreclosure alternatives. A mortgage loan does not qualify for HAFA
unless the mortgage insurer waives any right to collect additional sums (cash contribution or a
promissory note) from the borrower.
6.2.2 Payment Forbearance
In accordance with its HAFA Policy, the servicer must identify in the SSN, DIL Agreement, any
proprietary form DIL notice or agreement or, if provided prior to the issuance of an SSN, written
approval of an executed sales contract the amount of the monthly mortgage payment, if any, that
the borrower is required to make during the term of the applicable agreement and pending
transfer of property ownership, as applicable. The borrower’s monthly mortgage payment may
not exceed the equivalent of 31 percent of the borrower’s monthly gross income unless the
borrower elects to make a full contractual payment in order to stay current on the mortgage loan.
6.2.3 Borrower Fees
Servicers may not charge the borrower for any administrative processing fees in connection with
HAFA. The servicer must pay all out-of-pocket expenses, including but not limited to notary fees,
Chapter IV: HAFA
MHA Handbook v4.3
165recordation fees, release fees, title review costs, property valuation fees, credit report fees, or
other allowable and documented expenses, but the servicer may add these expenses to the
outstanding debt in accordance with the borrower’s mortgage documents and applicable laws in
the event the short sale or DIL is not completed. Servicers may require borrowers to waive
reimbursement of any remaining escrow, buy down funds or prepaid items, and to assign any
insurance proceeds to the investor, if applicable. Those funds will not be applied to reduce the
total net proceeds from the sale.
6.2.4 Release of Liens
6.2.4.1 First Mortgage Lien
The servicer should follow local or state laws or regulations to time the release of its first
mortgage lien after receipt of sale proceeds from a short sale or delivery of the deed and property
in a DIL transaction. If local or state law does not require release of the lien within a specified time
from the date the servicer receives payment and satisfies the mortgage, the servicer must release
its first mortgage lien within 30 business days. Additionally, the investor must waive all rights to
seek a deficiency judgment and may not require the borrower to sign a promissory note for the
deficiency.
6.2.4.2 Subordinate Liens
It is the responsibility of the borrower to deliver clear marketable title to the purchaser or investor
and to work with the listing broker, settlement agent and/or lien holders to clear title impediments.
The servicer may, but is not required to, negotiate with subordinate lien holders on behalf of the
borrower. The servicer, on behalf of the investor, will authorize the settlement agent to allow a
portion of the gross sale proceeds to be used as payment(s) to subordinate mortgage/lien
holder(s) in exchange for a lien release and full release of borrower liability. All subordinate lien
holders will be paid in order of priority. Subordinate mortgage lien holders with subordinate liens
secured by a mortgage on the subject property may be paid no more than an aggregate cap of
$8,500. Such cap does not apply to non-mortgage subordinate lien holders with subordinate
liens not secured by a mortgage on the subject property, such as mechanics’ liens or liens
associated with assessments owing to homeowner’s associations. Payments will be made at
closing from the gross sale proceeds and must be reflected on the HUD-1 Settlement Statement.
6.2.4.2.1 Written Commitment from Subordinate Lien Holders
Prior to releasing any funds to subordinate mortgage/lien holder(s), the servicer through its agent
must obtain written commitment from the subordinate lien holder that it will release the borrower
from all claims and liability relating to the subordinate lien in exchange for receiving the agreed
upon payoff amount. Although servicers have discretion to draft policies and procedures for
ensuring that the commitment of subordinate lien holders is documented prior to closing and such
documentation is retained in the servicing system and/or mortgage file, they would be in
compliance with HAFA guidelines if they further required the closing attorney or agent to either
confirm that they are in receipt of this commitment from subordinate lien holders on the HUD-1
Settlement Statement, or request that a copy of the written commitment provided by the
subordinate lien holder be sent to the servicer with the HUD-1 Settlement Statement which is
provided in advance of the closing.
6.2.4.2.2 Prohibition on Contributions
Subordinate mortgage/lien holder(s) may not require contributions from either the real estate
agent or borrower as a condition for releasing its lien and releasing the borrower from personal
liability. In addition, any payments to subordinate mortgage/lien holder(s) related to the short sale
or DIL must be reflected on the HUD-1 Settlement Statement, as applicable.
Chapter IV: HAFA
MHA Handbook v4.3
1666.2.5 Relocation Assistance
A borrower who occupies the property as a principal residence and is required to vacate as a
condition of the HAFA short sale or DIL may be eligible to receive $3,000 in relocation assistance
at closing. In addition, a borrower requesting a HAFA short sale or DIL with respect to a rental
property (as defined in Section 1.1.3 of Chapter II) may be able to claim relocation assistance for
a tenant that occupies the rental property as a principal residence, or the borrower’s legal
dependent, parent or grandparent that occupies the rental property as a principal residence with
no rent charged or collected, if such parties are required to vacate as a condition of the HAFA
short sale or DIL. In the case of a rental property occupied by a tenant or other non-borrower
occupant, the entire $3,000 in HAFA relocation assistance must be paid to the tenant or other
non-borrower occupant (assuming the conditions of such payment are satisfied), must be
reflected on the HUD-1, and may not be reduced to pay any costs and expenses of the tenant or
other non-borrower occupant. No portion of the $3,000 may be retained by a borrower. A
borrower may exercise his or her discretion in allocating the incentive among tenants or other
non-borrower occupants who otherwise satisfy the conditions of payment. Servicers must notify
borrowers of the availability of relocation assistance.
If the borrower seeks relocation assistance for themselves, a tenant or other non-borrower
occupant in accordance with this Section, the borrower must provide the servicer with evidence
satisfactory to the servicer that the borrower, tenant or other non-borrower occupant was residing
in the property as a principal residence as of the date the borrower requests a HAFA short sale or
DIL or approval of an executed sales contract. Such evidence may include but is not limited to,
property inspections conducted by or on behalf of the servicer, lease agreements, utility bills, etc.
Additionally, the borrower must ensure that a Dodd-Frank Certification (described in Section 1.7
of Chapter I) and, if applicable, “Non-Owner Occupant Certification,” in each case executed
respectively by the borrower and, if applicable, each occupant that will receive relocation
assistance, is delivered to the servicer in advance of the transaction settlement date. A servicer
may not authorize a closing that includes HAFA relocation assistance unless and until the
servicer has received satisfactory evidence of occupancy and executed Dodd-Frank
Certification(s) and, if applicable, Non-Owner Occupant Certification, and the assistance payment
is accurately reflected on the HUD-1.
To provide the least disruption in real estate closings, the servicer in its HAFA Policy may
establish a minimum number of days in advance of closing by which any Dodd-Frank Certification
and, if applicable, Non-Owner Occupant Certification, from an occupant of a rental property must
be received by the servicer and must communicate this information to the borrower in the SSN,
DIL Agreement, any proprietary form DIL notice or agreement or, if provided prior to the issuance
of an SSN, the approval of an executed sales contract.
7 Short Sale Process
The HAFA short sale process employs standard form documents and defined performance
timeframes to facilitate clear communication between the parties to the listing and sale
transaction. Servicers must adhere to the following guidelines in connection with the issuance of
an SSN.
7.1 Minimum Acceptable Net Proceeds
Prior to approving a borrower to participate in a HAFA short sale, the servicer must determine the
minimum acceptable net proceeds (Minimum Net) that the investor will accept from the
transaction and in accordance with its HAFA Policy. The Minimum Net may be expressed as a
fixed dollar amount, as a percentage of the current market value of the property, or as a
percentage of the list price as approved by the servicer. However, the Minimum Net must be at
least equal to or less than the list price minus the sum of allowable costs that may be deducted
from gross sale proceeds (or the acceptable sale proceeds).
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167Once determined, the servicer must document the minimum net in the servicing system and/or
mortgage file for each property subject to HAFA. After sending the SSN, the servicer may not
increase the minimum net requirement until the initial date for expiration of the pre-approved
HAFA short sale terms is reached (not less than 120 calendar days from the date the servicer
sends the SSN to the borrower). Subsequent changes to the minimum net pursuant to the
provisions of Section 6.1.2, or when the expiration date for the pre-approved HAFA short sale
terms is extended, must be documented.
7.2 Allowable Transaction Costs
In determining the Minimum Net, the servicer must consider reasonable and customary real
estate transaction costs for the community in which the property is located and determine which
of these costs the servicer or investor is willing to pay from sale proceeds. The servicer must
describe the costs that may be deducted from the gross sale proceeds in the SSN.
7.3 Arm’s Length Transaction
The short sale must be an arm’s length transaction with the net sale proceeds (after deductions
for reasonable and customary selling costs) being applied to a discounted (short) mortgage
payoff acceptable to the servicer.
A servicer may in its discretion approve a transaction under HAFA that provides an option for the
property to be sold to a non-profit organization with the stated purpose that the property will be
rented or resold to the borrower so long as all other HAFA program requirements are met.
Servicers offering programs of this type must include program descriptions and conditions in their
HAFA Policy as well as retain evidence demonstrating that any such organization is a non-profit
organization.
7.4 Short Sale Notice
At the request of an eligible borrower (whether the request is in response to the servicer’s
notification as described in the first paragraph of Section 4 or was initiated by a borrower), the
servicer will prepare and send an SSN to the borrower after determining that the proposed sale is
in the best interest of the investor. The servicer must complete and send the HAFA pre-approval
to the borrower within the time frames set forth in Sections 3.3 or 4.1, as applicable.
A borrower may not participate in a TPP and be offered a HAFA pre-approved short sale
simultaneously.
Servicers are encouraged to use the form SSN posted on www.HMPadmin.com to communicate
pre-approval of a HAFA short sale. Servicers may amend the terms of the SSN in accordance
with investor guidelines, applicable laws or local real estate practice. If a servicer elects to use a
proprietary form of SSN and not Treasury’s form, at a minimum the servicer’s SSN must include
the following:
 A fixed termination date not less than 120 calendar days from the effective date of the
SSN (SSN Effective Date). The SSN Effective Date must be stated in the SSN and is the
date the SSN is mailed (or otherwise delivered) to the borrower. The term may be
extended at the discretion of the servicer up to a total term of 12 months if agreed to by
the borrower, in accordance with investor guidelines.
 A requirement that the property be listed with a licensed real estate professional who is
regularly doing business in the community where the property is located.
 Either a list price approved by the servicer or the acceptable sale proceeds, expressed as
a net amount after subtracting allowable costs that the servicer will accept from the
transaction.
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168 Notice that the borrower is responsible for property maintenance and repair from the SSN
Effective Date until closing of the short sale transaction and will be responsible for
conveying marketable title in as described in Section 6.2.4.2.
 The amount of closing costs or other expenses the servicer will permit to be deducted
from the gross sale proceeds expressed as a dollar amount, a percentage of the list price
or a list by category of reasonable closing costs and other expenses that the servicer will
permit to be deducted from the gross sale proceeds.
 The amount of the real estate commission that may be paid, not to exceed six percent of
the contract sales price, and when applicable, notification that the servicer retained a
contractor or vendor to assist the listing broker with the transaction and a statement that
any associated vendor fees will not be charged to the borrower or deducted from the real
estate commission along with the payment amount (expressed as a fixed dollar amount
or percentage of the contract sales price) if paid from sale proceeds. Furthermore, a
statement informing the borrower that a borrower with a real estate license cannot earn a
commission selling his or her own property and may not have any agreement to receive
all or a portion of any real estate commission after closing.
 Cancellation and contingency clauses that must be included in listing and sale
agreements notifying prospective purchasers that the sale is subject to approval by the
servicer and/or third parties.
 Notice that (i) the sale must represent an arm’s length transaction, (ii) the purchaser may
not sell the property within 30 calendar days of closing and (iii) for the period between 31
and 90 calendar days of the closing, the purchaser is prohibited from selling the property
for a gross sales price greater than 120% of the HAFA short sale price and (iv) the
prohibitions described in clauses (ii) and (ii) must be included in the sales contract.
 Notice that upon successful closing of a short sale acceptable to the servicer, the servicer
will record a mortgage lien release and the borrower will be released from all liability for
repayment of the first mortgage debt.
 When applicable in accordance with Section 6.2.5, an agreement that upon successful
closing of a short sale acceptable to the servicer, the borrower, tenant or other non-
borrower occupant, as applicable, will be entitled to relocation assistance of $3,000,
which will be deducted from the gross sale proceeds at closing; the borrower will need to
provide evidence of occupancy and, for any non-borrower occupant, a Non-Borrower
Occupant Certification and, for the borrower, a Dodd-Frank Certification, regardless of
whether the borrower or some other party is receiving the relocation assistance.
 Notice that the servicer will allow a portion of gross sale proceeds to be paid to
subordinate lien holders in exchange for release and full satisfaction of their liens.
 Notice that a short sale may have income tax consequences and/or may have a negative
impact on the borrower’s credit score and a recommendation that the borrower seek
professional advice regarding these matters.
 The amount of the monthly mortgage payment, if any, that the borrower will be required
to pay during the effective period of the SSN, which amount must not exceed 31 percent
of the borrower’s monthly gross income, unless the borrower elects to make a full
contractual payment in order to stay current on the mortgage loan.
 A statement that so long as the borrower performs in accordance with requirements
identified by the servicer in the SSN, the servicer will not complete a foreclosure sale;
however, the servicer may initiate or continue the foreclosure process as permitted by the
mortgage documents.
 Terms under which the HAFA pre-approval can be terminated.
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169 The terms of any sale approved by the servicer that provides an option for the property to
be sold to a non-profit organization with the stated purpose that the property will be
rented or sold to the borrower.
 Notice of those items that the borrower must submit when the borrower receives an
executed sales contract (Offer Documents), for example, a copy of the executed sales
contract and all addenda, buyer’s documentation of funds or pre-approval or commitment
letter on letterhead from a lender and information regarding the status of subordinate
liens and/or negotiations with subordinate lien holders. The servicer may permit but not
require a borrower to deliver a Request for Approval of a Short Sale (RASS) in the form
posted at www.HMPadmin.com.
 Notice that, if not already provided, the borrower must execute a Hardship Affidavit and a
HAFA Affidavit, each as a condition of closing.
7.5 Reserved
7.6 Reasons for Termination
During the term of the SSN, the servicer may terminate the terms of the pre-approval before its
expiration due to any of the following events (as long as such potential events are described in
the SSN):
 The borrower’s financial situation improves significantly, the borrower qualifies for a
modification, or the borrower brings the account current or pays the mortgage in full.
 The borrower or other occupant(s) in the property, or the listing broker fails to act in good
faith in listing, marketing and/or closing the sale.
 A significant change occurs to the property condition and/or value.
 There is evidence of fraud or misrepresentation.
 The borrower files for bankruptcy and the Bankruptcy Court declines to approve a sale
under the terms of the SSN.
 Litigation is initiated or threatened that could affect title to the property or interfere with a
valid conveyance.
 The borrower fails to make the monthly payment stipulated in the SSN, if applicable.
7.7 Offer Receipt and Response
Within three business days following receipt of an executed purchase offer, the borrower or the
listing broker should deliver to the servicer the executed purchase offer and other Offer
Documents.
7.8 Approval or Disapproval of Sale
If the net sale proceeds available for payment to the servicer from a pre-approved HAFA short
sale equal or exceed the Minimum Net established by the servicer prior to issuing the SSN and
the offer meets all other sales terms and conditions of the pre-approval, the servicer must notify
the borrower of its approval of the proposed sale within 10 business days of receipt of the Offer
Documents.
If the net sale proceeds available for payment to the servicer are less than the Minimum Net or
the offer fails to meet the other sales terms and conditions in the pre-approval, within 10 business
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170days of receipt of the Offer Documents, the servicer must notify the borrower of the servicer’s
approval or disapproval of the offer or intent to make a counter-offer. If the servicer elects to
make a counter-offer, the servicer has 30 calendar days from the date of the servicer’s receipt of
the Offer Documents to make the counter-offer.
Servicers are not prohibited under HAFA from accepting a purchase offer that results in net sales
proceeds that are lower than the Minimum Net so long as the proposed sale is in the best
interests of the investor. Additionally, the servicer may not require, as a condition of approving a
short sale, a reduction in the real estate commission below the commission stated in the SSN.
The servicer may require that the sale closing take place within a reasonable period following
acceptance of the executed sales contract, but in no event may the servicer require that a
transaction close in less than 45 calendar days from the date of the sales contract without the
consent of the borrower.
8 Request for Approval of Short Sale Prior to Issuance of an SSN
If the borrower has an executed sales contract and requests the servicer to approve a short sale
under HAFA before the issuance of an SSN, the borrower may submit the request to the servicer
by delivering the executed sales contract. Within 10 business days of receipt of an executed
sales contract, the servicer must send to the borrower written acknowledgement of the receipt of
the borrower’s request for approval of an executed sales contract using the Acknowledgement of
Request for Short Sale (ARSS) in the form posted on www.HMPadmin.com or an other written
acknowledgement similar in content. The acknowledgement must identify any additional
documentation that may be required from the borrower to make the short sale decision and
inform the borrower of all applicable short sale terms set forth in Section 7.4. For borrowers who
have not submitted a Hardship Affidavit or, if applicable, RMA, the servicer must also include the
forms thereof (or otherwise make them available to the borrower through electronic means).
When considering a borrower’s request for approval of an executed sales contract, the servicer
must determine the borrower’s eligibility as set forth in Section 6.1.1. If the borrower appears to
be eligible for HAMP, the servicer must notify the borrower of the availability of HAMP as set forth
in Section 4. Evidence of the borrower’s request must be provided by postmark or other
independent indicator such as a date and time stamp (electronic or otherwise) evidencing
submission by the borrower on or before December 31, 2015.
If a borrower has previously submitted an executed Hardship Affidavit or, if applicable, an RMA,
within 30 calendar days of receipt of an executed sales contract, the servicer must verify the
borrower’s eligibility for HAFA and communicate approval or disapproval of the sale, or provide a
counter offer. If a borrower has not previously executed a Hardship Affidavit or, if applicable, an
RMA and has a Pre-Determined Hardship, within 30 calendar days of receipt of an executed
sales contract, the servicer must verify the borrower’s eligibility for HAFA and communicate
approval or disapproval of the executed sales contract, or provide a counter offer. If the executed
sales contract is approved, an executed Hardship Affidavit must be provided by the borrower prior
to and as a condition of the closing of the HAFA short sale. If a borrower has not previously
executed a Hardship Affidavit or, if applicable, an RMA and does not have a Pre-Determined
Hardship, within 30 calendar days of receipt of an executed Hardship Affidavit, the servicer must
verify a borrower’s hardship and eligibility for HAFA and communicate approval or disapproval of
the sale, or provide a counter offer. If the servicer is unable to respond within the applicable 30-
calendar day period, the servicer must send a written status notice to the borrower on or before
the 30 th calendar day, with written updates every 15 calendar days thereafter, until the servicer is
able to provide the approval or disapproval or a counteroffer, as applicable.
If the servicer is unable to respond within the applicable 30 calendar days the servicer must send
a written status notice to the borrower on or before the 30th calendar day, with written updates
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171every 15 calendar days thereafter, until the servicer is able to provide a written response to the
borrower’s request.
Servicers may not, as a condition of sale, require that the real estate commission stated in the
sales contract be reduced to less than six percent of the contract sale price. If a servicer retains
a contractor or vendor to assist the listing broker with completion of the transaction, the servicer
must inform the borrower in writing that any associated vendor fees will not be charged to the
borrower or deducted from the real estate commission.
9 Deed-In-Lieu Process
In accordance with its HAFA Policy and investor guidelines, servicers have the discretion to offer
and accept a DIL as part of the HAFA program. Acceptance of a DIL requires a full release of the
debt and a waiver of all claims against the borrower. Unless the borrower and servicer enter into
a deed-to-lease or other alternative arrangement, generally, the borrower must agree to vacate
the property or, in the case of a rental property, have the tenant or other non-borrower occupant,
if applicable, vacate the property by a date certain, leave the property in broom clean condition
and deliver clear, marketable title.
Typically, servicers require that the borrower make a good faith effort to list and market the
property before the servicer will agree to accept a DIL. Under circumstances acceptable to the
investor, servicers may agree to accept a DIL without requiring a marketing period.
9.1 DIL Language in the SSN
The SSN may contain language stating that the investor will accept a DIL in accordance with the
terms of the SSN if the term of the pre-approved marketing period expires without resulting in the
sale of the property. If this optional DIL language is included, the investor is obligated to accept a
DIL following expiration of the pre-approved marketing period.
If the servicer offers the HAFA DIL option separately from the SSN or without a marketing period,
the servicer must communicate the terms of the DIL to the borrower in writing using the DIL
Agreement form posted on www.HMPadmin.com or their own proprietary form DIL notice or
agreement as is consistent with the Service’s HAFA Policy, provided that all the information
contained in Section 9.2 is included in such notice or agreement. While the DIL Agreement must
be signed by the borrower, servicers may elect to use a unilateral form of DIL notice and not
require the borrower’s signature.
9.2 DIL Terms
The following terms apply to a HAFA DIL and must be included in a written communication from
the servicer to the borrower detailing the terms of a DIL, whether the servicer uses the SSN, DIL
Agreement or other written DIL notice or agreement:
 The borrower must be able to convey clear, marketable title to the servicer or investor.
The requirements for extinguishment of subordinate liens set forth in Section 6.2.4.2
apply to DIL transactions. Notice must be provided to the borrower that borrower is
responsible for property maintenance and repair until closing of the DIL.
 The conditions for acceptance of a DIL must be in writing and signed by both the servicer
and borrower. They may be set forth in the SSA if approved with the short sale, or in a
separate DIL Agreement.
 The written DIL communication must specify the date by which the borrower, tenant or
other non-borrower occupant, if applicable, must vacate the property, which in no event
shall be less than 30 calendar days from the date of the termination date of the SSN or
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172the date of a separate DIL Agreement or other DIL notice or agreement, unless the
borrower voluntarily agrees to an earlier date.
 An agreement that upon successful closing of the DIL transaction, a borrower, tenant or
other non-borrower occupant who will be required to vacate the property as a result of the
DIL will be entitled to a relocation assistance of $3,000 subject to the requirements of
Section 6.2.5.
 DIL may provide an option for the borrower or tenant, if applicable, to continue to occupy
the property on a rental basis (deed-for-lease) or provide an opportunity for the borrower
to repurchase the property at some future time. Such transactions are not eligible for
relocation assistance, but are eligible for servicer and investor incentives under HAFA, so
long as all other program requirements are met. Servicers offering programs of this type
must include program descriptions and conditions in their HAFA Policy.
 Conditional DIL agreements that allow a borrower to reinstate the original loan following
some period of rental occupancy are not eligible for HAFA incentives unless and until the
DIL is successfully closed and the borrower no longer has the option of reinstating or
modifying the original first mortgage lien.
 The written notice or agreement of DIL must include notice to the borrower that a short
sale may have income tax consequences and/or may have a negative impact on the
borrower’s credit score and a recommendation that the borrower seek professional
advice regarding these matters.
 The amount of the monthly mortgage payment, if any, that the borrower will be required
to pay until closing of the DIL.
 Notice that upon successful closing of the DIL, the servicer will record a mortgage lien
release and the borrower will be released from all liability for repayment of the first
mortgage debt.
 A statement that so long as the borrower performs in accordance with the requirements
identified by the servicer, the servicer will not complete a foreclosure sale; however, the
servicer may initiate or continue the foreclosure process as permitted by the mortgage
documents.
 Terms under which the approval of a DIL can be terminated.
 A statement that completion of the DIL may be subject to mortgage insurer or guarantor
approval.
10 HAFA Documents
Servicers are encouraged to use the form SSN and DIL Agreement provided on
www.HMPadmin.com. While the use of such documents is optional, if servicers do not use such
forms, servicers must use written communications substantially similar in content. All documents
must reflect the actual date of issuance by the servicer and must be binding on the servicer.
At closing, servicers are required to obtain from the borrower and purchaser a HAFA Short Sale
Affidavit (HAFA Affidavit) in the form posted on www.HMPadmin.com, except that the servicer
may amend the terms of the HAFA Affidavit in accordance with investor requirements, applicable
laws or local real estate practice and may customize the HAFA Affidavit with servicer specific
logos. In the HAFA Affidavit the borrower and purchaser make certain representations regarding
the arm’s length nature of the transaction and occupancy and acknowledge certain limitations on
future resale of the property. The HAFA Affidavit must be signed by the borrower and purchaser
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173as a condition of closing the transaction. Furthermore, all borrowers on or prior to closing, must
have provided the servicer with an executed Hardship Affidavit (including a copy of the Dodd-
Frank Certification) or an executed RMA.
Unless a borrower or co-borrower is deceased or a borrower and a co-borrower are divorced, all
parties who signed the original loan documents or their duly authorized representatives must
execute the Hardship Affidavit and HAFA Affidavit. If a borrower and a co-borrower are divorced
and the property has been transferred to one spouse in the divorce decree, the spouse who no
longer has an interest in the property is not required to execute such documents. Servicers may
evaluate requests on a case-by-case basis when the borrower is unable to sign due to
circumstances such as mental incapacity or military deployment.
Any party to a document utilized in HAFA may, subject to applicable law and any investor
guidelines, prepare, sign and send the document through electronic means provided: (a)
appropriate technology is used to store an authentic record of the executed document and the
technology otherwise ensures the security, confidentiality and privacy of the transaction, (b) the
document is enforceable under applicable law, (c) the servicer obtains the borrower’s consent to
use electronic means to enter into the document, (d) the servicer ensures that the borrower is
able to retain a copy of the document and provides a copy to the borrower that the borrower may
download, store and print, and (e) the borrower, at any time, may elect, to the extent applicable,
to enter into the document through paper means or to receive a paper copy of the document.
11 Reporting Requirements
11.1 Treasury Reporting
Servicers are required to report periodic HAFA loan level data to the Program Administrator via
the HAMP Reporting Tool. The data submitted must be accurate, complete, timely, and agree
with the servicer’s records. Data will be reported by a servicer at key milestones in the
transaction:
 Notification – when the terms of the short sale or DIL are conveyed in writing to the
borrower, or updated following an extension of the marketing terms;
 Short Sale/DIL Loan Set Up – at the transfer of property ownership (closing of a short
sale or acceptance of DIL); and/or
 Termination – when the SSA or DIL Agreement expires or when the SSA or DIL
Agreement is terminated by the servicer.
Each milestone is a separate data transmission and must be reported no later than the fourth
business day of the month following the event. Note also that servicers must provide the
additional data set forth in the HAMP Additional Data Requirements Data Dictionary for all HAFA
transactions. Detailed HAFA reporting requirements are available on www.HMPadmin.com.
11.2 Credit Bureau Reporting
The servicer should continue to report a “full file” status to the major credit repositories for each
loan under the HAFA program in accordance with the Fair Credit Reporting Act and the CDIA’s
Metro 2 Format credit bureau requirements. “Full file” reporting means that the servicer must
describe the exact status of each mortgage it is servicing as of the last business day of each
month. The Payment Rating code should be the code that properly identifies whether the account
is current or past due within the activity period being reported – prior to completion of the HAFA
transaction. Because CDIA’s Metro 2 format does not provide an Account Status Code allowable
value for a short sale, a short sale should be identified with the reporting of Special Comment
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174Code “AU”. The information below is consistent with “CDIA Mortgage and Home Equity Reporting
Guidelines in Response to Current Financial Conditions” (May 2009).
Reporting for short sales should be as follows:







Account Status Code = 13 (paid or closed/zero balance) or 65 (Account paid in full/a
foreclosure was started), as applicable
Payment Rating = 0, 1, 2, 3, 4, 5, or 6
Special Comment Code = AU (account paid in full for less than the full balance)
Current Balance = $0
Amount Past Due = $0
Date Closed = MMDDYYYY
Date of Last Payment = MMDDYYYY
Reporting for DILs should be as follows:






Account Status Code = 89 (deed-in-lieu of foreclosure on a defaulted loan)
Payment Rating = 0, 1, 2, 3, 4, 5, or 6
Current Balance = $0
Amount Past Due = $0
Date Closed = MMDDYYYY
Date of Last Payment = MMDDYYYY
12 Incentive Compensation
Borrowers, servicers and investors, and in some cases, tenants and other non-borrower
occupants, will be eligible for HAFA incentives as described below upon successful completion of
the short sale or DIL. However, no incentives will be paid to any party if the net proceeds from a
sale exceed the total amount due on the first mortgage when title is transferred. The amount of
any contribution paid by a mortgage insurer or other provider of credit enhancement shall not be
considered in determining whether the mortgage was paid in full and whether servicers are
eligible for such incentive compensation.
12.1 Relocation Assistance
Upon the successful closing of a short sale or DIL, a borrower, tenant or other non-borrower
occupant who occupies the property as a principal residence and is required to vacate as a
condition of the HAFA short sale or DIL shall be eligible to receive relocation assistance of $3,000
per HAFA transaction (regardless of the number of occupants who will vacate), subject to the
requirements in Section 6.2.5.
In a short sale transaction, if relocation assistance is to be paid, the servicer must instruct the
settlement agent to pay the borrower, tenant or other non-borrower occupant from sale proceeds
at the same time that all other payments, including the payoff to the servicer, are disbursed by the
settlement agent. If the property is occupied by the borrower, in addition to paying for relocation
expenses, the borrower may use the relocation assistance payment to pay for transaction costs
that the borrower has instructed the settlement agent, in writing, to pay on its behalf, such as the
cost of legal representation in connection with representation of the borrower in the short sale or
DIL, overdue utility bills on the property or minor repairs made as a result of being identified
during a property inspection. Borrowers, however, may not use the relocation assistance
payment for the release of subordinate mortgage or non-mortgage liens recorded against the
property and may not be required by the servicer, as a condition of the sale, to utilize the
relocation assistance to pay any transaction expenses.
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175In the case of a rental property occupied by a tenant or other non-borrower occupant, the entire
$3,000 must be paid to the tenant or other non-borrower occupant at closing and may not be
reduced by other expenses. If relocation assistance is being paid, the HUD-1 Settlement
Statement must show the full $3,000 as a credit to the borrower, tenant or other non-borrower
occupant, as applicable, and show any authorized transaction costs paid out of the relocation
assistance in accordance with the foregoing guidance as charges to the borrower.
If the servicer conducts a formal closing for a DIL transaction where relocation assistance will be
paid and the borrower, tenant or other non-borrower occupant, as applicable, has already
vacated the property, the relocation assistance of $3,000 must be paid at closing and reflected on
the HUD-1 Settlement Statement. If, at the time of a closing where relocation assistance will be
paid, the borrower, tenant or other non-borrower applicant (as applicable) has not vacated the
property, the servicer must mail a check to the prior occupant within five business days of
vacancy and delivery of keys to the servicer or the servicer’s agent. Similarly, if the DIL
transaction where relocation assistance will be paid is not conducted as a formal closing, the
servicer must mail a check to the prior occupant within five business days from the later of the
borrower’s execution of the deed or vacancy and delivery of keys to the servicer or servicer’s
agent.
Servicers will be reimbursed for the $3,000 relocation assistance after the HAFA transaction is
reported in the HAMP Reporting Tool, provided that the servicer has obtained the requisite proof
of occupancy and Dodd-Frank Certification(s) and, if applicable, Non-Owner Occupant
Certification(s) as required under Section 6.2.5 and the other applicable requirements of this
Chapter IV are satisfied.
12.2 Servicer Incentive
The servicer will be paid $1,500 to cover administrative and processing costs for a short sale or
DIL completed in accordance with the requirements of HAFA and the applicable documents.
Investors may elect to pay additional incentive compensation to servicers, which will not affect the
HAFA servicer incentive.
12.3 Investor Reimbursement for Subordinate Lien Releases
The investor will be paid a maximum of $5,000 for allowing a portion of the short sale proceeds to
be distributed to or paid to subordinate mortgage lien holders. This reimbursement will be earned
on a two-for-three matching basis for amounts paid from the gross sale proceeds to subordinate
mortgage lien holder(s). For each three dollars an investor pays to secure release of a
subordinate mortgage lien, the investor will be entitled to two dollars of reimbursement up to the
maximum reimbursement of $5,000. To receive an incentive, subordinate lien holders must
agree to release their subordinate mortgage liens and waive all future claims against the
borrower. The servicer is not responsible for any future actions or claims against the borrower by
such subordinate mortgage lien holders. No investor will be paid for allowing a portion of the
short sale proceeds to be paid to subordinate non-mortgage lien holders.
Chapter IV: HAFA
MHA Handbook v4.3
176Chapter V
Second Lien Modification Program
(2MP)
Chapter V: 2MP
MHA Handbook v4.3
1771 Introduction
This Chapter provides guidance on the Second Lien Modification Program (2MP), which is
designed to work in tandem with HAMP. Together, HAMP and 2MP create a comprehensive
solution to help borrowers achieve greater affordability by lowering payments on both first lien
and second lien mortgage loans. Under 2MP, when a borrower’s first lien is modified under
HAMP or pursuant to certain GSE requirements that servicers modify first lien GSE loans using
standard modification terms that are substantially similar to the modification terms for first liens
modified under HAMP Tier 2 (GSE Standard Modification), and the servicer of the corresponding
second lien is a 2MP participant, that servicer must offer to modify the borrower’s second lien
according to a defined protocol, to accept a lump sum payment from Treasury in exchange for full
extinguishment of the second lien, or to accept a lump sum payment from Treasury in exchange
for a partial extinguishment and modify the remaining borrower’s second lien according to a
defined protocol.
MHA-C will incorporate an evaluation of 2MP implementation, processes, and controls into its
servicer reviews. Servicers should refer to Section 2 of Chapter I.
2 Participation
In order to participate in 2MP, a servicer must have executed the SPA and the 2MP Service
Schedule prior to October 3, 2010. A servicer need not service the related first lien or participate
in HAMP in order to participate in 2MP. See Chapter I for the servicer participation requirements.
Servicers that are participating in 2MP (2MP servicers) with respect to Non-GSE Mortgages must
follow the guidance set forth in this Chapter when borrowers seeking assistance have a second
lien mortgage loan.
3 Eligibility
3.1 2MP Modification and Extinguishment Eligibility Criteria
Second lien
The mortgage loan is a second lien mortgage loan originated on or before
January 1, 2009. This includes a mortgage lien that would be in second lien
position but for a tax lien, a mechanic’s lien or other non-mortgage related lien
that has priority.
The reference to “originated on or before” refers to the date on which the loan
was first originated (i.e., not the date a loan may have been modified
previously).
First lien
modified under
HAMP or GSE
Standard
Modification The mortgage loan is a second lien mortgage loan with a corresponding first
lien mortgage loan that has received a permanent HAMP modification, or a
GSE Standard Modification that satisfies the HAMP eligibility criteria in Section
1, the second paragraph of Section 6.1 (at the Expanded Acceptable DTI
Range) and Section 6.3.3 of Chapter II, and is in good standing. This
guidance does not apply to loans modified under the GSE Streamlined
Modification process.
Not previously
2MP modified The second lien mortgage loan has not been previously modified under 2MP.
Chapter V: 2MP
MHA Handbook v4.3
178Unpaid principal
balance limits
The second lien mortgage loan (current or delinquent) has a UPB at initial
consideration for modification or partial extinguishment under 2MP of $5,000
or more and a pre-modification scheduled monthly payment equal to or greater
than $100. The servicer must determine the thresholds as of the date of the
initial 2MP evaluation. Payments and interest rate fluctuations during the
evaluation period or trial period do not affect the initial 2MP eligibility
determination.
There are no UPB limits for full extinguishment under 2MP.
Program cut-off
date
The servicer must receive notification of a match with a permanent first lien
modification under HAMP, or a GSE Standard Modification that satisfies the
HAMP eligibility criteria in Section 1, the second paragraph of Section 6.1 (at
the Expanded Acceptable DTI Range) and Section 6.3.3 of Chapter II and the
2MP Modification Effective Date is on or before September 30, 2016.
Servicers may reasonably conclude that when a first lien appears on the LPS
match file as permanently modified it satisfies such eligibility criteria.
3.2 Additional Factors Impacting 2MP and Extinguishment Eligibility
First Lien Home
Equity Loans
and Lines of
Credit A HEL or HELOC that is in first lien position is not eligible under 2MP and
should be evaluated for HAMP as set forth in Chapter II.
Partial claim or
equity
appreciation
loans A second lien mortgage loan on which no interest is charged and no payments
are due until the first lien is paid in full (e.g., FHA partial claim liens and/or
equity appreciation loans) is not eligible under 2MP.
Insured or
guaranteed by
federal
government Second lien mortgage loans insured, guaranteed or held by a federal
government agency (e.g., FHA, VA and RHS) are not eligible for 2MP.
Incentive
Compensation If a second lien mortgage loan is modified under 2MP, it is not later eligible for
payment of full or partial extinguishment incentives under 2MP. However,
when a partial extinguishment of principal is combined with a modification of
an eligible second lien, incentives can be paid for each activity.
Subordinate
mortgage loan A mortgage loan that is subordinate to a second lien is ineligible under 2MP.
Modification or extinguishment of such a subordinate mortgage loan in place
of the second lien will not satisfy the 2MP servicer’s obligation to modify or
extinguish the second lien.
If a second lien is fully extinguished under 2MP, no other subordinate lien on
the property that secured that lien shall become eligible for modification or
extinguishment.
3.3 Borrower Notice for 2MP
When a servicer had contact with a borrower in connection with a potential 2MP modification, the
borrower is evaluated for 2MP and the borrower is not offered a 2MP modification, the 2MP
servicer must mail a notice to the borrower no later than 10 business days following the date of
the 2MP servicer’s determination that a modification will not be offered. The notice must describe
the reason(s) why the borrower is not eligible for a 2MP modification. Such notices may be sent
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MHA Handbook v4.3
179electronically only if the borrower has previously agreed to exchange correspondence relating to
the modification with the 2MP servicer electronically. The content of the notice to the borrower
may vary depending on the information intended to be conveyed or the determination made by
the 2MP servicer. All notices must be written in clear, non-technical language, with acronyms and
industry terms explained in a manner that is easily understandable.
4 2MP Process
When a borrower’s first lien is modified under HAMP or a qualifying GSE Standard Modification,
the 2MP servicer must offer to modify or extinguish the corresponding second lien according to
the steps outlined in Section 5. In addition, if the borrower’s first lien is modified under HAMP or
a qualifying GSE Standard Modification, the 2MP servicer must dismiss any outstanding
foreclosure action on the borrower’s second lien.
If the 2MP servicer is evaluating a borrower for 2MP and for its own second lien proprietary
modification program, the 2MP servicer must offer 2MP first (or at least simultaneously) with the
second lien proprietary modification, regardless of the terms of the second lien proprietary
modification. If the 2MP servicer already has modified the borrower’s second lien with a
proprietary modification, the 2MP servicer should still make a 2MP offer.
4.1 Matching Second Liens to HAMP First Liens
4.1.1 LPS Matching
To facilitate the communication of modification information to 2MP servicers, Lender Processing
Services’ Applied Analytics Division (LPS) has built and is maintaining a database of second liens
that may be eligible under 2MP. Information from the database will be used to match first and
second liens and to notify 2MP servicers of the modification status and details necessary for the
2MP servicer to offer a 2MP modification to the borrower. LPS will provide matching information
to 2MP servicers via a secure transmission. 2MP servicers must enter into a contract directly
with LPS to facilitate this program and will be required to pay a one-time set up fee and nominal
transaction fees for each second lien matched, regardless of whether a 2MP modification is
completed.
As part of its contract with LPS, a 2MP servicer will agree to provide the following categories of
information on all eligible second liens loans that it services to LPS for matching:




Loan Identifying Information
Borrower/Co-Borrower Identifying Data
Property Identifying Data
2MP Servicer Contact Information
If the 2MP servicer identifies matching first and second liens on its own system, it should work
with LPS so that the required loan information is accurately reflected in the LPS database. In
addition, the 2MP servicer must provide monthly updates of this information to LPS. The
information provided to LPS will be used for matching first and second liens to facilitate 2MP
modifications and for program analysis and reporting.
The LPS match file will also include qualifying first liens that have been modified under the GSE
Standard Modification. The LPS match file will indicate whether the matched first lien is a HAMP
Modification, HAMP GSE Modification, or a GSE Standard Modification. Servicers of GSE loans
are not required to provide data on GSE Standard Modifications directly to LPS, Treasury, or the
Program Administrator. Such data will be provided by the GSEs. 2MP servicers can reasonably
conclude that when a first lien modified under the GSE Standard Modification appears on the LPS
match file, it satisfies the eligibility criteria in Section 1, the second paragraph of Section 6.1 (at
the Expanded Acceptable DTI Range) and Section 6.3.3 of Chapter II; except that servicers must
Chapter V: 2MP
MHA Handbook v4.3
180obtain a completed Occupancy Certification from all borrowers whose qualifying first lien was
modified under the GSE Standard Modification requirement, regardless of whether the borrower
occupies the property as their principal residence or it is a rental property. A standalone
Occupancy Certification that servicers can use for this purpose is posted on
HMPadmin.com. As 2MP servicers are also required to obtain a completed Dodd-Frank
Certification when the first lien is modified under GSE HAMP or the GSE Standard Modification
requirements, a combined certification form is also provided on HMPadmin.com.
A “multiple subordinate lien match” will be deemed to exist when there are multiple second lien
matches for a single modified first lien. LPS will identify multiple matches that are discovered
during the regular match process and will provide certain limited information to the 2MP servicer.
A “probable lien match” will be deemed to exist for a modified first lien and second lien where the
property addresses for both loans are not an exact match but the social security numbers of the
borrowers and the property zip codes are the same for both liens.
4.1.2 Enhanced Matching Capabilities
In some cases, information in the LPS database may not identify a match between a first lien
modification and corresponding eligible second lien, but the 2MP servicer may have sufficient
information to identify a match. A 2MP servicer may direct LPS to match a second lien to a
modified first lien where the 2MP servicer is confident that the first and second lien should be
matched because the 2MP servicer obtains sufficient documentation of the modification from (1)
the probable lien matches that LPS provided or (2) sources independent of LPS (e.g., the 2MP
servicer itself, if the 2MP servicer services both the first and second liens, reliable borrower
communications or direct communications with the first lien servicer).
In addition, to facilitate modifications, the HAMP Reporting Tool has been updated to allow
reporting of valid 2MP modifications for which the corresponding first lien match was not
confirmed through LPS. Therefore, participating 2MP servicers may offer and report a 2MP
modification when the servicer identifies the match, even if the match is not reflected in the LPS
system.
If servicers choose to offer and report 2MP modifications outside of the LPS process, the 2MP
servicer must be able to provide sufficient documentation that the borrower is entitled to the 2MP
modification being offered. Such documentation includes a copy of the fully executed
modification agreement, and the information that must match includes, at a minimum, borrower
name(s), social security number(s), property address and the first lien loan number. For servicer-
identified matches where the servicer services both the first and second liens, the servicer can
rely on the executed modification documents in the servicer’s possession and the servicer must
verify the modified first lien’s good standing. For servicer-identified matches where the 2MP
servicer does not servicer the first lien, the 2MP servicer can rely on a copy of the executed
modification agreement obtained from the first lien servicer and verification from the first lien
servicer of the modified first lien’s good standing. In addition, in the case of GSE Standard
Modifications, the 2MP servicer must verify that the first lien modified under the GSE Standard
Modification satisfies the eligibility criteria in Section 1, the second paragraph of Section 6.1 (at
the Expanded Acceptable DTI Range) and Section 6.3.3 of Chapter II, and the 2MP servicer must
obtain a completed Occupancy Certification from the borrower(s) regardless of whether the
borrower occupies the property as their principal residence or it is a rental property.
All copies of documents validating the match of the first and second liens must be placed in the
borrower’s mortgage loan file and/or servicing system along with a record of the terms of the
modification at the time the 2MP offer was sent to the borrower. Additionally, any communication
with the first lien servicer where the 2MP servicer is not the servicer of the first lien, including
discussions about the first lien modification and the first lien servicer contact information, must
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MHA Handbook v4.3
181also be noted in the borrower’s loan file and/or servicing system. Servicers must make this
information available to MHA-C upon request.
4.2 2MP Timing
The modification of a second lien may not become effective unless and until (i) the modification of
a corresponding first lien becomes effective and, when applicable, (ii) the borrower has made all
required 2MP trial period payments. In addition, if the modified first lien loses good standing prior
to the 2MP modification becoming effective, the second lien is not eligible for 2MP and the 2MP
servicer is not required to offer a 2MP modification to the borrower. If, however, the same first
lien loan is subsequently modified under HAMP Tier 2 or the GSE Standard Modification, as
applicable, the servicer will be required to offer a 2MP that corresponds to the terms of the
subsequent modification.
4.2.1 LPS Matches
In cases of a match through the LPS process, a 2MP servicer must offer a 2MP trial period or
2MP modification, as applicable, to any eligible second lien borrower no later than:
 For the first match file provided by LPS after the 2MP servicer goes into production with
LPS, 120 calendar days from the date the servicer receives the notification of a match
from LPS of the related permanent HAMP modification.
 For all subsequent match files provided by LPS, 60 calendar days from the date the 2MP
servicer receives the notification of a match from LPS of the related permanent HAMP
modification.
 For all match files where a borrower is in a bankruptcy, 60 calendar days from the later of
(1) the date the borrower, the borrower’s counsel or the bankruptcy trustee requests
consideration for a 2MP modification and (2) the date the 2MP servicer receives the
notification of a match from LPS of the related permanent HAMP modification. The
servicer must work with the borrower or borrower’s counsel to obtain any court and/or
trustee approvals required in accordance with local court rules and procedures and
should extend time frames as necessary to accommodate dates in obtaining the
approvals.
A 2MP servicer must offer 2MP no later than 150 calendar days from “The Date of First
Match” in the first match file provided by LPS containing a match to a GSE Standard
Modification. For all subsequent match files provided by LPS, a 2MP servicer must offer 2MP no
later than 60 calendar days from “The Date of First Match” in the file for the related GSE Standard
Modification.
Servicers are not required to offer 2MP trial periods or modifications for probable lien matches
which the servicer has not confirmed with LPS the probable lien match. 2MP servicers must
record the date when they obtained information from LPS to use for the modification.
4.2.2 Matches Outside of the LPS Process
If a servicer chooses to offer a 2MP modification outside of the LPS process where the servicer
services both the first and second liens, the servicer must offer a 2MP trial period or 2MP
modification, as applicable, to the borrower no later than 60 calendar days after the effective date
of the related permanent modification.
If a servicer chooses to offer a 2MP modification outside of the LPS process where the 2MP
servicer does not service the first lien, the 2MP servicer must offer a 2MP trial period or 2MP
modification, as applicable, to the borrower no later than 60 calendar days after the date the copy
of the executed modification agreement and other appropriate documentation is obtained from
Chapter V: 2MP
MHA Handbook v4.3
182the first lien servicer and verification from the first lien servicer of the HAMP modified first lien’s
good standing.
For information on matches for a borrower in bankruptcy, refer to guidance in Section 4.2.1.
Servicers must record in the borrower’s mortgage loan file and/or the servicing system the date it
receives the information from the first lien servicer.
4.3 Reliance on First Lien Data
The terms of the modification of the first lien will be used to determine the terms of the 2MP
modification of the second lien. 2MP servicers are not required to verify any of the financial
information provided by the borrower in connection with the first lien modification.
In general, modification of the first lien under HAMP confers a benefit on any associated second
liens. Because the first lien was, as required by Section 1.1 of Chapter II, delinquent or in
imminent default prior to receiving a permanent modification, 2MP servicers may reasonably
conclude that default is foreseeable with respect to a related second lien. Therefore, it can be
reasonably concluded that the combination of the modification of the first lien under HAMP and
the second lien under 2MP will be NPV positive, and for that reason, the 2MP servicer is not
required to perform an additional NPV analysis on the related second lien.
Furthermore, post-foreclosure recoveries of second liens, as a class, are likely to be de minimis if
the first lien is delinquent or at risk of default. Accordingly, it is reasonable for 2MP servicers to
conclude that modification of second lien mortgages in accordance with this guidance is likely to
provide an anticipated recovery on the outstanding principal mortgage debt that, as a class, will
exceed the anticipated recovery through foreclosure.
2MP servicers may rely on the first lien information provided by LPS at the time of the 2MP offer,
even if the terms of the first lien modification subsequently are updated or corrected in the HAMP
Reporting Tool. Servicers should retain a record from the match file of the terms of the
modification at the time the 2MP offer is sent to the borrower and must make this information
available to MHA-C upon request.
2MP servicers are not required to verify any of the financial information provided by the borrower
in connection with the first lien modification. However, if the 2MP servicer has questions or
concerns regarding attributes of a modified first lien that are material to the terms of an individual
2MP modification (e.g., forbearance percentage, forgiveness percentage, term after modification),
the 2MP servicer should notify the Program Administrator via secure e-mail at
support@HMPadmin.com so the Program Administrator can be involved in the resolution of the
issue. 2MP servicers must include the following information relating to the second lien: servicer
name, servicer number, contact name, phone number and e-mail address, loan number, borrower
name and property address. 2MP servicers must also include the following information relating to
the first lien information received in the match file: servicer name, servicer number, loan number,
borrower name and property address, and identify the data that is being disputed. If the 2MP
servicer has general questions or concerns regarding the match files maintained by LPS, the
2MP servicer should contact LPS.
4.4 Fraud
Unless there is evidence of fraud or misrepresentation, evidence that the modified first lien does
not meet the basic eligibility requirements of HAMP or evidence that the property valuation
provided is incorrect, there is no additional responsibility on the part of the 2MP servicer to verify
the information provided by the first lien servicer through LPS. If the 2MP servicer identifies such
evidence, the 2MP servicer should not proceed with the 2MP modification and must notify the
Chapter V: 2MP
MHA Handbook v4.3
183Program Administrator at Escalations@HMPadmin.com and shall be given an opportunity to
present such evidence.
5 Modification and Extinguishment
5.1 2MP Modification Steps
2MP servicers must follow the standard modification steps set forth below to modify the second
lien.
5.1.1 Step 1 – Capitalization
In the first step, the 2MP servicer capitalizes accrued interest and servicing advances (costs and
expenses incurred in performing second lien servicing obligations, such as those related to
preservation and protection of the security property and enforcement of the mortgage) paid to
third parties in the ordinary course of business and not retained by the 2MP servicer, if allowed by
applicable state law. Accrued interest may be waived or deferred at the discretion of the 2MP
servicer.
2MP servicers should capitalize only those third-party delinquency fees that are reasonable and
necessary. Fees permitted by Fannie Mae and Freddie Mac for GSE mortgage loans shall be
considered evidence of fees that would be reasonable for Non-GSE Mortgages.
Late fees and other ancillary income fees (e.g., insufficient funds fees, over limit fees and annual
fees) may not be capitalized and must be waived if the second lien is permanently modified under
2MP.
5.1.2 Step 2 – Reduce Interest Rate
5.1.2.1 Step 2.A – For amortizing second liens (payment of both principal and interest)
In the second step, the 2MP servicer reduces the interest rate of the second lien to 1.0 percent.
After five years, the interest rate on the second lien will reset at the then-current interest rate on
the modified first lien. If applicable, following the initial interest rate reset, the interest rate of the
modified second lien will reset on the same terms and schedule as the interest rate of the
modified first lien. At any time, the 2MP servicer may, in its discretion, offer a rate of interest that
is lower than the modified first lien.
Example: The Interest Rate Cap (as defined in Section 9.3.6 of Chapter II) on the modified first
lien is 6.5%. The interest rate on the modified first lien is fixed at 5.0% for the first five years and
then increases by 1.0% in year six to 6.0%, and by 0.5% in year seven to 6.5%. Thereafter, the
interest rate remains at 6.5% for the remaining term of the first lien. Accordingly, the interest rate
of the modified second lien will be fixed at 1.0% for the first five years and then increase by 5.0%
in year six to 6.0%, and by 0.5% in year seven to 6.5%.
5.1.2.2 Step 2.B – For second liens with interest-only payments
In the second step, the 2MP servicer may, in accordance with investor and regulatory guidance,
either (i) follow the procedure above to convert interest-only payments to amortizing payments at
1.0 percent interest, or (ii) retain the interest-only payment schedule and reduce the interest rate
of the second lien to 2.0 percent. After five years, the interest rate on the second lien will reset at
the then-current interest rate on the modified first lien. If applicable, following the initial rate reset,
the interest rate of the modified second lien will reset on the same terms and schedule as the
interest rate of the modified first lien. At any time, the 2MP servicer may, in its discretion, offer a
rate of interest that is lower than the modified first lien.
Chapter V: 2MP
MHA Handbook v4.3
184Example: The Interest Rate Cap on the modified first lien is 6.5%. The interest rate on the
modified first lien is fixed at 5.0% for the first five years and then increases by 1.0% in year six to
6.0%, and by 0.5% in year seven to 6.5%. Thereafter, the interest rate remains at 6.5% for the
remaining term of the first lien. Accordingly, the interest rate of the modified second lien will be
fixed at 2.0% for the first five years and then increase by 4.0% in year six to 6.0%, and by 0.5% in
year seven to 6.5%.
5.1.2.3 Step 2.C – For partially amortizing second liens (such as convertible HELOCs)
In the second step, if 50 percent or more of a second lien (based on the unmodified aggregate
UPB as of the date the 2MP offer is made to the borrower) is currently amortizing, the 2MP
servicer should follow Section 5.1.2.1 to reduce the interest rate of the second lien. If less than
50 percent of a second lien (based on the unmodified aggregate UPB as of the date the 2MP
offer is made to the borrower) is currently amortizing, the 2MP servicer should follow Section
5.1.2.2 to reduce the interest rate of the second lien.
In the alternative, and at the discretion of the 2MP servicer in accordance with investor
guidelines, for the steps above in Sections 5.1.2.1, 5.1.2.2 or 5.1.2.3, the terms of the 2MP
modification may include a more gradual interest rate step-up after five years. At no time may the
interest rate on the modified second lien exceed the interest rate on the modified first lien.
5.1.3 Step 3 – Extend Term
5.1.3.1 Step 3.A – For amortizing second liens (payment of both principal and interest)
In the third step, if the original term of the second lien is shorter than the remaining term of the
modified first lien, the 2MP servicer extends the term of the second lien to match, at a minimum,
the term of the modified first lien. The 2MP servicer must amortize the modified UPB of the
second lien over the term of the modified second lien. If a term extension is not permitted under
applicable investor guidelines or applicable law, but an extension of the amortization period is
permissible, then the 2MP servicer must reamortize the second lien with a balloon payment due
at maturity so that the new amortization period matches, at a minimum, either the amortization
period or the term of the modified first lien. Subject to regulatory and investor guidance, a 2MP
servicer may extend the term or the amortization period of the second lien up to 40 years,
regardless of the term or amortization period on the first lien.
5.1.3.2 Step 3.B – For second liens with interest-only payments
In the third step, if the original term of the second lien is shorter than the remaining term of the
modified first lien, the 2MP servicer extends the term of the second lien to match, at a minimum,
the term of the modified first lien. The 2MP servicer must amortize the modified UPB of the
second lien beginning at the time specified in the original second lien documents or after year
five, whichever is later. If, however, the second lien is interest-only until the maturity date under
the original loan documents and does not become amortizing, then amortization on the 2MP-
modified second lien must begin after year five. If a term extension is not permitted under
applicable investor guidelines or applicable law, but an extension of the amortization period is
permissible, the 2MP servicer must reamortize the second lien with a balloon payment due at
maturity so that the new amortization period matches, at a minimum, either the amortization
period or the term of the modified first lien. Subject to regulatory and investor guidance, a 2MP
servicer may extend the term or the amortization period of the second lien up to 40 years,
regardless of the term or amortization period on the first lien.
5.1.3.3 Step 3.C – For partially amortizing second liens (such as convertible HELOCs)
In the third step, if 50 percent or more of a second lien (based on the unmodified aggregate UPB
as of the date the 2MP offer is made to the borrower) is currently amortizing, the 2MP servicer
should follow Section 5.1.3.1 to extend the term of the second lien. If less than 50 percent (based
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MHA Handbook v4.3
185on the unmodified aggregate UPB as of the date the 2MP offer is made to the borrower) of a
second lien is currently amortizing, the 2MP servicer may, in accordance with investor guidance,
follow either Section 5.1.3.1 or Section 5.1.3.2 to extend the term of the second lien.
5.1.4 Step 4 – Principal Forbearance / Principal Forgiveness
In the fourth step, if there was principal forbearance or forgiveness on the modified first lien, a
2MP servicer must forbear or forgive principal on the second lien in at least the same proportion;
however, the 2MP servicer may, in its discretion and in accordance with investor guidelines,
forbear or forgive more than the required proportionate amount. If the 2MP servicer has deferred
accrued interest in lieu of capitalization in Section 5.1.1, the deferred amount will be in addition to
any principal forbearance or forgiveness required under this Section 5.1.4. The 2MP servicer
may, at its discretion and as permitted under applicable investor guidelines, choose to forgive any
amounts that are required to be forborne. All principal forgiveness required or provided under
2MP will be applied at the time of the permanent 2MP modification and will not be deferred.
Example: The total UPB plus the forgiveness amount of the modified first lien on its Modification
Effective Date is $100,000, the amount of principal forbearance on the first lien is $5,000 and the
amount of principal forgiveness is $5,000. Therefore, the 2MP servicer must forbear five percent
of the second lien and must forgive five percent of the second lien. If the total UPB of the second
lien on the Modification Effective Date is $40,000, the 2MP servicer must forbear $2,000 and
must forgive $2,000, or the 2MP servicer may elect to forgive a larger amount.
5.2 Partial Extinguishment Option
In addition to any required forgiveness in Section 5.1.4 of the 2MP modification waterfall, 2MP
servicers may, at their discretion and when permitted under applicable investor guidelines, agree
to partial extinguishment of additional principal as part of a 2MP modification and will be eligible
for both modification incentives and extinguishment incentives on any partial amount of principal
that is extinguished so long as the UPB of the second lien at initial consideration for 2MP is equal
to or greater than $5,000 and the second lien has a pre-modification scheduled monthly payment
equal to or greater than $100.
Additionally, a 2MP servicer may elect to use partial extinguishment rather than interest rate
reduction to achieve an affordable monthly payment and will be eligible for both extinguishment
incentives on any partial amount of principal that is extinguished and modification incentives so
long as the UPB of the second lien at initial consideration for 2MP is equal to or greater than
$5,000 and the second lien has a pre-modification scheduled monthly payment equal to or
greater than $100. In this instance, the 2MP servicer must first determine what the modified
monthly payment on the second lien would be under the 2MP modification waterfall (“target
payment”). The monthly payment during the first five years of the 2MP modification must be no
greater than the target payment. The interest rate may exceed the 2MP modification waterfall
interest rate of 1% for amortizing loans and 2% for interest-only loans, but in no event may be
higher than the Interest Rate Cap plus 200 basis points.
5.3 Full Extinguishment Option
As an alternative to modifying an eligible second lien, a 2MP servicer, in accordance with investor
guidelines, may elect to extinguish second lien in exchange for a lump sum payment paid in
accordance with the formula set forth in Section 11.3.2. 2MP servicers may, at their discretion,
fully extinguish a second lien with a UPB at initial consideration for 2MP of less than $5,000 or a
pre-modification scheduled monthly payment less than $100.
5.3.1 Extinguishment Timing
When extinguishment is selected, the extinguishment of the second lien or any part thereof may
not become effective unless and until the modification of the first lien becomes effective under
Chapter V: 2MP
MHA Handbook v4.3
186HAMP or GSE Standard Modification. The same timing requirements set forth in Section 4.2
apply to extinguishments.
5.4 Investor and Other Prohibitions
If the applicable investor guidelines prohibit the 2MP servicer from entering into a modification of
the second lien, the 2MP servicer must seek approval from the investor or its representative for
an exception. In the event that investor guidelines or applicable law restricts or prohibits a
modification step (e.g., extension of term beyond a specific point in time), a 2MP servicer may
either skip the modification step or perform the step within the limitations of the law or investor
guidelines without obtaining prior approval from the investor.
5.5 Re-modification Under HAMP Tier 2 or the GSE Standard Modification
If a 2MP modification is associated with a HAMP modification that loses good standing, the loan
with the 2MP modification is no longer eligible for incentives under 2MP. However, a 2MP
modification that is no longer receiving incentives because the borrower lost good standing on a
HAMP modification may be reinstated if the first mortgage lien is subsequently modified under
HAMP Tier 2 or the GSE Standard Modification, as applicable. In this instance the 2MP servicer
will be notified by the LPS matching facility that the first lien has been re-modified and the
servicer must resume 2MP monthly reporting in the HAMP Reporting Tool. Servicers will not be
required to re-modify a 2MP permanent modification to match the terms of the HAMP Tier 2
modification or the GSE Standard Modification, all prior 2MP modification terms apply. Upon
receipt of the 2MP monthly report by the Program Administrator, incentive payments will resume
and a true-up of incentives unpaid during the interim will be calculated and paid as appropriate.
6 2MP Trial Period Requirements
Borrowers must demonstrate their ability and willingness to support the modified payment on the
second lien; therefore, a 2MP trial period may be required based on the borrower’s delinquency
status. A borrower’s delinquency status on the second lien is determined as of the date the 2MP
offer is made to the borrower.
When a borrower is current on the existing second lien and the current contractual payment
amount is equal to or greater than the monthly payment that will be due following the 2MP
modification, a 2MP trial period is not required (unless a trial period is necessary to comply with
applicable contractual obligations). The 2MP servicer and borrower may execute a modification of
the second lien immediately following modification of the first lien.
When a borrower has two or more payments that are due and unpaid on the second lien at the
time of the 2MP offer, the borrower must complete a 2MP trial period with payments that reflect
the terms of the proposed 2MP modification to be eligible for a permanent 2MP modification.
6.1 Duration of 2MP Trial Period
The 2MP trial period must be three months in duration (or longer if necessary to comply with
applicable contractual obligations). If the 2MP servicer does not service the first lien, the 2MP
trial period may only begin after the first lien modification becomes effective. In cases where the
2MP servicer services both the first and second liens, at the servicer’s option in accordance with
investor guidelines, the 2MP trial period may run concurrently or overlap in time with the trial
period for the related first lien. The 2MP trial period for the second lien may be longer than three
months if it overlaps with the first lien trial period. If this occurs, the borrower must continue to
make timely 2MP trial period payments throughout the 2MP trial period regardless of its length.
Timely payment by the borrower of the first 2MP trial period payment is evidence of the
borrower's acceptance of the terms of the 2MP trial period. If the 2MP trial period is not accepted
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MHA Handbook v4.3
187by the last day of the month in which the first trial period payment is due, the 2MP servicer may
permanently withdraw the 2MP offer and will not be obligated to modify the second lien. If the
offer is permanently withdrawn, the 2MP servicer must mail a notice to the borrower no later than
10 business days following the date of the 2MP servicer’s determination. The notice must
describe the reason(s) why the borrower is not eligible for a 2MP modification.
6.2 2MP Trial Period Payments
2MP trial period payment due dates may be any day of the month. However, the 2MP
modification agreement must require that payments are due on the first day of each month. If the
final 2MP trial period due date is not the first day of the month, then the 2MP servicer may, at its
option, extend the trial period by one additional month. If the 2MP servicer elects this option, the
borrower will not be required to make an additional trial period payment during the month in
between the final trial period month and the month in which the modification becomes effective.
A 2MP servicer must treat all borrowers the same in applying this flexibility by developing and
applying a written policy.
The borrower must make each trial period payment no later than 30 days from the date such trial
period payment is due in order to receive a 2MP modification, though 2MP servicers may use
business judgment in accepting late payments when there are mitigating circumstances and must
document that decision in the servicing file. Although the borrower may make scheduled
payments earlier than expected, the early payments do not affect the length of the trial period or
accelerate the 2MP modification effective date.
If the borrower does not pay the final trial period payment on or before the last due date of the
trial period, then the 2MP servicer may, at its option, extend the trial period by one additional
month. If the 2MP servicer elects this option, the borrower will not be required to make an
additional trial period payment during the month in between the final trial period month and the
month in which the modification becomes effective. A 2MP servicer must treat all borrowers the
same in applying this flexibility by developing and applying a written policy by which the final trial
period payment must be submitted before the servicer applies this option (cutoff date). The cutoff
date must be after the due date for the final trial period payment.
In addition, the 2MP servicer must inform the borrower in writing about (i) the delay of the
modification effective date by one month and (ii) the effects of the interim month and the delay in
the effective date of the modification, including, but not limited to, the delay in the effective date of
the modified interest rate and the increase in the delinquent interest capitalized if the borrower
does not make an additional trial period payment.
If a 2MP servicer entered a borrower in a second lien trial period prior to executing the SPA and
the corresponding first lien has been converted to a permanent modification, that trial period will
satisfy the 2MP trial period requirements if the trial period is at least three months in duration and
the second lien modification follows the modification steps set forth in Section 5.1. However, the
2MP servicer must have executed the SPA prior to the effective date of a permanent 2MP
modification in order for the modification to be eligible for any 2MP incentives.
6.3 Application of 2MP Trial Period Payments
During a 2MP trial period, and if permitted by the applicable loan documents and the 2MP
servicer’s business practices, 2MP servicers may accept and hold as “unapplied funds” (held in a
custodial account) amounts received that do not constitute a full monthly, contractual payment.
However, when the total of the reduced payments held as “unapplied funds” is equal to a full
contractual payment, the 2MP servicer is required to apply the payment to the second lien.
Chapter V: 2MP
MHA Handbook v4.3
188Any unapplied funds remaining at the end of any 2MP trial period that do not constitute a full
monthly, contractual payment should be applied to reduce any amounts that would otherwise be
capitalized as part of the modified principal balance.
6.4 Borrowers in Active Bankruptcy
Borrowers in active Chapter 7 or Chapter 13 bankruptcy cases are eligible for 2MP if the
borrower, borrower’s counsel or bankruptcy trustee contacts the 2MP servicer to request
consideration. With the borrower’s permission, a bankruptcy trustee may contact the 2MP
servicer to request a 2MP modification. 2MP servicers are not required to solicit these borrowers
for 2MP when they are under bankruptcy protection.
Borrowers who are currently in a 2MP trial period and subsequently file for bankruptcy may not be
denied a permanent 2MP modification on the basis of the bankruptcy filing. The 2MP servicer
and its counsel must work with the borrower or borrower’s counsel to obtain any court and/or
trustee approvals required in accordance with local court rules and procedures.
6.5 Reserved
7 Permanent Modification
The 2MP modification offer may not be made to the borrower until after the first lien permanent
modification is effective. If the modified first lien loses good standing while the second lien is in a
2MP trial period, the 2MP servicer is not required to offer a permanent 2MP modification to the
borrower unless and until the first lien is subsequently re-modified under HAMP Tier 2 or GSE
Standard Modification, as applicable, and is in good standing.
7.1 2MP Modification Agreement
The 2MP servicer is responsible for ensuring that the final 2MP terms match the final terms of the
modification of the related first lien. The borrower must sign the 2MP modification agreement
within 30 calendar days from the date of the permanent 2MP modification offer. If the
modification offer is not accepted by the borrower within 30 calendar days, the 2MP servicer may
permanently withdraw the offer and will not be obligated to modify the second lien under 2MP.
7.2 Effective Date
The 2MP permanent modification may not become effective unless and until (i) the modification of
the corresponding first lien becomes effective under HAMP or GSE Standard Modification, and,
when applicable (ii) the borrower has made all required 2MP trial period payments in accordance
with Section 6.2. Subject to Section 5.5, the 2MP servicer is responsible for ensuring that the final
2MP terms match the final terms of the modification of the related first lien.
7.3 Conditions of Modification
7.3.1 Re-Subordinate Junior Liens
To ensure alignment of all programs within MHA, 2MP servicers must re-subordinate junior liens
within their servicing portfolio to facilitate the modification of a first lien under HAMP or the
refinance of a mortgage loan under the Home Affordable Refinance Program.
7.3.2 Lien Release
When partial or full extinguishment is utilized, the 2MP servicer, investor and any mortgage or
other insurer must relinquish, in whole or in part, all rights and remedies against the borrower(s)
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MHA Handbook v4.3
189related to the portion of the second lien obligation that is forgiven, and the borrower(s) may not be
required to sign a promissory note or be charged a fee.
Following an extinguishment of the entire second lien, 2MP servicers must take all necessary
action to cancel the indebtedness and release the second lien in a timely manner. When the
mortgage note is cancelled and the required release and/or satisfaction documents are executed
and filed, the 2MP servicer must promptly send the cancelled documents to the borrower with a
cover letter instructing the borrower to retain the evidence of cancellation. The 2MP servicer
must not charge the borrower a fee for cancelling the indebtedness and releasing or discharging
the second lien against the property. When a second lien is fully extinguished, no other
subordinate lien shall become eligible for modification or extinguishment.
Following an extinguishment of a portion of the second lien, 2MP servicers must take all
necessary action to reflect the new UPB of the loan in the 2MP modification documents.
7.3.3 Closed-end Second Liens
All loans modified under 2MP must result in closed-end second liens. If the second lien is an
open-end line of credit, 2MP servicers must terminate the borrower’s ability to draw additional
amounts on the credit line when the 2MP modification becomes effective. In addition,
immediately upon notification that the first lien is entering a HAMP or GSE Standard Modification
trial period or has been modified under HAMP or GSE Standard Modification, 2MP servicers
should terminate the borrower’s ability to draw additional amounts on open-end lines of credit if
permitted by applicable law and the second lien loan documents. When terminating the
borrower’s ability to draw additional amounts under an open-end line of credit, the 2MP servicer
must provide the borrower with disclosures in a manner consistent with applicable law.
7.3.4 Mortgage and Other Insurer Approval
Typically, mortgage insurance for a second lien is issued through a master pool policy placed by
the investor or holder of the mortgage. As a result, the 2MP servicer might not be aware of the
existence of mortgage insurance. When a 2MP servicer is servicing second liens on behalf of an
investor, the 2MP servicer should ensure that the investor has identified those second liens that
have mortgage insurance. The second lien investor should seek to obtain a blanket delegation of
authority from mortgage insurers to modify and/or extinguish second liens under 2MP.
As an alternative to a blanket delegation of authority, 2MP servicers may obtain mortgage insurer
approval to modify and/or extinguish second liens under 2MP on a case-by-case basis. 2MP
servicers should consult their mortgage insurance providers for specific processes related to the
reporting of modified terms, payment of premiums, payment of claims, and other operational
matters in connection with loans modified and/or extinguished under 2MP.
2MP servicers should also obtain insurer approval for other types of lender placed protection
policies, such as lien protection policies. Lien protection policies provide coverage for the lender
against liens and encumbrances that assert a priority over an insured mortgage.
7.3.5 Assignment to MERS
If the original second lien was registered with MERS and the originator elected to name MERS as
the original mortgagee of record, solely as nominee for the lender named in the security
instrument and the note, the 2MP servicer must ensure the 2MP modification agreement it is
using contains the following language:
A new definition under the “Property Address” definition must read as follows:
“MERS” is Mortgage Electronic Registration Systems, Inc. MERS is a separate
corporation that is acting solely as a nominee for lender and lender’s successors and
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MHA Handbook v4.3
190assigns. MERS is the mortgagee under the Mortgage. MERS is organized and existing
under the laws of Delaware, and has an address and telephone number of P.O. Box
2026, Flint, MI 48501-2026, (888) 679-MERS.
The following section must also be included:
That MERS holds only legal title to the interests granted by the borrower in the mortgage,
but, if necessary to comply with law or custom, MERS (as nominee for lender and
lender’s successors and assigns) has the right: to exercise any or all of those interests,
including, but not limited to, the right to foreclose and sell the Property; and to take any
action required of lender including, but not limited to, releasing and canceling the
mortgage loan.
MERS must be added to the signature lines at the end of the 2MP modification agreement, as
follows:
_______________________________
Mortgage Electronic Registration
Systems, Inc. – Nominee for Lender
According to MERS Policy Number 2010-1, the 2MP servicer is required to complete a
certification process before being authorized to execute documents as a MERS Certifying Officer.
Once certified, the 2MP servicer may then execute the 2MP modification agreement on behalf of
MERS and, if applicable, submit it for recordation.
7.3.6 Monthly Statements
For modifications that include principal forbearance, 2MP servicers are encouraged to include the
amount of the gross UPB on the borrower’s monthly payment statement.
7.4 Re-default and Loss of Good Standing
If a borrower misses three consecutive payments at any time on his or her second lien following
the execution of a 2MP modification (three monthly payments are due and unpaid on the last day
of the third month), the second lien is no longer considered to be in “good standing.” A loan that
is not in good standing permanently loses eligibility to receive further 2MP servicer and borrower
incentives and reimbursements under the program. Undisbursed incentive payments to borrowers
and 2MP servicers, even if accrued, will not be made. Once lost, good standing on the second
lien cannot be restored and eligibility for incentives and interest reimbursements cannot be
reclaimed, even if the borrower fully cures the delinquency or the corresponding first mortgage
lien is subsequently re-modified as described in Section 5.5. Further, the second lien is not
eligible for another 2MP modification or extinguishment.
7.5 Principal Curtailments Following 2MP Modification
If principal curtailment is received from or on behalf of the borrower on a 2MP modification that
includes principal forbearance, 2MP servicers are instructed to apply the principal curtailment to
the interest-bearing UPB. If, however, the principal curtailment amount is greater than or equal to
the interest-bearing UPB, then the curtailment should be applied to the principal forbearance
portion. If the curtailment satisfies the principal forbearance portion, any remaining funds should
then be applied to the interest-bearing UPB. This eliminates the possibility of a curtailment
paying off (and satisfying) the interest-bearing portion of the UPB, which would cause the entire
loan to become due and payable and force the borrower to pay off the principal forbearance
portion of the loan balance as a balloon payment.
Chapter V: 2MP
MHA Handbook v4.3
1917.6 Reserved
8 2MP Documents
Treasury will not issue standard modification documents for 2MP. 2MP servicers may rely on their
existing second lien modification documents, revised as necessary to include 2MP program
requirements and to ensure that the documents comply with applicable federal, state, and local
laws. At a minimum, the modification documents used must include the following:
 A representation by the borrower that, under penalty of perjury, all documents and
information provided by borrower to the 2MP servicer are true and correct.
 A statement from the borrower that the modification documents supersede the terms of
any modification, forbearance, trial period plan or workout plan previously entered into in
connection with the borrower’s second lien.
 A statement from the borrower that the borrower will comply with and is bound by all
covenants, agreements, and requirements of his/her loan documents except to the extent
that such loan documents are modified by the modification agreement.
 A statement from the borrower that the loan documents are composed of duly valid,
binding agreements, enforceable in accordance with their terms.
 A statement from the borrower that nothing in the modification agreement shall be
understood or construed to be a satisfaction or release in whole or in part of the
obligations contained in the loan documents as modified by the modification agreement.
 A due on sale provision to the extent enforceable under federal law.
 A statement that prohibits any subsequent assumption of the loan after modification.
 A statement that declares any provision providing for a penalty for full or partial
prepayment of the modified principal balance null and void.
 A statement where the borrower agrees that the modification agreement will be null and
void if the 2MP servicer does not receive all necessary title endorsement(s), title
insurance product(s) and/or subordination agreement(s).
 A statement in which the borrower agrees to execute any documents, including corrected
documents and replacements for lost documents, necessary to consummate the
transactions contemplated in the modification agreement.
 A statement from the borrower that if the second lien is an open-end line of credit, the
borrower consents to the termination of his or her ability to draw additional amounts on
the line.
 A statement in which the borrower consents to the disclosure of his/her personal
information, including the terms of the modification, to (a) Treasury for purposes related
to HAMP and 2MP, (b) any investor, insurer, or guarantor that owns, insures or
guarantees his/her mortgage, (c) the 2MP servicer of his/her first lien, (d) the Program
Administrator and MHA-C, and (e) companies that perform support services for HAMP
and 2MP, including marketing HAMP or 2MP, conducting surveys or providing marketing
research or other borrower outreach, data processing, and technical systems consulting.
Chapter V: 2MP
MHA Handbook v4.3
1929 2MP Reporting Requirements
2MP servicers are required to provide loan level data reporting to the Program Administrator
detailing the modification and servicing of a loan modified under 2MP. This data must be
accurate, complete, and in agreement with the servicer’s records. The loan level reporting
requirements, timing, loan attributes and detailed guidelines for submitting data files are posted
on www.HMPadmin.com. 2MP servicers are required to submit 2MP data using the HAMP
Reporting Tool.
9.1 2MP Trial Period Reporting
2MP servicers are not required to report the initiation of a 2MP trial period or the receipt of 2MP
trial period payments to the Program Administrator.
9.2 2MP Modification Reporting
9.2.1 2MP Modification and Extinguishment Set Up
2MP servicers must report a 2MP permanent modification, 2MP extinguishment, or a 2MP partial
extinguishment. 2MP servicers have the ability to cancel and resubmit this information.
2MP servicers are required to provide the following categories of information to the Program
Administrator, to set up the second lien loan official modification:






Loan Identifying Information
General Loan Information
Borrower/Co-Borrower Identifying Data
Property Identifying Data
Loan Characteristics Before Modification
Loan Characteristics After Modification
9.2.2 2MP Official Monthly Reporting
Once a permanent 2MP modification (with or without a partial extinguishment) is reported, 2MP
servicers are required to provide the following categories of information on a monthly basis to the
Program Administrator:


Loan Identifying Information
Monthly Loan Activity
If the 2MP servicer is notified through the LPS matching facility that the associated first lien has
been re-modified under HAMP, the 2MP servicer must resume monthly reporting for the 2MP
modification in the HAMP Reporting Tool.
10 External Reporting Requirements
10.1 Credit Bureau Reporting
2MP servicers must report a “full-file” status report to the credit repositories for each loan under
2MP in accordance with the Fair Credit Reporting Act as well as other applicable law and credit
bureau requirements as provided by the CDIA. “Full-file” reporting means that the 2MP servicer
must describe the exact status of each mortgage it is servicing as of the last business day of each
month. Following modification of a second lien under 2MP, 2MP servicers should use Special
Comment Code “CN” to identify loans being paid under a modified payment agreement as
described in the guidance below provided by CDIA.
Chapter V: 2MP
MHA Handbook v4.3
19310.1.1 Trial Period Reporting
If the borrower was current with payments prior to the trial period and he or she makes each trial
period payment on time, 2MP servicers must report the borrower as current (Account Status 11)
during the trial period and report Special Comment Code ‘AC’ (Paying under a partial payment
agreement).
If the borrower was delinquent (at least 30 days past the due date) prior to the TPP and the
reduced payments do not bring the account current, 2MP servicers must report the Account
Status Code that reflects the appropriate level of delinquency and report Special Comment Code
‘AC’ (Paying under a partial payment agreement).
10.1.2 Post Modification Reporting
2MP servicers should continue to report one trade line under the original Account Number.
 Date Opened = the date the account was originally opened
 Original Loan Amount = the original amount of the loan, including the Balloon Payment
Amount, if applicable. If the principal balance increases due to capitalization of delinquent
amounts due under the loan, the Original Loan Amount should be increased to reflect the
modified principal balance
 Terms Duration = the modified terms
 Scheduled Monthly Payment Amount = the new amount as per the modified agreement
 Current Balance = the principal balance (including the Balloon Payment Amount, if
applicable), plus the interest and escrow due during the current reporting period
 Account Status Code = the appropriate code based on the new terms of the loan
 Special Comment Code = CN
 K4 Segment = used to report the Balloon Payment information, if applicable:
o Specialized Payment Indicator = 01 (Balloon Payment)
o Payment Due Date = the date the balloon payment is due which is equal to
maturity of the amortizing portion of the loan. Note: The payoff date can be used
in this field
o Payment Amount = the amount of the balloon payment in whole dollars only
10.1.3 Extinguishment Reporting
For second liens that are extinguished in their entirety under 2MP, the 2MP servicer must report
the following to the credit repositories:
 Account Status Code = 13 (Paid)
 Payment Rating = the appropriate code that identifies the status of the account within the
activity period being reported
 Special Comment Code = AU (Paid in full for less than the full balance)
 Current Balance and Amount Past Due = zero
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MHA Handbook v4.3
194
Date Closed = date the accounts are forgiven and considered to be paid
Note that payment history for the forgiven accounts will be retained.
For second liens where a portion of the principal is extinguished in conjunction with a modification
under 2MP, the 2MP servicer must report to the credit repositories in the same manner as it
would a modification under 2MP as set forth in Section 10.1.2.
11 Incentive Compensation
Borrowers, 2MP servicers and investors are eligible for incentive compensation under 2MP. The
Program Administrator will make incentive payments to the 2MP servicer via an ACH transaction
in a consolidated fashion and will provide detailed loan-level accounting for incentives on a
monthly basis. Upon receipt of such incentive compensation, each 2MP servicer must promptly
apply or remit, as applicable, all borrower and investor compensation with respect to any modified
or extinguished loan. Treasury is not providing guidance on how funds are to be passed through
to security holders of securitization trusts. However, MHA-C will monitor to ensure that cost
share reduction payments are remitted to security holders and borrower pay for performance
incentive payments are applied to borrower accounts in accordance with program guidelines.
With respect to payment of any incentive that is predicated on a six percent reduction in the
borrower’s monthly second lien payment, the reduction will be calculated by comparing the
monthly payment prior to the 2MP modification and the borrower’s payment under 2MP.
No incentives of any kind will be paid if:
 The 2MP servicer has not executed the SPA to participate in 2MP;
 The 2MP servicer has reached its Program Participation Cap, as discussed in Section 1.5
of Chapter I;
 The borrower does not qualify for, or otherwise enter into, a permanent 2MP modification;
or
 The loan has not been reported to the Program Administrator through the HAMP
Reporting Tool.
As long as the modified first lien was in good standing and was not paid off as of the effective
date of the 2MP modification or partial extinguishment (Modification or Extinguishment Effective
Date), incentive compensation will be paid for 2MP modifications and partial extinguishments for
the period between the Modification or Extinguishment Effective Date and the date the modified
first lien loses good standing or is paid off. Furthermore, servicer and investors will be entitled to
incentive compensation for 2MP full extinguishments when the servicer does not also service the
modified first lien and as long as the 2MP servicer relied on the most recent LPS match file
provided to the servicer before the effective date of the full extinguishment that indicated that the
modified first lien was in good standing and not paid off, even if the modified first lien information
is subsequently updated or corrected. Each servicer should retain in the servicing system and/or
mortgage file the most recent LPS match file on which the servicer relied to determine that the
modified first lien was reported as in good standing and not paid off before the effective date of
the full extinguishment.
Incentive compensation will accrue from the 2MP modification effective date for all modifications.
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MHA Handbook v4.3
19511.1 Servicer Incentive Compensation
11.1.1 Completed Modification Incentive
A 2MP servicer will receive one-time compensation of $500 for each completed 2MP
modification. The completed modification will be paid to the servicer in the month that the
permanent 2MP modification becomes effective.
11.1.2 Pay-for-Success Incentive
If a particular borrower’s monthly second lien mortgage payment is reduced through 2MP by six
percent or more, a 2MP servicer will receive an annual pay-for-success fee of $250 for up to
three years. The pay-for-success fee does not accrue during the 2MP trial period, if any. The
pay-for-success fee accrues monthly and is payable annually for each of the first three years after
the anniversary of the month in which the permanent 2MP modification became effective.
If either the first or second lien loan ceases to be in good standing or either loan is paid in full, the
2MP servicer will forfeit any incentive payments that have accrued but are unpaid and will cease
to be eligible for any further incentive payments after that time, even if the borrower subsequently
cures his or her delinquency. However, if the modified first lien is subsequently re-modified under
HAMP Tier 2 or GSE Standard Modification, 2MP incentive compensation will resume and a true-
up of incentives unpaid during the interim period between the HAMP Tier 1 and HAMP Tier 2
modifications, or the GSE HAMP and GSE Standard Modification, will be calculated and paid, as
appropriate.
11.1.3 Extinguishment Incentive
A 2MP servicer will receive one-time compensation of $500 for each second mortgage lien with a
UPB equal to or greater than $5,000 and a pre-modification scheduled monthly payment equal to
or greater than $100 that is fully extinguished under 2MP. No additional compensation is payable
to a 2MP servicer for partial extinguishment other than the completed modification incentive
provided in conjunction with the modification of the remaining loan balance.
11.2 Borrower Incentive Compensation
Borrowers whose monthly second lien mortgage payment is reduced through 2MP by six percent
or more and who make timely monthly payments will earn an annual pay-for-performance
principal balance reduction payment of up to $250 for up to five years.
The pay-for-performance principal balance reduction payment will accrue for each month in which
the borrower makes current payments (made by the last day of the month in which they are due)
on both the first and second liens. The payment will be applied annually for each of the first five
years after the anniversary of the month in which the permanent 2MP modification became
effective. The pay-for-performance principal balance reduction payments do not accrue during
the 2MP trial period, if any.
For example, if the borrower is current and makes 10 out of 12 payments on time, he or she will
be credited for 10/12 of the annual incentive payment as long as the first and second lien loans
are in good standing and have not been paid in full at the time the annual incentive is paid. A
borrower whose first and/or second lien loan is delinquent on a rolling 30- or 60-day basis will not
accrue annual incentive payments.
The borrower pay-for-performance principal balance reduction payment will be paid to the 2MP
servicer to be applied first towards reducing the interest-bearing UPB on the second lien and then
to any principal forbearance amount (if applicable). Any applicable prepayment penalties on
partial principal prepayments made by the government must be waived. In the event the
Chapter V: 2MP
MHA Handbook v4.3
196borrower is delinquent, but still in good standing, the borrower’s incentive should continue to be
applied as a curtailment to the interest-bearing UPB.
If the first or second lien loan ceases to be in good standing or either is paid in full, the borrower
will forfeit any incentive payments that have accrued, but are unpaid, and will cease to be eligible
for any further incentive payments after that time, even if the borrower subsequently cures his or
her delinquency. However, if the modified first lien is subsequently re-modified under HAMP Tier
2 or GSE Standard Modification, 2MP incentive compensation will resume and a true-up of
incentives unpaid during the interim period between the HAMP Tier 1 and HAMP Tier 2
modifications, or the GSE HAMP and GSE Standard Modification, will be calculated and paid, as
appropriate.
“Pay for performance” principal balance reduction payments are excluded from gross income for
tax reporting purposes.
11.3 Investor Incentive Compensation
11.3.1 Payment Reduction Cost Share Incentive
Investors are entitled to payment reduction cost share compensation equal to 160 basis points
multiplied by the unmodified UPB (less any partial principal forgiveness, if applicable) of the
second lien, converted to a monthly rate. The calculation formula is:

160 basis points x unmodified UPB (less any partial principal forgiveness, if applicable) of
second lien / 12.
Payment reduction cost share compensation is paid monthly beginning the month following the
month the permanent 2MP modification becomes effective. This compensation will be provided
for up to five years as long as the modified first lien remains in good standing and neither the first
lien nor the second lien has been paid in full. However, if the modified first lien is subsequently re-
modified under HAMP Tier 2 or GSE Standard Modification, 2MP incentive compensation will
resume and a true-up of incentives unpaid during the interim period between the Tier 1 and Tier 2
modifications, or the GSE HAMP and GSE Standard Modification, will be calculated and paid, as
appropriate.
11.3.2 Extinguishment Incentive
For purposes of determining the incentive payment to the investor for extinguishing a second lien,
the 2MP servicer must know the borrower’s combined loan-to-value (CLTV) ratio. The CLTV is
the ratio of the current total UPB of the modified first lien and the current total UPB of the
unmodified second lien divided by the property value obtained in connection with the permanent
first lien modification. LPS will provide the 2MP servicer with the current total UPB of the
modified first lien and the value of the property that secures the modified first lien in the second
lien match notification.
Investors are entitled to compensation per dollar of UPB extinguished in CLTV range based on
the table below.
2MP Compensation per Dollar of UPB Extinguished in CLTV Range
(Loans Less Than or Equal to Six Months Past Due)
<115%
115% to 140%
>140%
0.42
0.30
0.20
Notwithstanding the foregoing, the investor will be paid $0.12 per dollar of the UPB being
extinguished for second mortgage liens that were greater than six months past due at any time
during the 12 months prior to the date of extinguishment.
Chapter V: 2MP
MHA Handbook v4.3
197Second lien extinguishment compensation is paid in the month following receipt by the Program
Administrator of all required data relating to the second lien extinguishment. The 2MP servicer
must represent and warrant that the second lien has been released in compliance with applicable
laws when submitting a request for 2MP extinguishment payment.
11.4 Impact on 2MP Incentives of HAMP Modified First Liens Repurchased
from GSEs
If a first lien loan that has been permanently modified under HAMP is repurchased from a GSE
and cancelled in the HAMP Reporting Tool, but is not subsequently re-boarded in the HAMP
Reporting Tool as a permanent modification under this guidance, no servicer, borrower or
investor incentives will be paid on any corresponding 2MP modification. The 2MP servicer will be
notified through the LPS matching facility if the associated first lien is re-boarded, at which point
the 2MP servicer must resume monthly reporting for the 2MP modification and will be entitled to
2MP incentive compensation in accordance with current guidance
Chapter V: 2MP
MHA Handbook v4.3
198Chapter VI Loans
Government
Government Loans
Chapter VI: Government Loans
MHA Handbook v4.3
199CHAPTER VI: GOVERNMENT LOANS
1 Introduction
Both FHA and RHS have implemented programs to provide eligible borrowers with sustainable
mortgage payments through modification of FHA-insured or RHS-guaranteed first lien mortgage
loans in a manner complementary to HAMP. Similar to HAMP Tier 1, each of these programs
provides a borrower with an affordable monthly mortgage payment tied to a percentage of his or
her monthly gross income and requires the borrower to complete a trial payment plan before the
loan is permanently modified. If the FHA-insured or RHS-guaranteed mortgage loan meets
Treasury’s eligibility criteria, the borrower is eligible for pay-for-performance compensation and
the servicer is eligible for pay-for-success compensation from Treasury.
2 Eligibility and Underwriting
2.1 Treasury FHA-HAMP
In July 2009, FHA launched FHA-HAMP through Mortgagee Letter 2009-23. The effective date of
FHA-HAMP was August 15, 2009. The guidance in Mortgagee Letter 2009-23, including any
attachments and Questions and Answers, and Mortgagee Letters 2009-35, 2009-39, 2010-04,
2010-11 and 2012-22 are incorporated by reference into this Handbook. Servicers should consult
only these Mortgagee Letters and other existing or future guidance issued by FHA for
requirements related to eligibility, underwriting and administration of FHA-HAMP (hereafter
referred to as FHA-HAMP Mortgagee Letters), with the exception of the specific requirements of
Treasury FHA-HAMP set forth in this Handbook. In addition to any guidance provided by FHA, to
be eligible for incentive compensation under Treasury FHA-HAMP, the first lien mortgage loan
must have been originated on or before January 1, 2009 and a written request for modification
assistance must be made by the borrower on or before December 31, 2015 4 and the effective
date of the permanent modification must be on or before September 30, 2016.
2.2 RD-HAMP
In August 2010, RHS published its Final Rule providing guidance for Special Loan Servicing
modifications to RHS-guaranteed loans. The guidance in the Final Rule is incorporated by
reference into this Handbook. Servicers should consult the Final Rule and other existing or future
guidance issued by RHS for requirements related to eligibility, underwriting and administration of
Special Loan Servicing, with the exception of the specific requirements of RD-HAMP. In addition
to any guidance provided by RHS, to be eligible for incentive compensation under RD-HAMP, all
borrowers must execute a Hardship Affidavit (as described in Section 4.1.1 of Chapter II), the first
lien mortgage loan must have been originated on or before January 1, 2009, and a written
request for modification assistance must be made on or before December 31, 2015 5 and the
effective date of the permanent modification must be on or before September 30, 2016.
4
Evidence of borrower
date and time stamp
December 31, 2015.
5
Evidence of borrower
date and time stamp
December 31, 2015.
submission must be provided by postmark or other independent indicator such as a
(electronic or otherwise) evidencing submission by the borrower on or before
submission must be provided by postmark or other independent indicator such as a
(electronic or otherwise) evidencing submission by the borrower on or before
Chapter VI: Government Loans
MHA Handbook v4.3
2003 Participation, Incentive Compensation, Treasury Reporting
Requirements, Compliance
3.1 Participation
Participation in Treasury FHA-HAMP or RD-HAMP requires execution of a SPA on or before
October 3, 2010. Servicers that previously executed a SPA are required to execute an Amended
or Restated SPA or an additional Service Schedule that includes Treasury FHA-HAMP or RD-
HAMP, as applicable. Servicers may execute a SPA that is applicable only to Treasury FHA-
HAMP or RD-HAMP loans without the obligation to apply HAMP to other loans that they service.
See Chapter I for the servicer participation requirements.
3.2 Incentive Compensation
Borrowers and servicers are eligible for incentive compensation under Treasury FHA-HAMP and
RD-HAMP. The Program Administrator will make incentive payments to the servicer via an ACH
transaction in a consolidated fashion and will provide detailed loan-level accounting for incentives
on a monthly basis. Upon receipt of such incentive compensation, each servicer must promptly
apply or remit, as applicable, all borrower and investor compensation with respect to any modified
loan. MHA-C will monitor to ensure that borrower pay-for-performance incentive payments are
applied to borrower accounts in accordance with program guidelines.
With respect to payment of any incentive that is predicated on a six percent reduction in the
borrower’s monthly mortgage payment, the reduction will be calculated by comparing the monthly
mortgage payment used to determine eligibility (as defined in Section 6.1.2 of Chapter II) 6 and the
borrower’s payment under FHA-HAMP and Special Loan Servicing.
No incentives of any kind will be paid if:
 The servicer has not executed the SPA;
 The servicer has reached its Program Participation Cap, as discussed in Section 1.5 of
Chapter I;
 The borrower does not meet the basic eligibility qualifications for FHA-HAMP and
Treasury FHA-HAMP or Special Loan Servicing and RD-HAMP, as applicable;
 The borrower is no longer in good standing or the loan has been paid in full; or
 The loan has not been reported to the Program Administrator through the HAMP
Reporting Tool.
Furthermore, for any FHA-HAMP trial period plan with an effective date on or after November 16,
2012, no incentives of any kind will be paid on the related FHA-HAMP permanent modification if
the modified monthly mortgage payment does not fall within the target monthly mortgage
payment ratio required by FHA for FHA-HAMP, subject to a maximum post modification debt to
income ratio of 40 percent. No incentives of any kind will be paid on RD-HAMP modifications if
the modified monthly mortgage payment does not achieve the target monthly mortgage payment
ratio of 31 percent.
6
For Treasury FHA-HAMP this will also include mortgage insurance.
Chapter VI: Government Loans
MHA Handbook v4.3
2013.2.1 Servicer Incentive Compensation
If a particular borrower’s monthly mortgage payment is reduced through FHA-HAMP or Special
Loan Servicing by six percent or more, a servicer will receive an annual pay-for-success fee for a
period of three years. The fee will be equal to the lesser of:
 $1,000 ($83.33/month); or
 One-half of the reduction in the borrower’s annualized monthly payment.
The pay-for-success fee will be payable annually for each of the first three years after the
anniversary of the first trial payment due date under FHA-HAMP or Special Loan Servicing, as
long as the loan is in good standing and has not been paid in full at the time the incentive is paid.
If the loan ceases to be in good standing or is paid in full, the servicer will forfeit any incentive
payments that have accrued but are unpaid and will cease to be eligible for any further incentive
payments after that time, even if the borrower subsequently cures his or her delinquency.
3.2.2 Borrower Incentive Compensation
Borrowers whose monthly mortgage payment is reduced through FHA-HAMP or Special Loan
Servicing by six percent or more and who make timely monthly payments will earn an annual pay-
for-performance principal balance reduction payment equal to the lesser of:
 $1,000 ($83.33/month); or
 One-half of the reduction in the borrower’s annualized monthly payment for each month a
timely payment is made.
The pay-for-performance principal balance reduction payment will accrue for each month in which
the borrower makes current payments. The payment will be payable annually for each of the first
five years after the anniversary of the first trial payment due date under FHA-HAMP or Special
Loan Servicing occurred as long as the loan is in good standing and has not been paid in full at
the time the incentive is paid.
For example, if the borrower is current and makes 10 out of 12 payments on time, he or she will
be credited for 10/12 of the annual incentive payment as long as the loan is in good standing and
has not been paid in full at the time the annual incentive is paid. A borrower whose loan is
delinquent on a rolling 30- or 60-day basis will not accrue annual incentive payments.
This payment will be paid to the mortgage servicer to be applied first towards reducing the
interest-bearing UPB on the mortgage loan and then to any principal forbearance amount (if
applicable). In the event the borrower is delinquent, but still in good standing, the borrower’s
incentive payment should continue to be applied as a curtailment to the interest-bearing UPB.
If the loan ceases to be in good standing or is paid in full, the borrower will forfeit any incentive
payments that have accrued but are unpaid and will cease to be eligible for any further incentive
payments after that time, even if the borrower subsequently cures his or her delinquency.
Pay for-performance principal balance reduction payments are excluded from gross income for
tax reporting purposes.
3.2.3 Re-default and Loss of Good Standing
If a borrower defaults on a loan modification executed under FHA-HAMP or Special Loan
Servicing (delinquent by the equivalent of three full monthly payments at the end of the month in
which the last of the three delinquent payments was due), the loan is no longer considered to be
Chapter VI: Government Loans
MHA Handbook v4.3
202in “good standing” for purposes of Treasury FHA-HAMP or RD-HAMP, as applicable. Once lost,
good standing cannot be restored even if the borrower subsequently cures the default. A loan
that is not in good standing is not eligible to receive borrower or servicer incentives and
reimbursements and these payments will no longer accrue for that loan.
Furthermore, once a borrower has defaulted on a TPP or lost good standing on a Treasury FHA-
HAMP or RD-HAMP permanent modification, no incentives will be paid on any subsequent FHA-
HAMP or RD-HAMP modification. In the event a borrower defaults on the modified loan, the
servicer should work with the borrower to cure the modified loan. If this is not possible, the
servicer should evaluate the borrower for any other loss mitigation alternative prior to
commencing foreclosure proceedings.
3.3 Treasury Reporting Requirements
Servicers are required to provide Treasury FHA-HAMP or RD-HAMP loan level data reporting to
the Program Administrator at the start of the modification trial period, during the modification trial
period, at loan set up of the permanent modification and monthly after the modification is set up.
This data must be accurate, complete, and in agreement with the servicer’s records. The loan
level reporting requirements, timing, loan attributes and detailed guidelines for submitting data
files are posted on www.HMPadmin.com. Servicers are required to submit four separate data
files using the HAMP Reporting Tool.
The Treasury FHA-HAMP Data Dictionary, accessible on www.HMPadmin.com, provides details
of all the data fields that must be reported for Treasury FHA-HAMP. For RD-HAMP, servicers will
be required to report the majority of the data fields in the Treasury FHA-HAMP Data Dictionary.
However, certain data fields may be optional or the values modified to accommodate RD-HAMP
loans.
The Data Dictionary for RD-HAMP is available on www.HMPadmin.com.
3.4 Compliance
Treasury has agreed with FHA and RHS that each has specific responsibilities to ensure program
compliance as described in Section 2.4 of Chapter I.
Chapter VI: Government Loans
MHA Handbook v4.3
203Chapter VII
Treasury/FHA Second Lien
Program
(FHA2LP)
Chapter VII: FHA2LP
MHA Handbook v4.3
2041 Introduction
This Chapter provides guidance to second lien servicers for adoption and implementation of the
Treasury/FHA Second Lien Program (FHA2LP). In addition, this Chapter provides guidance to
first lien servicers that have modified loans through HAMP with respect to the servicer’s
responsibility for terminating those loans in the HAMP Reporting Tool upon closing of the FHA
Refinance. FHA2LP became effective on September 27, 2010.
2 Participation
In order to participate in FHA2LP, a servicer must have executed the SPA and the FHA2LP
Service Schedule prior to October 3, 2010. A servicer need not service the related first lien or
participate in HAMP in order to participate in FHA2LP. See Chapter I for the servicer participation
requirements. Servicers that are participating in FHA2LP (FHA2LP servicers) with respect to
Non-GSE Mortgages must follow the guidance set forth in this Chapter when borrowers seeking
assistance refinance through FHA Refinance have a second lien mortgage loan.
3 Eligibility
All guidance in the FHA Refinance Mortgagee Letter 2010-23, including any attachments and
Questions and Answers (collectively, the FHA Refinance ML), is incorporated by reference into
this Handbook. Servicers should rely on the FHA Refinance ML and other relevant FHA
documents for requirements related to eligibility, underwriting and administration of FHA
Refinance, while this Handbook addresses the specific requirements of FHA2LP.
In addition to the requirements of the FHA Refinance ML, a loan is eligible for FHA2LP if the
servicer verifies that all of the following criteria are met:
Second lien The mortgage loan is a second lien mortgage loan originated on or
before January 1, 2009. The loan must hold second mortgage lien
priority prior to the FHA Refinance; however, a mortgage loan that
would be in second lien position but for a tax lien, mechanic’s lien or
other non-mortgage related lien is eligible.
Monthly mortgage
payment The borrower is required to make a monthly payment. For example,
second liens on which payments have been deferred for 36 or more
months are not eligible.
Unpaid principal
balance The second lien has a UPB of $2,500 or more on the day prior to the
closing of the FHA Refinance.
Program cut-off date The FHA Refinance must close on or before December 31, 2013
4 Extinguishment
An FHA2LP servicer, in accordance with any investor guidelines, may elect to extinguish a
portion of or the entire second lien balance in order to facilitate an FHA Refinance. Because
FHA2LP servicers have discretion in offering partial or full extinguishment, servicers must
develop and adhere to a written policy for making extinguishment determinations that treat all
similarly situated loans in a consistent manner and in compliance with Section 1.6 of Chapter I.
4.1 Partial Extinguishment
In conjunction with the partial extinguishment of a second lien, FHA2LP servicers may curtail the
UPB by the agreed upon extinguishment amount and leave all other repayment terms as
scheduled, or may elect to modify the loan by re-amortizing the payment schedule based on the
Chapter VII: FHA2LP
MHA Handbook v4.3
205reduced UPB, reducing the interest rate or extending the repayment term to achieve a lower
second lien monthly payment. Additionally, FHA2LP servicers may convert an adjustable-rate or
interest-only second lien to a fixed-rate, fully amortizing second lien.
FHA2LP servicers may not, as a condition of extinguishment, increase the scheduled interest rate
or change the payment terms to include an interest-only or an adjustable rate interest repayment
schedule.
4.2 Conditions of Partial or Full Extinguishment
4.2.1 Lien Release
The FHA2LP servicer, investor and any mortgage or other insurer must relinquish all rights and
remedies against the borrower(s) related to the portion of the second lien obligation that is
extinguished. The borrower(s) may not be required to sign a promissory note and may not be
charged a fee as a condition of, or in conjunction with, such release.
In conjunction with the closing of an FHA Refinance, the FHA2LP servicer, either on its own or
through the settlement agent, must take all necessary actions to cancel the indebtedness and
release the second lien, or the extinguished portion thereof, in a timely manner. When the
cancelled or modified mortgage note and the required release and/or satisfaction documents are
executed and recorded, the servicer or settlement agent must promptly send the documents to
the borrower.
4.2.2 Re-Subordinate Junior Liens
The FHA2LP servicer, either on its own or through the settlement agent, must take all necessary
actions to subordinate the remaining portion of the second lien to the new FHA first lien.
4.2.3 Closed-end Second Liens
All loans partially extinguished under FHA2LP must result in closed-end second liens. If the
second lien is an open-end line of credit, FHA2LP servicers must terminate the borrower’s ability
to draw additional amounts on the credit line when the FHA Refinance closes. When terminating
the borrower’s ability to draw additional amounts under an open-end line of credit, the FHA2LP
servicer must provide the borrower with disclosures in a manner consistent with applicable law.
Any permanent changes to the loan terms must be documented in a written modification
agreement signed by the servicer and borrower(s).
4.2.4 Mortgage Insurer Approval
FHA2LP servicers must be able to identify second liens in their servicing portfolio that have
mortgage insurance and should seek to obtain a blanket delegation of authority from each
mortgage insurer to partially or fully extinguish second liens under FHA2LP. As an alternative to a
blanket delegation of authority, FHA2LP servicers must obtain mortgage insurer approval to
partially or fully extinguish the second lien under FHA2LP on a case-by-case basis.
5 Reporting Requirements
5.1 Treasury Reporting
FHA2LP servicers are required to provide loan level data reporting to Bank of New York Mellon
(BNYM) as Incentives Processor for FHA2LP detailing the partial or full extinguishment of a
second lien under FHA2LP. This data must be accurate, complete, and in agreement with the
servicer’s records. Each FHA2LP servicer is required to have registered with the Program
Administrator using the FHA2LP Registration Form on www.HMPadmin.com. The loan level
Chapter VII: FHA2LP
MHA Handbook v4.3
206reporting requirements, timing, loan attributes and detailed guidelines for submitting data files are
available on www.HMPadmin.com.
FHA2LP servicers are required to provide the following categories of information to the BYNM
System of Record:






General Transaction Information
Loan Identifying Information
General Loan Information
Borrower/Co-Borrower Identifying Data
Loan Characteristics Before Refinance
Loan Characteristics After Refinance
Data must be reported by the FHA2LP servicer no later than the third business day of the month
following the closing of the FHA Refinance. A full description and detail of the required attributes
is provided in the FHA2LP Data Dictionary posted on www.HMPadmin.com.
FHA2LP servicers must represent and warrant that all or a portion of the second lien has been
released in compliance with applicable laws when submitting a request to the Incentives
Processor for payment of FHA2LP incentives.
5.2 Reporting Conversion of HAMP or 2MP Loans to FHA Refinance
Servicers of any HAMP-modified first lien that is paid off through FHA Refinance must follow the
guidance in the HAMP Servicer Reporting Requirements on www.HMPadmin.com regarding the
reporting of the loan as “paid off” in the HAMP Reporting Tool. In addition, the servicer must
submit the OMR that reflects the payoff within the first four business days of the month following
the FHA Refinance closing.
For 2MP loans that are partially or fully extinguished through FHA2LP or where the corresponding
first lien is paid off through FHA Refinance, servicers must follow the guidance in the HAMP
Servicer Reporting Requirements on www.HMPadmin.com regarding the reporting of the loan as
“paid off” in the HAMP Reporting Tool. In addition, the servicer must submit the 2OMR that
reflects the payoff within the first four business days of the month following the FHA Refinance
closing.
5.3 Credit Bureau Reporting
5.3.1 Reporting Full Extinguishments
For second liens that are extinguished in their entirety under FHA Refinance, the servicer must
report the following to the credit repositories:
 Account Status Code = 13 (Paid)
 Payment Rating = the appropriate code that identifies the status of the account within the
activity period being reported
 Special Comment Code = AU (Paid in full for less than the full balance)
 Current Balance and Amount Past Due = zero
 Date Closed = date the accounts are forgiven and considered to be paid
Note that payment history for the forgiven accounts will be retained.
Chapter VII: FHA2LP
MHA Handbook v4.3
2075.3.2 Reporting Partial Extinguishment
For second liens that are partially extinguished under FHA Refinance, the servicer must report
the following to the credit repositories:
 Date Opened = the date the account was originally opened
 Original Loan Amount = the original amount of the loan, including the Balloon Payment
Amount, if applicable. If the principal balance increases due to capitalization of delinquent
amounts due under the loan, the Original Loan Amount should be increased to reflect the
modified principal balance
 Terms Duration = the modified terms
 Scheduled Monthly Payment Amount = the new amount as per the modified agreement
 Current Balance = the principal balance (including the Balloon Payment Amount, if
applicable), plus the interest and escrow due during the current reporting period
 Account Status Code = the appropriate code based on the new terms of the loan
 Special Comment Code = CN
 K4 Segment = used to report the Balloon Payment information, if applicable:
o Specialized Payment Indicator = 01 (Balloon Payment)
o Payment Due Date = the date the balloon payment is due which is equal to
maturity of the amortizing portion of the loan. Note: The payoff date can be used
in this field
o Payment Amount = the amount of the balloon payment in whole dollars only
Servicers should continue to report one trade line under the original account number.
6 Incentive Compensation
Servicers and investors are eligible for incentive compensation under FHA2LP. The Incentives
Processor will make incentive payments to the servicer via an ACH transaction in a consolidated
fashion and will provide detailed loan-level accounting for incentives on a monthly basis. Upon
receipt of such incentive compensation, each servicer must promptly apply or remit, as
applicable, all investor compensation with respect to any partially or fully extinguished loan.
Treasury is not providing guidance on how funds are to be passed through to security holders of
securitization trusts. However, MHA-C will monitor to ensure that cost share reduction payments
are remitted to security holders.
FHA2LP incentive payments will be made in the month following the later of (i) the date of receipt
by the Incentives Processor of all required data relating to the second lien extinguishment or (ii)
the date of confirmation from FHA that the new FHA first lien mortgage has been endorsed. The
Incentives Processor will match the data entered into the BNYM System of Record by the
servicer with the data received from FHA related to the endorsed first lien mortgage. Payment of
FHA2LP incentives is also contingent upon, if applicable, the servicer reporting the loan as “paid
off” in the HAMP Reporting Tool as set forth in Section 5.2.
Servicers and investors are not eligible for incentive compensation under FHA2LP if the second
lien servicer or investor charges a subordination fee or other administrative fee to the borrower or
Chapter VII: FHA2LP
MHA Handbook v4.3
208the first lien servicer or investor in conjunction with the full or partial extinguishment of a second
lien to facilitate an FHA refinancing transaction.
6.1 Servicer Incentive Compensation
An FHA2LP servicer of a second lien that is partially or fully extinguished under FHA Refinance
will receive one-time compensation of $500 for each second lien with a UPB equal to or greater
than $2,500 on the day prior to the closing date of the FHA Refinance.
Servicers of second liens that were previously modified under 2MP will not be eligible for the
$500 incentive if the closing date of the FHA Refinance occurs within 180 calendar days of the
effective date of the 2MP modification.
6.2 Investor Incentive Compensation
An FHA2LP second lien investor is eligible for incentive payments for the amount of principal
extinguishment that reduces the borrower’s CLTV ratio to between 105 percent and 115 percent
based on the amount of post-refinance mortgage debt. The post-refinance CLTV is the ratio of all
mortgage debt, including the new principal balance of the refinanced first lien and any
subordinate liens to the current FHA appraised value of the property.
However, the amount of investor incentive payment to be paid under FHA2LP will be calculated
using the pre-refinance (rather than post) CLTV ratio, the delinquency status of the loan at the
time of the FHA Refinance, and the dollar amount of the principal extinguishment. The pre-
refinance CLTV is the ratio of the UPB of the existing first lien and the UPB of the second lien
prior to any extinguishment divided by the current FHA appraised value of the property.
Treasury FHA2LP Compensation Per Dollar of UPB Extinguished in CLTV Range
(Loans Less than or Equal to Six Months Past Due)
105% to <115%
115% to 140%
>140%
0.21
0.15
0.10
With respect to second liens that were less than or equal to six months past due at all times
during the 12-month period before the FHA Refinance closing date, second lien investors will be
entitled to receive $0.21 per dollar of principal extinguishment equal to or greater than 105
percent and less than 115 percent CLTV ratio; $0.15 per dollar of principal extinguishment equal
to or greater than 115 percent and less than or equal to 140 percent CLTV ratio; and $0.10 per
dollar of principal extinguishment in excess of 140 percent CLTV ratio.
With respect to second liens that were more than six months past due at any time during the 12-
month period prior to the FHA Refinance closing date, regardless of the CLTV ratio range,
second lien investors will be paid $0.06 per dollar of principal extinguishment and will not be
eligible for incentives in the above extinguishment schedule.
Chapter VII: FHA2LP
MHA Handbook v4.3
209CHAPTER VIII: INTERACTIONS WITH HFA HARDEST HIT FUND PROGRAMS
Chapter VIII
Interactions with HFA Hardest Hit
Fund Programs
Chapter VII: FHA2LP
MHA Handbook v4.3
2101 Introduction
Hardest Hit Fund (HHF) programs may interact with or complement assistance provided through
MHA programs. While voluntary, Treasury encourages servicers to work with the HFAs to
implement their programs for borrowers in states with HHF programs. Servicers that are
participating in an MHA program must follow the guidance set forth in this Chapter when
borrowers seeking assistance are participating in an HHF program.
2 Communication
2.1 Communication between Servicers and HFAs
To ensure that HHF programs operate effectively and that applicants are matched to the
appropriate program, HFAs may need access to information about an HHF-qualified borrower's
HAMP status. When working with a state HFA and in receipt of a Borrower Authorization, an
example of which is available on www.HMPadmin.com, a servicer must provide the HFA with
applicable borrower-specific information including, but not limited to:
 The status of the borrower’s request to be considered for HAMP, UP, HAFA, 2MP or
another MHA program (including, if applicable, the primary reason for ineligibility);
 The terms of the borrower’s TPP or permanent modification;
 A print out of the NPV result(s) for HAMP Tier 1 or HAMP Tier 2, as appropriate, from the
applicable standard modification waterfall and alternative modification waterfall
evaluations (as described in Section 6.3 and Section 6.4 of Chapter II, respectively), as
applicable; and
 Other relevant loan information.
2.2 Communication between Servicers and Borrowers
A servicer may not directly solicit the borrower for participation in an HHF program without
express written consent from the HFA.
Servicers may not deny or delay consideration of a borrower for any MHA program pending
acceptance of that borrower into an HHF program and may not require borrowers first request
HFF program assistance through an HFA or housing counselor as a condition of consideration for
an MHA program. If a borrower is denied assistance under any MHA program, and the servicer
is aware of an HHF program that may help the borrower qualify for an MHA program, the servicer
may notify the borrower of this option (or alternative) if authorized by the HFA. If a servicer is
actively working with an HHF program to find an affordability solution for the borrower, the
servicer may suspend the time frames detailed in Section 4.5, Section 6 and Section 2.3.2 of
Chapter II, for an additional 30 days to allow the HFA to decide about appropriate assistance for
that borrower. In addition, if HHF program assistance enables a TPP offer within these
timeframes, verification of the borrower’s income documentation will not be required if it was
previously verified in accordance with Section 5 of Chapter II where assistance was denied.
3 Interactions with HAMP
HHF programs may target assistance to borrowers who are not HAMP eligible because the
proposed modification is NPV negative (as described in Section 7 of Chapter II). HFAs hope to
make modifications NPV positive for HAMP by providing assistance in the form of upfront
principal reduction to enable the modification. Depending on the HHF program rules, the investor
may be required to contribute to or match, on a dollar-for-dollar basis, this assistance. The Base
NPV Model does not evaluate the impact of principal reduction payments made by a third party
Chapter VIII: HHF
MHA Handbook v4.3
211on investor cash flows. In order to estimate the impact of HHF principal reduction payments,
servicers who participate in these types of programs should follow a different analysis protocol
than that required for PRA.
Generally, the NPV result will improve by an amount greater than the principal reduction
contribution provided by the HHF. However, the precise contribution required to generate an NPV
positive result for HAMP depends on individual loan and borrower characteristics and is difficult to
predict. Servicers working with HHF programs to find an amount of principal reduction that will
produce an NPV positive result for HAMP may be required to iteratively increase the HHF
contribution amount. In addition, for HAMP Tier 2, the post-modification monthly mortgage
payment ratio must fall within the Expanded Acceptable DTI Range, or the Servicer’s DTI Range,
if different. HHF programs and servicers may wish to jointly establish a threshold NPV positive
amount beyond which further testing is not required. HHF programs should provide written testing
instructions to participating servicers detailing preferred iteration amounts and allowed thresholds.
Such instructions must reflect a minimum contribution amount of $1,000 and increases in
increments of not less than $1,000, up to the maximum amount established by the applicable
HHF program. The last NPV run should reflect the final terms of the HAMP modification.
In evaluating for HAMP Tier 1 –
 Generate the modification terms: Similar to the steps of the standard or alternative
modification waterfall, servicers should first capitalize allowable costs into the pre-
modification UPB. Then servicers should subtract the projected amount of principal
reduction, including any required investor contributions, to determine an adjusted UPB
that should be used to calculate any interest rate, term, and forbearance changes
required to achieve the 31 percent target monthly mortgage payment ratio.
 Run the NPV Test: Servicers will use only the input fields for the standard modification
waterfall (not the alternative modification waterfall) in testing for HHF principal reduction.
The servicer should enter into the NPV model the adjusted UPB, interest rate, term and
forbearance generated by applying the guidance in the paragraph above. The servicer
should enter all principal reduction associated with the modification – including PRA
reduction, HHF reduction, and any investor match for HHF reduction – into the
appropriate input field as indicated in the Base NPV Model Documentation.
 Calculate NPV: Because the Base NPV Model does not evaluate the impact of principal
reduction payments made by a third party on investor cash flows, after the NPV
evaluation, the servicer must add the amount of the HHF reduction to the NPV result to
determine the cash flow to the investor. Any principal reduction contributions from the
investor should not be added to the NPV result.
In evaluating for HAMP Tier 2 –
 Determine Capitalized UPB: Similar to the steps of the standard or alternative
modification waterfall, servicers should first capitalize allowable costs into the pre-
modification UPB.
 Run the NPV Test: Servicers will use only the input fields for the standard modification
waterfall (not the alternative modification waterfall) in testing for HHF principal reduction.
The servicer should enter the capitalized UPB into the NPV model. The servicer should
also enter all principal reduction associated with the modification – including PRA
reduction, HHF reduction, and any investor match for HHF reduction – into the
appropriate input field as indicated in the Base NPV Model Documentation. The model
will calculate the interest rate, term and forbearance in accordance with the Tier 2
Standard Modification Waterfall described in Section 6.3.2 of Chapter II.
Chapter VIII: HHF
MHA Handbook v4.3
212
Calculate NPV: Because the Base NPV Model does not evaluate the impact of principal
reduction payments made by a third party on investor cash flows, after the NPV
evaluation, the servicer must add the amount of the HHF reduction to the NPV result to
determine the cash flow to the investor. Any principal reduction contributions from the
investor should not be added to the NPV result.
3.1 Interactions with PRA
As detailed in the program guidance set forth in Section 6.4 of Chapter II, under PRA, servicers
must evaluate every HAMP-eligible borrower with an LTV ratio greater than 115 percent for
possible principal reduction by completing both the applicable standard modification waterfall and
the applicable alternative modification waterfall that includes principal reduction. If as a result of
this evaluation the servicer elects to offer principal reduction as part of a permanent modification,
Treasury will pay principal reduction incentives to the investor. These incentives are in addition to
any investor cost share or home price decline protection incentives the investor may be eligible to
receive.
Several HHF programs are designed to assist borrowers whose homes are significantly
underwater by providing principal reduction payments, which may or may not require a matching
contribution from the first lien investor. Loans modified under HAMP that include HHF principal
reduction are eligible for standard borrower, servicer and investor incentives, as applicable, as
described in Section 13 of Chapter II.
Investors are not eligible to receive PRA incentives for any principal reduction contributions made
as part of an HHF program with principal reduction. However, if the servicer agrees to provide a
greater amount of principal reduction than is required under an HHF program, the investor may
be eligible for PRA incentives if, after subtracting the total HHF principal reduction and any
required investor match from the UPB after capitalization in accordance with Section 6.3.1 of
Chapter II, the adjusted LTV ratio is greater than 105 percent. If the adjusted LTV ratio is equal
to or less than 105 percent, the loan is only eligible for PRA investor incentives for principal
reduction down to 105 percent (as discussed in Section 13.3.4 of Chapter II).
HHF programs can be used to pay escrow shortages and reduce arrearages. If these amounts
have been capitalized, the payments are treated as principal reduction.
3.2 Trial Period Plans
If, after a borrower is placed in a TPP, the servicer learns that a borrower is receiving Non-MHA
Unemployment Assistance, the servicer must cancel the TPP. The servicer must submit Trial
Fallout reason code number 19, Unemployment Forbearance Plan. If the borrower made timely
payments during the TPP prior to receiving Non-MHA Unemployment Assistance, the borrower
will be eligible for reconsideration for HAMP after the Non-MHA Unemployment Assistance ends.
In order to be reconsidered for HAMP, the borrower must submit a new Initial Package with
updated documentation. If the borrower is eligible for HAMP based on the updated
documentation he or she must enter a new TPP. If the borrower did not make timely payments
during a HAMP Tier 1 TPP, he or she may be evaluated for HAMP Tier 2, but may not be
evaluated for HAMP Tier 1.
4 Interactions with UP
As detailed in the program guidance set forth in Chapter III, UP requires servicers to offer eligible
borrowers receiving unemployment benefits a minimum 12-month forbearance period. Many
Non-MHA Unemployment Assistance programs also provide mortgage assistance to unemployed
borrowers by paying all or some of the borrower’s monthly mortgage payment for a period of time.
Non-MHA Unemployment Assistance may precede an UP forbearance plan or may be used to
Chapter VIII: HHF
MHA Handbook v4.3
213extend it. If a borrower on an UP forbearance plan accepts Non-MHA Unemployment
Assistance, the UP forbearance plan must be cancelled.




Borrowers who have received less than 12 months of Non-MHA Unemployment
Assistance and remain unemployed, must be considered for UP forbearance for a period
that extends the total unemployment assistance to a minimum of 12 months, subject to
investor and regulator guidelines.
Borrowers who have already received 12 or more months of Non-MHA Unemployment
Assistance are not required to be offered UP.
Borrowers who have received any duration of UP forbearance may be eligible for Non-
MHA Unemployment Assistance in accordance with applicable program terms.
Servicers may, but are not required to, provide any additional period of UP forbearance to
a borrower who terminated a prior UP forbearance plan to receive assistance through
Non-MHA Unemployment Assistance following expiration of the Non-MHA
Unemployment Assistance.
In evaluating a borrower for UP, servicers may encourage borrowers to apply for Non-MHA
Unemployment Assistance, however, servicers may not delay the UP evaluation timelines
described in Section 4.1 of Chapter III while a borrower is being evaluated for Non-MHA
Unemployment Assistance.
In connection with UP, servicers may require a borrower to make a minimum monthly mortgage
payment not to exceed 31 percent of the borrower’s monthly gross income during the UP
forbearance plan. Servicers are required to have a written policy detailing when a monthly
mortgage payment under UP will be required and how it will be determined, and the policy cannot
change based on the availability of a Non-MHA Unemployment Assistance.
A borrower that has obtained employment during or after UP or Non-MHA Unemployment
Assistance, but still has a financial hardship and otherwise meets HAMP eligibility criteria, must
be considered for HAMP prior to consideration of other loss mitigation alternatives. Any Non-MHA
Unemployment Assistance may not be considered as income for HAMP, and an unemployed
borrower in a TPP may not use Non-MHA Unemployment Assistance funds to make their TPP. If
a borrower receives a permanent modification, and subsequently becomes unemployed, he or
she can use funds provided through Non-MHA Unemployment Assistance to help them to
continue to make their monthly mortgage payments.
5 Interactions with HAFA
As detailed in the program guidance set forth in Chapter IV, under HAFA, incentives may be paid
to borrowers, servicers and investors, and in some cases, tenants and other non-borrower
occupants, to facilitate a short sale or DIL. A borrower that is participating in HAFA may receive
funds from an HHF program to assist with monthly payments required during the short sale
marketing period or to provide additional relocation assistance following a successful short sale or
DIL. HHF program funds may not be used to provide compensation to extinguish subordinate
liens in a HAFA transaction.
Additionally, Chapter IV requires each servicer to develop and implement a written policy,
consistent with investor guidelines, describing the basis on which the servicer will offer HAFA and
whether they will require monthly payments during the short sale/DIL process. Servicers may not
establish different policies applicable to borrowers in a state where there is an HHF short sale
assistance program.
6 Interactions with 2MP
As detailed in the program guidance in Chapter V, a 2MP servicer is required to modify or
extinguish a second lien mortgage loan if the first lien mortgage loan is modified under HAMP. If
Chapter VIII: HHF
MHA Handbook v4.3
214a second lien mortgage loan has already been modified or is eligible for modification under 2MP,
the servicer/investor is prohibited from accepting any fees, incentives or remuneration from an
HFA for additional modification or extinguishment of the second lien mortgage loan. If the first
lien mortgage loan is not in a TPP, has not been permanently modified under HAMP or if the
servicer does not participate in 2MP, the second lien may be modified or extinguished under an
HHF Program. If the corresponding first lien mortgage loan is subsequently modified under
HAMP, and the second lien is otherwise eligible for 2MP, the participating servicer must modify
the loan according to 2MP program guidelines. Servicers and investors are not eligible for any
2MP incentives in conjunction with a second lien modified or extinguished through an HHF
program, but they will be eligible for 2MP incentives relating to additional modification or
extinguishment as part of 2MP. For all purposes of 2MP, the pre-modification loan characteristics
must take into account any HHF contributions.
Servicers must document in their loan files and servicing systems all interactions between HHF
programs and 2MP in a manner sufficient to determine the accuracy and appropriateness of
processing, and make this information available to MHA-C on request.
7 Government Insured or Guaranteed Loans
As detailed in program guidance set forth in Chapter VI, under Treasury FHA-HAMP and RD-
HAMP, Treasury provides pay-for-performance compensation for borrowers and pay-for-success
compensation to servicers for FHA-insured or RHS-guaranteed first lien mortgages that are
modified under FHA-HAMP and Special Loan Servicing, respectively. HHF programs may be
able to facilitate modifications through the payment of arrearages, reduction of forborne amounts
or settlement of other debt (to bring a borrower below a 55% back-end debt-to-income ratio).
HHF programs should work with servicers and the government insurer or guarantor to determine
the most efficient and effective use of resources.
8 Interactions with FHA2LP
As detailed in program guidance set forth in Chapter VII, under FHA2LP, Treasury provides
servicer and investor compensation for the full or partial extinguishment of second lien mortgage
loans in conjunction with an FHA Refinance closing. Servicers and investors of second mortgage
liens are not eligible for any FHA2LP incentives if they have accepted any amount of
compensation from an HHF program for partial or full extinguishment of a second mortgage lien.
9 Treasury Reporting Requirements
Servicers will be required to report to the Program Administrator certain information related to any
loan in the HAMP Reporting Tool (whether through HAMP, 2MP, HAFA or another program) that
has received assistance from an HHF program. The specific data elements to be reported have
been posted at www.HMPadmin.com.
The HAMP Reporting Tool has been modified to facilitate these reporting requirements. Any
principal reduction that occurs through an HHF program should be reported as standard principal
reduction in the HAMP Reporting Tool and be deducted from the UPB after modification (not as
incentivized forgiveness for PRA).
Chapter VIII: HHF
MHA Handbook v4.3
215Exhibits
Exhibit A
MHA Handbook v4.3
216EXHIBIT A: Model Clauses for Borrower Notices
The model clauses in this exhibit provide sample language that may be used to communicate the
status of a borrower’s request for a Home Affordable Modification. Use of the model clauses is
optional; however, they illustrate a level of specificity that is deemed to be in compliance with
language requirements of the program.
Non Approval Notice
1. Ineligible Mortgage. We are unable to offer you a Home Affordable Modification because
your loan did not meet one or more of the basic eligibility criteria of the Home Affordable
Modification Program.
 You did not obtain your loan on or before January 1, 2009.
 Your loan with us is not a first lien mortgage.
 The current unpaid principal balance on your loan is higher than the program limit.
($729,750 for a one unit property, $934,200 for a two unit property, $1,129,250 for a
three unit property and $1,403,400 for a four unit property).
 Your mortgage loan has been charged off and you have been released from liability for
repayment.
2. Ineligible Borrower. The following should be used only for loans considered for HAMP prior
to June 1, 2012: We are unable to offer you a Home Affordable Modification because your
current monthly housing expense, which includes the monthly principal and interest payment
on your first lien mortgage loan plus property taxes, hazard insurance premiums and
homeowner’s dues (if any) is less than or equal to 31% of your gross monthly income (your
income before taxes and other deductions) which, we verified as $____________. If you
believe this verified income is incorrect, please contact us at the number provided below.
The following should be used for loans considered for HAMP after June 1, 2012:
We are unable to offer you a Home Affordable Modification because [insert as appropriate:]
[you or a co-borrower own in excess of five single family properties (exclusive of principal
residence.) OR [the borrower on the loan or owner of the property is not a natural person.]
OR [we have been unable to verify your identity.]
3. Property Not Owner Occupied. The following should be used only for loans considered for
HAMP prior to June 1, 2012: We are unable to offer you a Home Affordable Modification
because you do not live in the property as your primary residence.
4. Ineligible Property. We are unable to offer a Home Affordable Modification because your
property:
 Your property is vacant (use the following only for loans considered for HAMP prior to
June 1, 2012)
 Your property has been condemned or is in such poor physical condition that it is
uninhabitable
 Your property has more than four dwelling units
 Your property fails to satisfy the criteria for a rental property to receive a Home Affordable
Modification because:
o
o
o
Your property is a second home;
Your property is rented on a seasonal basis and not on a year-round basis; or
You failed to make the Rental Property Certification included in the Request for
Mortgage Assistance.
5. Investor Guarantor Not Participating. We are unable to offer you a Home Affordable
Modification because:
Exhibit A
MHA Handbook v4.3
217 We service your loan on behalf of an investor or group of investors that has not given us
the contractual authority to modify your loan under the Home Affordable Modification
Program.
 Your loan is insured by a private mortgage insurance company that has not approved a
modification under the Home Affordable Modification Program.
 Your loan is guaranteed and the guarantor has not approved a modification under the
Home Affordable Modification Program.
6. Court/Public Official Declined. We are unable to offer you a Home Affordable Modification
because the proposed modified loan terms were not approved by the court with authority to
direct action of this account. You may wish to contact your counsel or trustee to discuss this
decision.
7. Negative NPV. The Home Affordable Modification Program requires a calculation of the net
present value (NPV) of a modification using a formula developed by the Department of the
Treasury. The NPV calculation requires us to input certain financial information about your
income and your loan including the factors listed below. When combined with other data in
the Treasury model, these inputs estimate the cash flow the investor (owner) of your loan is
likely to receive if the loan is modified and the investor’s cash flow if the loan is not modified.
Based on the NPV results the owner of your loan has not approved a modification.
The NPV input values we used in your NPV evaluation are listed in the NPV Data Input Fields
and Values chart in this letter. You have 30 calendar days from the date of this letter to
provide us with written evidence that one or more of the NPV input values is inaccurate. If
you wish to dispute more than one NPV input, you must provide us with the written evidence
for each input being disputed at the same time. If your written evidence identifies material
inaccuracies in the NPV input values, we will not conduct a foreclosure sale until the
inaccuracies are reconciled. If your written evidence is valid and material to the NPV
outcome, we will re-perform the NPV evaluation with the corrected input values. Following the
re-evaluation, we will provide you with the updated NPV outcome and input values.
If you believe that the “Property Value” input used in the NPV evaluation differs from the fair
market value of your home, you must provide us with a recent estimate of the property value
and a reasonable basis for that estimate at the same time that you provide evidence of any
other disputed NPV value inputs. We will then perform a test NPV using your estimated
value. If the test provides an NPV positive outcome, you have the right to request that we
obtain an appraisal to confirm the value of your home and use that appraised value to
conduct a new NPV evaluation.
The estimated cost of an appraisal in your community is $____. If you wish to exercise this
option we must, within 15 calendar days of the date we notify you that the preliminary NPV
result is positive, receive a check [or other payment source acceptable to the servicer] for
$200 as a deposit against the full cost of an appraisal. Once the appraisal is completed, we
will perform a final NPV evaluation using the appraised value and any other corrected NPV
inputs. Following the re-evaluation, we will provide you with the updated NPV outcome and
input values.
Alternatively, you may request assistance from MHA Help at the telephone number set forth
in this letter prior to contacting us to evaluate whether your disputed NPV inputs, including
“Property Value,” would change the NPV outcome from negative to positive. Using the
disputed inputs you provide, MHA Help will conduct a preliminary NPV re-evaluation and will
provide you with the printed NPV result. You should provide that result to us as part of your
written evidence that one or more of the NPV input values is inaccurate within 30 calendar
days from the date of this letter.
Exhibit A
MHA Handbook v4.3
218You may only request one NPV re-evaluation from MHA Help prior to contacting us. If the re-
evaluation performed by MHA Help or us using the disputed inputs returns a negative NPV
result, you will not be eligible for additional appeals of other inputs.
8. Default Not Imminent /Default Status not Eligible. Use the following only for HAMP Tier 1
or owner-occupied HAMP Tier 2: We are unable to offer you a Home Affordable Modification
because you are current on your mortgage loan and after reviewing the financial information
you provided us we have determined that you are not at risk of default because:
 You have not documented a financial hardship that has reduced your income or
increased your expenses, thereby impacting your ability to pay your mortgage as agreed.
 You have sufficient net income to pay your current mortgage payment.
 You have the ability to pay your current mortgage payment using cash reserves or other
assets.
Use the following only for a rental property considered under HAMP Tier 2: We are unable to
offer you a Home Affordable Modification because you have not missed two or more
mortgage payments.
9. Excessive Forbearance. Use the following only for loans considered for HAMP prior to June
1, 2012: We are unable to offer you a Home Affordable Modification because we are unable
to create an affordable payment equal to 31% of your reported monthly gross income without
changing the terms of your loan beyond the requirements of the program.
10. Previous HAMP Modification(s). We are unable to offer you a Home Affordable
Modification because:
 Your loan on the related property has received the maximum number of modifications
permitted under the Home Affordable Modification Program.
 You or a co-borrower have received the maximum number of modifications permitted
under the Home Affordable Modification Program.
11. Request Incomplete. We are unable to offer you a Home Affordable Modification because
you did not provide us with the documents we requested. Two notices which listed the
specific documents we needed and the time frames required to provide them have been sent
to you,
12. Trial Plan Default. We are unable to offer you a Home Affordable Modification because you
did not make the required Trial Period Plan payments.
13. Minimum Required Reduction. We are unable to offer you a Home Affordable Modification
because in performing our underwriting of a potential modification we could not reduce your
principal and interest payment by at least 10%.
14. Post Modification DTI Outside of Acceptable Range. We are unable to offer you a HAMP
Modification because, in performing our underwriting of a potential modification, we
determined that the proposed modified monthly payment which we could offer you, which
includes a modified monthly principal and interest payment on your first lien mortgage loan
plus property taxes, hazard insurance premiums, and homeowners dues (if any) was outside
the of the range of [insert as appropriate:] [10% - 55%] OR [insert Servicer’s DTI Range] of
your monthly gross income (your income before taxes and other deductions which we verified
as $____________. Your modified monthly housing expense must be within this range in
order for you to be eligible for HAMP. If you believe the verified income figure we have is
incorrect, please contact us at the number provided below.
15. Loan Paid Off or Reinstated. We are not considering your request for a modification
because:
 Your loan was paid in full on ________________.
Exhibit A
MHA Handbook v4.3
219 Your loan was reinstated on _________________ and you no longer appear to be in
need of modification. If you feel that you are at risk of default please contact us to
discuss your eligibility and qualification for a Home Affordable Modification.
16. Offer Not Accepted by Borrower / Request Withdrawn. We are not considering your
request for a modification because:
 After being offered a Trial Period Plan or Home Affordable Modification you notified us on
___________ that you did not wish to accept the offer.
 After initially asking to be considered for a Home Affordable Modification you withdrew
that request on ____________.
17. No Change in Circumstances.
 After previously being offered a Trial Period Plan or Home Affordable Modification on
____________, you notified us that you did not wish to accept that offer and [insert as
appropriate] [your circumstances have not changed].
 Twelve months have not elapsed since you received a Home Affordable Modification on
your loan and your circumstances have not changed.
 After previously being denied a Home Affordable Modification on __________, your
circumstances have not changed.
18. Dodd-Frank Certification. We are unable to offer you a Home Affordable Modification
because you did not meet the requirements of the Dodd-Frank Wall Street Reform and
Consumer Protection Act.
19. Application Discrepancy. We are unable to offer you a Home Affordable Modification
because [provide a description of the discrepancy].
Incomplete Information Notice - We cannot continue to review your request for a Home
Affordable Modification because:
 Use this language for only for loans considered before June 1, 2010: You are currently in
a Trial Period Plan; however you have not provided all of the documentation we
previously requested. If we do not receive the required documents by [insert expiration
date of Trial Period Plan but no less than 30 days from the date of the letter] we will
terminate your Trial Period Plan and may resume other means to collect any amounts
due on your account. The documents we need are: [Insert list of required documents]
 You have requested consideration for a Trial Period Plan, however, we need additional
documentation to complete the review of your loan. If we do not receive the required
documents by [insert date no less than 30 days from the date of the letter or, if it’s the
second notice, insert date no less than 15 days from the date of the letter] we will
consider that you have withdrawn your request for a modification and may resume other
means to collect any amounts due on your account. The documents we need are: [Insert
list of required documents. To the extent the borrower has submitted a document but it is
inadequate, provide a reason for the request for the submission.]
Borrower Response Period - You have 30 calendar days from the date of this notice to
contact [name of servicer] to discuss the reason for non-approval for a HAMP modification or
to discuss alternative loss mitigation options that may be available to you. Your loan may be
referred to foreclosure during this time, or any pending foreclosure action may continue.
However, no foreclosure sale will be conducted and you will not lose your home during
this 30-day period [or any longer period required for us to review supplemental material you
may provide in response to this Notice].
Unemployment Program - We are unable to offer you forbearance plan under the Home
Affordable Unemployment Program because:
 You were not unemployed at the time of your request.
Exhibit A
MHA Handbook v4.3
220 You previously received a Home Affordable Modification and had not lost good standing
under a Home Affordable Modification permanent modification.
 You did not provide us with documentation that you received or are receiving or will
receive unemployment benefits in the month of the effective date of the potential
forbearance plan for which you were being considered or within the six month period prior
to requesting a forbearance plan.
 The total delinquency at the time of your request for a forbearance plan exceeds 12
months of your scheduled monthly mortgage payment (including taxes and insurance, if
applicable).
20. Pre-Modification DTI Below Acceptable Range. We are unable to offer you a Home
Affordable Modification Program Modification because in reviewing your income
documentation we determined that your current monthly payment, which includes the monthly
principal and interest payment on your first lien mortgage loan plus property taxes, hazard
insurance premiums and homeowners dues (if any) is below [insert as appropriate:] [10%]
OR [the lowest end of the Servicer’s DTI Range] of your monthly gross income (your income
before taxes and other deductions) which we verified as $___________. If you believe the
verified income figure we have is incorrect, please contact us at the number provided below.
21. Involuntary Transfer of Loan to Non-Participating Entity. We are unable to offer you a
Home Affordable Modification because your loan is being transferred to an investor or
servicer that does not participate in the Home Affordable Modification Program.
Exhibit A
MHA Handbook v4.3
221NPV INPUT DATA FIELDS AND VALUES
Input Data Fields
Explanation
I.
Value used in NPV
calculation to
determine the HAMP
eligibility of your
mortgage
Borrower Information
1. Current Borrower Credit
Score This field identifies your credit score as provided by one or more of the
three national credit reporting agencies.
2. Current Co-borrower
Credit Score If a co-borrower is listed on the mortgage, this field identifies the co-
borrower’s credit score as provided by one or more of the three national
credit reporting agencies.
3. Monthly Gross Income This field identifies the monthly gross income of all borrowers on your loan
before any payroll deductions or taxes.
If the subject property (e.g., the property securing the loan for which the
borrower is requesting a HAMP modification) is a rental property, the rental
income is excluded.
4.
Principal Residence
Total Housing Expense
This field only applies if your application for a HAMP modification is for a
property that is not your principal residence.
This field identifies the amount of the total monthly housing expense (i.e.,
principal, interest, taxes, insurance and association fees, if any) for your
principal residence, and the principal residence(s) of any co-borrower(s).
II. Property Information
5. Property - State This field identifies the two letter state code of the property securing
mortgage for which you are applying for a HAMP modification.
6. Property - Zip Code This field identifies the zip code of the property securing the mortgage for
which you are applying for a HAMP modification.
7. Property Value This field identifies the estimated fair market value of the property for which
you are applying for a HAMP modification that was used for this analysis.
8. Property Valuation Type This field identifies the method by which the property for which you are
applying for a HAMP modification was valued (as noted in Field 6, Property
Value)
1 – Automated Valuation Model (AVM)
2 – Exterior Broker Price Opinion (BPO) / Appraisal (as is value)
3 – Interior BPO / Appraisal (as is value)
9.
Occupancy
This field uses codes to identify the occupancy of the property for which you
are applying for a HAMP modification.
The servicer will for owner-occupied properties use a code of 1, 3 or 4 and
for non-owner-occupied properties will use a code of 2.
10. Property - Monthly
Gross Rental Income
This field only applies if your application for a HAMP modification is for a
property that is not your principal residence.
This field identifies the monthly gross rental income from the property for
which you are applying for a HAMP modification.
III. Mortgage Information
11. Data Collection Date
Exhibit A
This field identifies the date on which the Unpaid Principal Balance and
other data used in the NPV analysis was collected by us.
MHA Handbook v4.3
222Input Data Fields
Explanation
12. Imminent Default Flag This field indicates your default status as of the Data Collection Date. If you
have not missed any payments or less than two payments are due and
unpaid by the end of the month in which they are due, you are considered
to be in imminent default and the value in this field is “Y”. If two or more
payments are due and unpaid by the end of the month in which they are
due as of the Data Collection Date, the value in this field is “N”.
13. Investor Code This field identifies the owner of the mortgage for which you are applying for
a HAMP modification.
Value used in NPV
calculation to
determine the HAMP
eligibility of your
mortgage
1 – Fannie Mae
2 – Freddie Mac
3 – Owned by a private investor other than us, your servicer
4 – Owned by us, your servicer or an affiliated company
5 – Ginnie Mae
14. Unpaid Principal
Balance at Origination This field identifies the amount of the mortgage for which you are applying
for a HAMP modification at the time it was originated (i.e., the amount you
borrowed).
15. First Payment Date at
Origination This field identifies the date the first payment on the mortgage for which you
are applying for a HAMP modification was due after it was originated.
16. Product Before
Modification This field uses codes to identify the type of mortgage you held prior to your
most recent application for a HAMP modification:
1. Adjustable Rate Mortgage (ARM) and/or Interest Only mortgage
loan
2. Fixed Rate
3. Step Rate
4. One Step Variable
5. Two Step Variable
6. Three Step Variable
7. Four Step Variable
8. Five Step Variable
9. Six Step Variable
10. Seven Step Variable
11. Eight Step Variable
12. Nine Step Variable
13. Ten Step Variable
14. Eleven Step Variable
15. Twelve Step Variable
16. Thirteen Step Variable,
17. Fourteen Step Variable
Exhibit A
MHA Handbook v4.3
223Input Data Fields
17. Adjustable Rate
Mortgage (ARM) Reset
Date
Explanation
Value used in NPV
calculation to
determine the HAMP
eligibility of your
mortgage
This field applies only if the type of mortgage you held prior to your most
recent application for a HAMP modification is an Adjustable Rate Mortgage
(ARM) loan.
This field identifies the date on which the next Adjustable Rate Mortgage
(ARM) reset was due to occur, as of the Data Collection Date (Field 11).
18. Next Adjustable Rate
Mortgage (ARM) Reset
Rate
This field identifies the rate at which your mortgage was expected to change
based on when the next reset date (Field 14) is scheduled to occur. Please
look to your mortgage loan documentation for information on how your
mortgage’s rate is recalculated at its reset date.
If the reset date on your ARM loan is within 120 days of the Data Collection
Date, this value in this field is the expected interest rate on your mortgage
at the next reset date.
If the reset date on your ARM loan is more than 120 days from the Data
Collection Date, the value in this field is your current interest rate at the time
of NPV evaluation.
19. Unpaid Principal
Balance Before
Modification This field identifies the unpaid amount of principal (money you borrowed) on
the mortgage for which you are applying for a HAMP modification as of the
Data Collection Date. It does not include any unpaid interest or other
amounts that you may owe.
20. Interest Rate Before
Modification This field identifies the interest rate on the mortgage for which you are
applying for a HAMP modification as of the Data Collection Date. Please
look to your mortgage loan documentation (including any permanent
modification documentation if previously modified) for information on the
interest rate of your mortgage.
21. Remaining Term (# of
Payment Months
Remaining) This field identifies the remaining number of months you have left to pay
under the original term of the mortgage for which you are applying for a
HAMP modification as of the Data Collection Date. Please look to your
mortgage loan documentation (including any permanent modification
documentation if previously modified) for information on the term of your
mortgage.
22. Principal and Interest
Payment Before
Modification This field is the amount of principal and interest you were scheduled to pay
each month as of the Data Collection Date.
A. If your loan had an adjustable rate scheduled to reset within 120
days, this field will reflect the principal and interest payment
associated with the new interest rate.
B. If your loan had an adjustable rate scheduled to reset after 120
days, this field will reflect the current scheduled monthly
mortgage payment and the note interest rate in effect at the time
of evaluation.
C. If your mortgage is an Interest Only loan and your loan was in the
interest only period, the value in this field is the interest payment
that was due each month.
D. If your mortgage is a negative-amortization loan, the value in this
field is the greater of:
a. the principal and interest payment you sent on the most
recent payment date; or
b. the minimum payment required on your loan.
For a loan that defaulted under the HAMP Trial Period Plan, enter the
contractual monthly P&I payment as of the Data Collection Date. For a loan
that defaulted under the HAMP Tier 1 permanent modification, enter the
permanent HAMP Tier 1 modification monthly P&I payment.
Exhibit A
MHA Handbook v4.3
224Input Data Fields
Explanation
23. Monthly Real Estate
Taxes This field identifies the monthly cost of your real estate taxes. If your taxes
th
are paid annually this amount will be 1/12 of the annual cost.
24. Monthly Hazard and
Flood Insurance This field identifies the monthly cost of your hazard and flood insurance
th
coverage. If your insurance is paid annually this amount will be 1/12 of the
annual cost.
25. Homeowners
Association Dues/Fees This field identifies your monthly homeowner’s or condominium association
fee payments, if any, and/or any future monthly escrow shortages. If your
homeowner’s or condominium association fee payments are paid annually,
th
this will be 1/12 of the annual cost.
Value used in NPV
calculation to
determine the HAMP
eligibility of your
mortgage
If your property has no association fee payments and/or any future monthly
escrow shortages, this field is blank.
26. Months Past Due This field identifies the number of mortgage payments you would have had
to make in order to make your mortgage current, as of the Data Collection
Date.
27. Mortgage Insurance
Coverage Percent This field identifies the percentage of private mortgage insurance coverage
on the mortgage for which you are applying for a HAMP modification.. If
you do not have private mortgage insurance this field is blank.
28. Capitalized UPB Amount This field identifies the capitalized unpaid principal balance amount that
includes all outstanding principal, accrued interest, escrow advances as of
the data collection date.
IV. Proposed Modification Information
The fields below describe the proposed HAMP modification that was calculated by your servicer according to the HAMP program
guidelines (subject to investor restrictions) that were used in your Net Present Value (NPV) evaluation.
29. NPV Date This field identifies the initial date that the Net Present Value evaluation was
conducted on the mortgage for which you are applying for a HAMP
modification.
30. Modification Fees This field identifies the total amount of costs and fees that would have been
paid by the investor (owner) of your loan, if you had been approved for a
HAMP modification. It includes expenses such as notary fees, property
valuation, credit report and other required fees.
31 This field identifies any mortgage insurance payout amount as part of the
proposed HAMP modified mortgage, which is, at the discretion of your
mortgage insurance company.
Mortgage Insurance
Partial Claim Amount of
the Proposed HAMP
Modification
This should be zero if you were not approved for a trial period plan or
permanent HAMP modification for reason of negative NPV.
32. Unpaid Principal
Balance of the Proposed
HAMP Tier 1
Modification (Net of
Forbearance & Principal
Reduction)
Exhibit A
This field identifies the beginning principal balance on which you would
have been required to pay interest if you had received a HAMP Tier 1
modification.
It is likely to be different than your current principal balance because it
includes amounts you owe for missed mortgage payments and unpaid
expenses that are allowed to be added (capitalized) to your principal
balance. Additionally, it may be reduced by proposed principal forbearance
(Field 36) or proposed principal forgiveness (Field 37).
MHA Handbook v4.3
225Input Data Fields
Explanation
33. Interest Rate of the
Proposed HAMP Tier 1
Modification This field identifies the starting interest rate of the proposed HAMP Tier 1
modified mortgage. This rate is fixed for at least the first 5 years after
modification.
34. Amortization Term of the
Proposed HAMP Tier 1
Modification This field identifies the number of months left to pay the proposed HAMP
Tier 1 modified mortgage.
35. Principal and Interest
Payment of the
Proposed HAMP Tier 1
Modification
36. Principal Forbearance
Amount of the Proposed
HAMP Tier 1
Modification This field identifies the amount of the monthly principal and interest
payment on the proposed HAMP Tier 1 modified mortgage.
37. Principal Forgiveness
Amount of the Proposed
HAMP Tier 1
Modification
38. Unpaid Principal
Balance of the Proposed
HAMP Tier 2
Modification (Net of
Forbearance & Principal
Reduction) This field identifies the amount of principal your investor was willing to
forgive under the proposed HAMP Tier 1 modified mortgage.
Value used in NPV
calculation to
determine the HAMP
eligibility of your
mortgage
This field identifies the amount of principal your investor was willing to
forbear on the proposed HAMP Tier 1 modified mortgage. You would have
still owed this amount, but you would not be charged interest on it and no
payments would have been due on this amount until you paid off your loan.
This field identifies the beginning principal balance [as of the Data
Collection Date] on which you would have been required to pay interest if
you had received a HAMP Tier 2 modification.
It is likely to be different than your current principal balance because it
includes amounts you owe for missed mortgage payments and unpaid
expenses that are allowed to be added (capitalized) to your principal
balance. Additionally, it may be reduced by proposed principal forbearance
(Field 43 or the amount calculated by the NPV model under the standard
Tier 2 modification) or proposed principal forgiveness (Field 39).
39. Principal Forgiveness
Amount of the Proposed
HAMP Tier 2
Modification This field identifies the amount of principal your investor was willing to
forgive under the proposed HAMP Tier 2 modified mortgage.
40. Investor Override for
Tier 2 Modification This field indicates whether the owner of your mortgage provides for
different terms than would be provided under the standard HAMP Tier 2
Modification. If not, the value in this field is “N”. If here are terms other than
the standard terms, the value in this field is “Y”.
41. Interest Rate of the
Proposed HAMP Tier 2
Modification This field only applies if the owner of your mortgage provides for a different
interest rate than would be provided under the standard HAMP Tier 2
Modification.
This field identifies the interest rate of the proposed HAMP Tier 2 modified
mortgage. This rate is fixed.
42. Amortization Term of the
Proposed HAMP Tier 2
Modification
This field only applies if the owner of your mortgage provides for a different
amortization term than would be provided under the standard HAMP Tier 2
Modification.
This field identifies the number of months left to pay the proposed HAMP
modified mortgage.
Exhibit A
MHA Handbook v4.3
226Input Data Fields Explanation
43. Principal Forbearance
Amount of the Proposed
HAMP Tier 2
Modification This field only applies if the owner of your mortgage provides for a different
forbearance amount than would be provided under the standard HAMP Tier
2 Modification.
Value used in NPV
calculation to
determine the HAMP
eligibility of your
mortgage
This field identifies the amount of principal forborne on the proposed HAMP
modified mortgage. You would have still owed this amount, but you would
not be charged interest on it and no payments would have been due on this
amount until you paid off your loan.
Exhibit A
MHA Handbook v4.3
227EXHIBIT B: Model Letter for Simultaneous Trial Plan –
Foreclosure Process Explanation
[Servicer Logo]
[Date]
[Name]
[Address 1]
[Address 2]
Dear [borrower and co-borrower name(s)]:
We are committed to helping you retain your home. That’s why we are currently evaluating your
mortgage for eligibility in the Home Affordable Modification Program (“HAMP”) which would
modify the terms of your loan and make your mortgage payments more affordable. Your loan has
been previously referred to foreclosure and we will continue the foreclosure process while we
evaluate your loan for HAMP. However, no foreclosure sale will be conducted and you will
not lose your home during the HAMP evaluation.
HAMP Eligibility
If you are eligible for HAMP, you will enter into a “trial period”. You will receive a Trial Period Plan
Notice which will contain a new trial payment amount (this will temporarily replace your current
mortgage payment during the HAMP trial period). To accept the Trial Period Plan, you must make
your first trial payment by the specified due date. Once you accept, we will halt the foreclosure
process as long as you continue to make your required trial plan payments.
If you do not qualify for HAMP, or if you fail to comply with the terms of the Trial Period Plan, you
will be sent a Non-Approval Notice. In most cases, you will have 30 days to review the reason for
non-approval and contact us to discuss any concerns you may have. During this 30-day review
period, we may continue with the pending foreclosure action, but no foreclosure sale will be
conducted and you will not lose your home.
Important—Do not ignore any foreclosure notices.
The HAMP evaluation and the process of foreclosure may proceed at the same time. You may
receive foreclosure/eviction notices - delivered by mail or in person - or you may see steps being
taken to proceed with a foreclosure sale of your home. While you will not lose your home during
the HAMP evaluation, to protect your rights under applicable foreclosure law, you may need to
respond to these foreclosure notices or take other actions. If you have any questions about the
foreclosure process and the evaluation of your HAMP request, contact us at [XXX.XXX.XXXX]. If
you do not understand the legal consequences of the foreclosure, you are also encouraged to
contact a lawyer or housing counselor for assistance.
Questions
Call XXX.XXX.XXXX if you cannot afford to make your trial period payments, but want to remain
in your home. Or if you have decided to leave your home, contact us—we have other options that
may be able to help you avoid foreclosure. Additionally, if you have any questions about the
foreclosure (or other legal notices that you receive), please call us for assistance. You can also
call the Homeowner’s HOPETM Hotline at 1-888-995-HOPE (4673) if you need further counseling.
They offer free HUD-certified counseling services in English and Spanish, and can help answer
any questions you have.
Sincerely,
[Servicer Contact Person Name]
[Servicer Contact Person Title]
[Servicer Name]
Exhibit B
MHA Handbook v4.3
228EXHIBIT C: Characteristics of the HPDP Incentive Calculation
First characteristic—The cumulative projected home price decline over the next year,
expressed in percentage points (projected home price decline), is related to recent momentum in
local market home prices. The projection is calculated from the percentage changes in the local
home price index in the most recent previous two quarters for which data is available.
Note: A table of home price index values for each local market (Home Price Index Table) is
provided on www.HMPadmin.com. The Home Price Index Table is updated quarterly, and the
updated values are effective for the following calendar quarter.
Second characteristic—The UPB of the mortgage loan prior to modification under HAMP
involves assignment of the loan to one of five UPB quintiles. The quintile assignments determine
the dollar payment per percentage point of projected price decline by UPB. Quintile assignments
will not change over the course of the program. Refer to Exhibit D for UPB Quintile Base
Amounts.
Third characteristic—The mark-to-market LTV of the mortgage loan based on the UPB of the
mortgage loan prior to modification under HAMP, further affects HPDP incentive payments by
applying a weighting factor to the payment. HPDP incentive payments will be weighted according
to a mortgage loan’s mark-to-market LTV in accordance with the chart in Exhibit D.
The HPDP incentive payment is calculated by multiplying the mark-to-market LTV weighting
factor by the UPB quintile amount, and then multiplying the result by the projected home price
decline. The example HPDP calculation in Exhibit D illustrates the calculation of the HPDP
incentive payment for a hypothetical mortgage loan modified under HAMP.
Exhibit C
MHA Handbook v4.3
229EXHIBIT D: Example HPDP Calculation
This example illustrates the calculation of the HPDP incentive payment for a hypothetical
mortgage loan modified under HAMP. The HPDP incentive payment is calculated by multiplying
the MTM-LTV weighting factor by the UPB quintile amount, and then multiplying the result by the
projected home price decline.
Assume for a hypothetical mortgage loan being modified under HAMP:




The NPV Date for the HAMP modification is September 1, 2009;
The projected home price decline value based on the Home Price Index Table is 10;
The UPB is $110,000, which results in a quintile assignment of 2, and, as a result, a
quintile base amount of $300; and
The loan’s MTM-LTV is 85%, which results in a weighting factor of 2/3.
The resulting total HPDP incentive payment potentially payable to an investor over a two-year
period relating to a HAMP modification of this hypothetical mortgage loan would be:


HPD Value * UPB Quintile Payment * MTM-LTV Weighting Factor
10 * $300 * 2/3 = $2,000
If the borrower of this hypothetical mortgage loan above has a TPP Effective Date of October
2009, successfully completes the trial period and then loses good standing in December 2010,
the investor would be paid 12/24 of the total HPDP incentive payment, or $1,000, on October 1,
2010, and 2/24 of the total HPDP incentive payment, or $166.67, on October 1, 2011.
UPB Quintile Base Amounts
Quintile UPB Prior to
Modification
1
2
3
4
5 $0 – $73,000
greater than $73,000 – $116,000
greater than $116,000 – $169,000
greater than $169,000 – $259,000
greater than $259,000
MTM-LTV Weighting Factors
MTM-LTV
(based on UPB prior to modification)
less than 70%
at least 70% but less than 80%
at least 80% but less than 90%
90% or greater
Exhibit D
MHA Handbook v4.3
Quintile Payment per
Percentage Point Decline in
House Price Index
$200
$300
$400
$500
$600
Weighting Factor
0
1/3
2/3
1
230