DOL Training Deck October 2009

Purpose of Training Deck - Assisting Homeowners Facing Foreclosure Role of Mortgage Insurers Role of Mortgage Companies Overview of HOPE NOW Alliance Explanation of Homeowners’ HOPE hotline Role of HUD counselors and overview of NeighborWorks® America

Foreclosure Crisis Stakeholders There are many stakeholders and parties involved in assisting homeowners avoid foreclosure where possible. Mortgage Companies/Servicers Mortgage Insurers (a.k.a. MI/PMI Companies) Investors (i.e. Fannie Mae, Freddie Mac, FHA, VA, Private Investors) HUD approved counseling agencies and networks such as NeighborWorks® America. Industry groups such as the HOPE NOW Alliance Non-Profit Attorney Networks

Mortgage Companies/Servicers

Role of Mortgage Company Definition of Mortgage Servicing Administering a mortgage loan, including recordkeeping, payment collection, releasing liens, making certain insurance and taxes are paid, and initiating foreclosure proceedings for loans that are in default. Lenders after originating a mortgage loan can retain the servicing or release to another mortgage company/servicer to handle the servicing process. Mortgage servicing is done by lenders and by businesses (i.e.) investors, that receive fee income for their services which could include collecting on past due payments. Servicers sign contract with investors called pooling and servicing agreements (PSAs) that provide specific rules that a service must follow with regard to collection and foreclosure activity. It’s important to understand that mortgage companies/servicers must adhere to guidelines provided by the investor and insurer (as applicable) specific to loss mitigation remedies. Each investor and/or insurer provides detailed guidelines. Mortgage companies service loans for investors such as Fannie Mae, Freddie Mac, and Ginnie Mae, as well as government agencies such as the Federal Housing Agency (“FHA”) / U.S. Department of Housing and Urban Development (“HUD”) and the Veterans Administration (“VA”). Some banks and/or lending institutions retain loans in its portfolio and is the investor of those loans. Lastly, mortgage companies will service loans for numerous private investors held in mortgage backed securities (MBS pools).

What is Loss Mitigation? Loss Mitigation is a collaborative effort among mortgage servicer/mortgage company, private mortgage insurers and investors, to help a customer(s) avoid foreclosure and remain in their home. The servicer assesses each customer’s financial situation and reason for hardship to determine their best option. If the borrower(s) wants to remain in the home, the goal of loss mitigation is to ensure that the borrower can remain in their home while following an investor/insurer plan to reinstate or bring the mortgage loan current. Should the borrower(s) wish to sell their home; the Loss Mitigation Team can work with the borrower(s) through the short sale process. Typically, Loss Mitigation works with any borrower(s) who is: (1) delinquent and unable to bring their loan current, (2) is anticipating an inability to pay in the near future (unemployment or reduction in income), (3) is experiencing a hardship and is in danger of imminent default, (4) or is requesting a short sale or no longer wants to keep their property. Loss Mitigation may include finding ways to help the customer(s) work out an alternative repayment option or restructure the mortgage loan (a.k.a. Loan Modification). Mortgage servicers have more flexibility in the Loss Mitigation review process when they actually own the mortgage loan, but in many cases, the mortgage is owned by an investor/insurer and the servicer must follow their guidelines. Eligibility for a particular loss mitigation option is based on the borrower(s) personal financial situation, reason for hardship, as well a strict adherence to investor/insurer guidelines.

Overview of Loss Mitigation Process STEP 1: Make Contact With Homeowner - Gather Basic Information as well as financial information. STEP 2: Determine the Reason for the Hardship – What is the hardship? STEP 3: Determine Homeowner’s Intentions – Do they want to keep their property? Has the customer filed Bankruptcy? Has the foreclosure process started? STEP 4: Gather Financial Information – Work with the Homeowner to complete the appropriate financial form or gather the required documentation. (Based on Investor Requirements) STEP 4: Determine Eligibility – Does the homeowner have a capacity to make any payment? Are they eligible for a loss mitigation option per investor guidelines? TYPICAL REQUIRED DOCUMENTATION (Note: Requirements are determined by Investor) Income verification (Pay stubs, W2, Profit and Loss Statements, Rental Lease Agreements and other income documentation such as unemployment income) – Documentation Requirements are determined by investor. Hardship letter – A letter in the customer’s own words explaining the reason for the hardship. Financial Worksheet –Investors determine which financial worksheet is acceptable. Financial Worksheet/Form documents income and expenses which determine if the customer has a surplus or deficit. Bank statements – Requirement is determined by investor

Loss Mitigation Workout Options - Retention Moratorium (Forbearance) - A moratorium is a temporary suspension of the customer’s regular monthly payment amount. Available Option When Customer: Wants to keep their home. Experienced a short term hardship. Anticipates that their financial situation will improve within a certain period of time. After a forbearance agreement, the customer sometimes will start a repayment plan. Key Benefits: Provides customer with a specified period of time of payment relief. Allows customer to focus on ameliorating their financial situation or work through a hardship situation if applicable. Repayment Plan - An agreement that gives the borrower a fixed amount of time to repay the past due amount by combining a portion of the arrears with their regular monthly payment. Has adequate income to make an increased payment amount. Brings a customer’s account current within a specified period of time. With a goal in sight, the customer can move forward knowing that their mortgage is secure.

Loss Mitigation Workout Options – Retention Loan Modification - Modification of the note is when the interest rate, unpaid principal balance and/or terms of the original note are changed. Available Option When Customer: Wants to keep their home. Has adequate income to make adjusted payment amount. Key Benefits: Changes the mortgage note itself, giving the customer a “fresh” start on managing their mortgage. Once finalized, a modification brings the loan current immediately. Partial Claim (FHA loans) - This is a promissory note that advances funds on the mortgagor’s behalf to bring past due interest and escrow current. Has an FHA Loan. HUD loan is interest-fee. Brings the customer’s account up to date/current immediately. VA Refunding - The mortgagor presents their hardship to the VA which will then consider restructuring the debt.

Loss Mitigation Workout Options – Liquidation Short Sale [(Pre-foreclosure Sale (HUD/FHA) / Compromised Sale (VA) - The property is sold by the customer for an amount less than the amount due to the investor. A private party is typically the purchaser in a short sale. The customer must have a sales contract on the property before SunTrust Mortgage can partner with the investor to determine if they can accept an amount less than a full payoff. The customer is not responsible for the deficiency amount and the debt is forgiven. When a short sale is completed, the loan balance is charged off.  The mortgage insurance company and/or investor may decide to pursue a deficiency judgment on the charged-off amount.  The borrower will receive a 1099-C for the balance that is written off, and in the past they have had to claim the “forgiven” amount as income on their taxes. However, as tax regulations are subject to change, the customer should always consult with a tax expert or visit www.IRS.gov for more information. Available Option When Customer: Does not want to keep their home. Can successfully list their home on the real estate market. Does not have adequate income to make mortgage payments and does not qualify for other Loss Mitigation remedies. Key Benefits: Avoids the lengthy legal process involved in foreclosure. Generally less damaging to the customer’s credit rating than foreclosure or a deed-in-lieu of foreclosure. Avoids a foreclosure and reduces the amount of the potential loss.

Loss Mitigation Workout Options – Liquidation Deed-in-Lieu of Foreclosure - The customer must have tried to sell the property themselves before the investor will consider this option. The customer “voluntarily surrenders” the collateral property to the investor in exchange for a release from all obligations under the mortgage. The property is transferred to “SunTrust Mortgage”. The property becomes an investor (Real Estate Owned) REO. The investor or mortgage insurance company can require a promissory note on the deficiency balance. Available Option When Customer: Does not want to keep their home. Has made an effort to put their home on the market unsuccessfully. Customer does not have adequate income to make mortgage payments. Key Benefits: Allows the customer to transfer the property to the mortgage company. Avoids a lengthy legal process involved in foreclosure. May be less damaging to a customer’s credit rating than foreclosure.

LOSS MITIGATION WORKOUT EXAMPLES

Loss Mitigation Workout Examples – Loan Modification Hardship: Customer falls behind due to a change in careers, which temporarily reduces overall household income and ability to maintain monthly mortgage payment. RECAP LOAN SITUATION Unpaid Principal Balance: $110,000.00 Currently Monthly Payment: $1,000.00 Total Past Due Amount: $3,450.00 (three payments including and escrow shortages, charges and costs) Remaining Term: 326 months Customer’s total monthly income is $2,300.00 with $1,850.00 in expenses, leaving a surplus of $450.00. The surplus is not enough to qualify for a repayment plan but potentially enough to handle the slight increase a modification may afford. SunTrust negotiator recommends to the investor a modification that will: -Leave the interest rate and term of the loan the same. -Bring the new unpaid balance to $113,450.00. WORKOUT RESULT: A new estimated monthly mortgage payment of $1,063.00 for the remaining term 326 months. *Note: An individual borrowers circumstances and specific investor rules will determine which specific terms of a repayment plan will apply. This is an illustration example.

Loss Mitigation Workout Examples – Repayment Plan Hardship: Customer(s) experiences a temporary reduction in work schedule because their job is seasonal. The customers falls behind on their mortgage payments and returns to a full-time schedule. SunTrust advises the customer that because they have overcome the hardship by returning to a full-time work schedule, they qualify for a repayment plan based on their current income: RECAP LOAN SITUATION Two (2) payments past due Current monthly payment= $1,100.00 Total past due amount= $2,200.00 Current financial analysis shows that the customer has a total monthly income of $2,300 and $1,850 in expenses per month, which results in a surplus of $450. Because the customer has a surplus in their monthly income, they qualify for a six (6) month repayment plan which will include all fees and outstanding charges accumulated during the delinquency period. WORKOUT RESULT: New monthly payment of $1466.66 will be due for the next six months to reinstate the account. *Note: An individual borrowers circumstances and specific investor rules will determine which specific terms of a repayment plan will apply. This is an illustration example.

Loss Mitigation Workout Options – Liquidation SHORT SALE Hardship: Customer falls behind due to marital problems and contacts SunTrust for assistance. Review of the borrower’s financials show a $200 per month deficit. Customer consults with a SunTrust negotiator and shares that due to the financial burden of the home, they are no longer interested in retaining the home and is confident that the market may allow them to sell their home but proceeds will not cover total debt. RECAP LOAN SITUATION Negotiator outlines the conditions for short sale consideration which include: List the property for sale at Fair Market Value with a Realtor. Attempt to clear all liens that are listed against the property, receiving lien release statements. Before the borrower begins to satisfy these requirements and is approved for the short sale program, SunTrust orders a valuation (BPO) and title report. Once approval to participate has been met, the customer will begin attempting to sell the property; offers that are made result in a comprehensive review by SunTrust. WORKOUT RESULT: Once an offer is mutually agreed upon, the short sale is sent to the investor for approval. *Note: An individual borrower’s circumstances and specific investor rules will determine which specific terms of a repayment plan will apply. This is an illustration example.

Directing Borrower to their Mortgage Company OPTION 1: Mortgage Companies Loss Mitigation Websites Go to www.hopenow.com On Home Page there is as drop down box with links to member servicers loss mitigation sites. Click on the respective mortgage company. Note: The servicer is who sends the homeowner their monthly mortgage statement.

Directing Borrowers to their Mortgage Companies OPTION 2: Mortgage Companies Toll-Free Number to Loss Mitigation Go to www.hopenow.com On Home Page in the section called “Contact Your Mortgage Company”, click on “Call for Assistance”. A complete list of member mortgage companies names, toll free loss mitigation phone numbers and websites are listed.

Directing Homeowners to their Mortgage Company OPTION 3: Submit Request through HOPE NOW website and referrals is forwarded to mortgage company Go to www.hopenow.com On Home Page in the section called “Contact Your Mortgage Company”, click on “Submit Request”. A complete list of member mortgage companies names, toll free loss mitigation phone numbers and websites are listed.

Mortgage Insurers

How Does a homeowner determine it has Private Mortgage Insurance (PMI)? What is Mortgage Insurance? It insures a lender against loss due to a default on mortgage loan. Makes homeownership easier for consumers by: Enabling homeownership sooner for families with <20% down payment Keeps mortgage interest rates affordable by reducing the repayment risk to a lender. How can a Mortgage Insurer help consumers having trouble with their mortgage payments? Insurers’ business objectives are naturally aligned with homeowners; we want to keep borrowers in their homes whenever possible Insurers’ encourage borrowers to contact their lender, however insurers are another avenue of support to help find workout options (modifications, forbearance plans, short sales, etc.)

Mortgage Insurers are dedicated to foreclosure prevention Mortgage insurers conduct outreach to borrowers through: Loss mitigation web sites to help inform borrowers of potential options. Outreach and assistance to insured borrowers. Direct homeowner assistance with mortgage insurance employees. Partnerships with third party outreach resources. Membership in the HOPE NOW Alliance enables insurers to support mortgage companies in foreclosure prevention efforts Genworth Mortgage Insurance Mortgage Guaranty Insurance Corporation (MGIC) PMI Mortgage Insurance Co. Radian Guaranty, Inc.

HOPE NOW Alliance & HOPE Hotline (1.888.995.HOPE)

What is the HOPE NOW Alliance? In late 2007, The Department of the Treasury and the Department of Housing and Urban Development encouraged leaders in the mortgage lending industry, mortgage investors and HUD approved counseling agencies to form the HOPE NOW Alliance.  The mission of HOPE NOW is to maximize homeownership while minimizing foreclosures; the key goal is to keep people in their homes and when that is not possible, prevent foreclosures.   To accomplish its various service and information-sharing objectives, HOPE NOW includes a broad cast of members involved in the mortgage industry which represent over 25 mortgage companies that account for more than 80% of serviced mortgage loans, key industry mortgage associations, government sponsored enterprises (GSEs) (i.e. Fannie Mae and Freddie Mac), mortgage insurers, and HUD-approved counseling agencies who have significant capacity to serve homeowners through telephonic and face-to-face counseling.  Since its inception HOPE NOW has been in partnership with the Homeowner's HOPE™ Hotline at 888-995-HOPE™ managed by the Homeownership Preservation Foundation (www.995hope.org).  Homeownership Preservation Foundation (HPF) is an independent nonprofit organization that provides housing counseling though a broad network of HUD certified counseling agencies who are dedicated to helping homeowners. HPF has a single mission: to help homeowners avoid foreclosure.

What is the HOPE Hotline? 1.888.995.HOPE™ General information About HPF and their HOPE Hotline The Homeownership Preservation Foundation (HPF) is a national non-profit dedicated to preventing foreclosure and preserving homeownership. HPF’s cornerstone is their 888-995-HOPE™ Hotline providing foreclosure prevention counseling to American homeowners. HPF’s mission is to develop innovative solutions for preserving and expanding homeownership through consumer education and counseling programs. HPF’s program goals are to empower consumers to understand and improve their personal housing financial position and review with them housing fiancé options offered by government, policy makers and the mortgage lending industry. HPF manages and supports the Homeowner’s HOPE™ Hotline. Counseling is free to the homeowner. Calls are answered 24 hours a day/7 days a week by counselors from one of our 10 HUD-certified counseling partner agencies. Over 600 counselors currently staff the 888-995-HOPE™ Hotline. Counseling can be completed in Spanish and 10 other languages. Our national network of counselors has provided counseli9ng to over 426,000 delinquent homeowners since 2002. Currently over 30,000 every month are counseled. The Homeowner’s HOPE™ Hotline, 888-995-HOPE™, offers two services to homeowners facing foreclosure.

HOPE NOW Homeowner Outreach Direct Mail Strategy Since November though June 2009, STM has mailed 98,120 HOPE NOW letters to customers meeting the criteria outlined below: -All loans which are 60+ days delinquent. -Only owner occupied first mortgage properties (excludes investment properties and second homes). -No right party borrower contact in the prior 60 days. -Exclude loans in active workout status, bankruptcy status loans, and loans <= 20 days from foreclosure sale date. Ad Council Campaign A national campaign led by NeighborWorks® America urges homeowners in trouble to call the 888-995-HOPE hotline because “nothing is worse than doing nothing.” Internet/Web Outreach Creation of www.hopenow.com that provides homeowners with information about resources available to them to prevent foreclosure. Creation of the “Borrower Assistance Intake Form” on www.hopenow.com which is a tool designed to offer as many options as possible, all for free. Homeowners may now request assistance from their servicer by simply filling out an online information form. This submittal is sent directly to the borrower’s chosen servicer, providing another resource for borrowers to use. Click on “Submit Request” on the home page.

Government Programs and Resources

Government Resources – Websites and Key Links Key Websites www.makinghomeaffordable.gov – Information about President Obama’s Making Home Affordable Modification Program www.hopenow.com has section on its site that links homeowners to key sites. See below.

Overview – Making Home Affordable Modification Program High-level Requirements Primary / owner-occupied residence (first mortgage) Amount owed on mortgage loan is = or less than $729,750 Delinquent on mortgage of facing imminent default (i.e.) job loss, reduction in income, etc. Was the mortgage originated on or before January 1, 2008? Is your payment on your first mortgage (including principal, interest, taxes, insurance and homeowner's association dues, if applicable) more than 31% of your current gross income? KEY LINKS TO DETERMINE ELIGIBILITY: http://www.makinghomeaffordable.gov/modification_eligibility.html

HOPE NOW Alliance Web Portal www.hopenow.com

Borrower On-Line Request Set-up. HOPE NOW Alliance Website – Home Page Link to Borrower Assistance – HOPE Web Referrals www.hopenow.com Borrower On-Line Request Set-up.

HOPE NOW – Borrower Assistance Form – Part 1 www.hopenow.com Borrower reads information and disclosure before providing any income, expense or hardship information through the HOPE NOW Web Portal

HOPE NOW – Borrower Assistance Form – Part 2 www.hopenow.com Intake form gathers pertinent borrower, mortgage, property, income and expense information.

HOPE NOW – Borrower Assistance Form – Part 3 www.hopenow.com Borrower advises who their mortgage company is and if they are working with a third party counseling agency.

HOPE NOW – Borrower Assistance Form – Part 4 www.hopenow.com Borrower must click on “Submit” Button to transmit form and data to selected mortgage company. NOTE: The respective mortgage copmany receives referrals real-time to a dedicated email address.

Assisting Unemployed Borrowers PLEASE ADVISE THE FOLLOWING: If you are unemployed, please visit www.hopenow.com for more information about unemployment resources (Click on Resources for the Unemployed under the Homeowner Resources Section). The U.S. Department of Labor has developed a Worker Reemployment Portal at www.careeronestop.org/ReEmployment to help individuals find information about how to apply for unemployment compensation and search for jobs. The site also provides information about the employment and training services available to unemployed workers at the 3,000 One Stop Career Centers nationwide and information on their location by zip code. This information is also available through a toll free help line at 1-877-US2-JOBS. If you do not have access to a computer, you may visit your local library for assistance.

Assisting Clients Who Allegedly Been Scammed You can refer them to the www.hopenow.com The HOPE NOW website and the FTC’s website has helpful information about resources. You may email Katie King with the name of the company, contact information/phone number and she will forward to the FTC.

Assisting Multi-Lingual Clients You can refer them to the www.hopenow.com The HOPE NOW website has a Google Translator Tool that translates all information on the site. The site provides helpful information about loss mitigation, housing counseling and other resources.

There is even help for Clients with Pets….. You can refer them to the www.hopenow.com Often non-profit organizations such as Best Friends, SCPAs, Humane Societies provide assistance. There is an Organization called No Paws Left Behind that helps Homeowners with Pets.

Foreclosure Prevention Events

Homeownership/Foreclosure Prevention Events Event Partners Local Business Sponsors Local Government Agencies Local / federal Government Officials / Congressmen and women. Non-Profit HUD Approved Counseling Agencies HOPE NOW Alliance Local Housing Groups, Associations and Taskforces Mortgage Companies and Banks Community Development Teams

Learning More About HOPE NOW Sponsored Events Click on www.hope.now.com Go to “Events in Your Area.” Click on 2009 HOPE NOW Events”

Learning More About HOPE NOW Sponsored Events Provides homeowners a document checklist. Gives detailed directions. Homeowners can print off the event flyer with information about the date/time.

Learning More Events in Your Area Click on www.hope.now.com Go to “Events in Your Area. Click on “Other Events in Your Area”

Learning More About HOPE NOW Sponsored Events Freddie Mac tracks all foreclosure prevention events in the U.S. Information is provided by state. Flyers, date and time information is shared as available.

HUD Approved Counseling Agencies and Networks

NeighborWorks® America Creates opportunities for people to live in affordable homes, improve their lives and strengthen their communities Non-profit Congressionally chartered in 1978 Provides financial support, technical assistance, and training for community development efforts around country 235 independent organizations (non-profit) All 50 states, Puerto Rico and D.C. Additional information on NeighborWorks® foreclosure programs and resources is available at: Center for Foreclosure Solutions http://www.nw.org/network/neighborworksprogs/foreclosuresolutions National Foreclosure Mitigation Counseling Program http://www.nw.org/nfmc HUD-approved providers of foreclosure prevention counseling http://www.findaforeclosurecounselor.org 46

NeighborWorks® America Center for Foreclosure Solutions Began in 2005 in response to indicators of rising foreclosure rates Partnership of non-profit providers of housing counseling and for-profit mortgage industry leaders National Foreclosure Mitigation Program Congressional appropriations to provide funds for foreclosure counseling, training, and capacity NeighborWorks® administered, for 18 HUD intermediaries and 36 state HFAs (1,600+ sub-grantees) Through competitive grant process, funds awarded near $400M (September, 2009) Through September 2009, foreclosure counseling under NFMC program was provided to 674,000 homeowners at-risk of foreclosure 47

NeighborWorks® America Center for Foreclosure Solutions Network of 200 organizations providing home preservation services as unbiased 3rd-parties Foreclosure prevention counseling Servie as liaisons between borrowers and Lender-Servicers in mortgage workouts/restructuring and refinance (loss mitigation and loan origination). Referrals to local providers of human services support Legal assistance Post-foreclosure assistance (relocation, credit repair, ongoing financial literacy) 48

How to Contact a Local HUD Counselor? Go to www.hud.gov.foreclosure Click on “Talk to a Foreclosure avoidance counselor” 49

Why Should A Homeowner Work with a HUD Counselor? Talk to a Housing Counselor HUD sponsors housing counseling agencies throughout the country to provide free or low cost advice. Search online for a housing counseling agency near you, or call HUD's interactive voice system at: (800) 569-4287. If you are facing foreclosure and want the assistance of a housing counselor, search the list of Foreclosure Avoidance Counselors . Consumer Fees for Housing Counseling Foreclosure prevention counseling and homeless counseling services are available free of charge through HUD's Housing Counseling Program. Housing Counseling agencies participating in HUD's Housing Counseling Program are not permitted to charge consumers for these specific housing counseling services. Counseling recipients should not pay for these services. However, housing counseling agencies are permitted to charge reasonable and customary fees for other forms of housing counseling and education services, including pre-purchase, reverse mortgage, rental, and non-delinquency post-purchase counseling services, provided certain conditions are met: You should contact your local HUD office if you encounter housing counseling agencies that you believe are not complying with these requirements. 50

How to Contact a Local HUD Counselor? Select your state of residence. Key in your zip code or look for an agency in your local area. HUD Agency Name Phone Toll-Free Fax Number Email Website Address Languages PEOPLE INCORPORATED OF SOUTHWEST VIRGINIA P: 276-623-9000-240 T: F: 276-628-2931 E: gvannoy@peopleinc.net W: www.peopleincorp.org 1173 W. Main Street Abingdon, Virginia 24210-2428 51