Making Home Affordable | August 2014 Making Home Affordable HAMP Modification: Interest Rate Step-Up, Impact, and Resources

2 Making Home Affordable | August 2014 Agenda Interest Rate Step Up 3 HAMP Waterfall Overview 1 NPV Overview 2 Options for Homeowners 4 Resources for Trusted Advisors 5

3 Making Home Affordable | August 2014 Total Active HAMP Modifications 10,000 and lower 10,001-20,000 20,001-30,000 30,001 and higher NEARLY 2 MILLION MHA assistance actions – modifications, short sales, and forbearances. Paid in MHA Incentives to borrowers, servicers & investors. OVER $7.8 BILLION OVER $26 BILLION In total monthly mortgage payment savings. Making Home Affordable (MHA) Program Highlights to Date

4 Making Home Affordable | August 2014 The Tier 1 Standard Modification Waterfall is a stated order of successive steps that must be applied until the homeowner’s target monthly mortgage payment ratio is reduced to 31% of his or her gross income. STEP 1 Capitalization STEP 2 Interest Rate Reduction STEP 2 Interest Rate Reduction STEP 3 Term Extension STEP 3 Term Extension STEP 4 Principal Forbearance STEP 4 Principal Forbearance HAMP Tier 1 Standard Modification Waterfall HAMP Overview

5 Making Home Affordable | August 2014 HAMP Modification Structure: Tier 1 (2009) & PRA * (2010) Provide deep payment reduction to achieve a 31% debt-to-income (DTI) ratio for troubled borrowers Waterfall steps performed in increments to achieve 31% DTI ratio 1.Interest rate reduced as low as 2.0 % 2.Term extended up to 480 months 3.Principal forbearance Borrower receives “pay-for-performance” incentive (up to $1,000/year for 5 years of principal forgiveness if current) Standard Modification Waterfall GOAL: TOOLS: PRA Modification Waterfall Provide relief to underwater borrowers who are struggling to make their mortgage payments All Non-GSE borrowers evaluated for principal forgiveness if loan-to-value (LTV) ratio is greater than 115% If eligible, principal is reduced. The reduction vests over a 3-year period Investor receives incentive per dollar of principal forgiven (maximum $0.63 per dollar of principal reduction) GOAL: TOOLS: *Principal Reduction Alternative +Similar programs and TARP incentives are offered to loans guaranteed by the Federal Housing Administration (FHA) and the Department of Agriculture’s Rural Housing Service (RHS)

6 June 2014 | Making Home Affordable * Calculations Performed by NPV Model Outstanding interest Escrow advances Out-of-pocket servicing expenses STEP 1 Capitalize Adjust the interest rate to Freddie Mac’s PMMS rate Extend loan term to 480 months. Forbear or forgive principal if pre-mod LTV is >115%. STEP 2* Adjust the Terms of the Mortgage Post-mod principal and interest payment is less than or equal to the pre-mod principal and interest payment Post-mod front-end DTI must be 10% - 55%. STEP 3* Affordability Requirements HAMP Tier 2 – Modification Waterfall Evaluation and Determination Core range: 25% - 42%

7 Making Home Affordable | August 2014 Net Present Value (NPV) Model NPV will be run as a single evaluation process. The standardized NPV test will be run simultaneously for both HAMP Tier 1 and Tier 2 if the borrower meets the eligibility requirements for HAMP Tier 1. Occupancy EligibilityTier 1 ResultTier 2 ResultOffer Owner-Occupied, HAMP Tier 1 Eligible Positive Tier 1 PositiveNegativeTier 1 NegativePositive Tier 2 Tier 1 (optional) Negative Tier 1 or Tier 2 (optional) Rental Property or other HAMP Tier 1 Ineligible N/APositiveTier 2 N/ANegativeTier 2 (optional)

8 Making Home Affordable | August 2014 HAMP Tier 1 modifications included interest rate reductions to as low as 2% for the first five years to help homeowners avoid foreclosure. The terms of the HAMP Tier 1 modification include a gradual interest rate step-up after five years. Homeowners in HAMP Tier 1 modifications will experience a gradual interest rate increase, also known as a rate step-up, of 1% per year (maximum) until their rate adjusts to the market rate at the time of their modification. HAMP Interest Rate Step-Up Understanding the terms of a HAMP Modification Homeowners with Fannie Mae or Freddie Mac owned HAMP loans who will experience a similar rate step-up should contact Fannie Mae, Freddie Mac, or their servicer.

9 Making Home Affordable | August 2014 HAMP Interest Rate Step-Up Interest Rate Step-Up Example Interest Rate Pre-Mod: 6.5% Interest Rate Step-Up Year 7 3 rd Increase: 4.85% (Fixed) Year 6 2 nd Increase: 4% Post-Mod Years st Increase: 3% Pre-Mod Post-Mod: 2% Total Monthly Payment $2,407 $1,594 $1,476 $1,342 $1,214 Year 8 – Life of Loan

10 Making Home Affordable | August 2014 HAMP Interest Rate Step-Up Timeframes & Payment Changes Offer For some HAMP homeowners, interest rate step-ups will begin in the 3rd quarter of 2014 (October 2014), impacting approximately 30,000 HAMP homeowners by the end of this year, all of whom received modifications in Timeframe for Rate Step-Ups Approximately 80 percent of homeowners with a HAMP Tier 1 modification will experience at least one future rate step-up. The majority of HAMP homeowners will experience two or three rate step-ups.  The number of rate step-ups and the amount of the payment increase will vary depending on the effective date of the modification, whether the modification included principal forgiveness and other factors. Number of Interest Rate Step-Ups The maximum rate depends on the market rate at time of modification.  For 92% of HAMP homeowners this will result in a rate at or below 5%, well below the average 6.3% interest rate before their modification for most homeowners.  After all interest rate step-ups have occurred, the cumulative monthly payment increase for a typical loan will be approximately $200. Final Rate and Mortgage Payment Source: Treasury Notes blog “HAMP Rate Reset: Just the Facts” (3/12/14)

11 Making Home Affordable | August 2014 Requiring Explanation of Modification Terms Servicers to notify homeowners of the interest rate step-up at time of modification. What Treasury is doing Helping Homeowner Prepare Requiring Mandatory Advance Notice Servicers to provide homeowners with advance notice calendar days and then calendars day before first rate step-up. Requiring Financial Counseling Largest servicers in HAMP to offer financial counseling to assist homeowners in staying current on their mortgage payments. Talking to Homeowners Treasury is collecting as much information as possible and monitoring all interest rate step-ups. Training HOPE™ Hotline Call Centers Treasury to provide training to HOPE™ Hotline agents to prepare them to assist homeowners with rate step-ups. Training Housing Counselors Treasury to provide training to housing experts that homeowners can turn to for help with preparing for the rate step-ups. Providing Information via the Internet Treasury to post more information for homeowners on and social media. Working with Servicers Treasury to obtain input from servicers regarding the effect of rate step-ups on homeowners via Roundtable series.

12 Making Home Affordable | August 2014 MHA Programs HAMP Tier 2 A homeowner currently in a HAMP Tier 1 permanent modification may be eligible for HAMP Tier 2 if:  The homeowner has been in the modification less than 5 years and loses good standing due to a hardship.  More than five years have passed since the HAMP Tier 1 Modification Effective Date, regardless of whether the homeowner is still in good standing. Homeowners may be eligible for HAMP Tier 2 if they have a hardship caused by mortgage payment increases. HAMP Tier 2 modifications have an interest rate that is fixed for the duration of the loan. Home Affordable Foreclosure Alternatives (HAFA) Provides homeowners with a healthy transition to more affordable housing.  Homeowners sell their home as a “short sale” or transfer the title to the lender through a “deed-in-lieu of foreclosure.”  HAFA offers a more efficient process than a traditional short sale.  Participating investors, servicers, and homeowners may be eligible for incentives. Options for Homeowners  

13 Making Home Affordable | August 2014 Treasury Programs Hardest Hit Fund (HHF) If a homeowner lives in a state that is participating in Treasury’s HHF Program, additional assistance may be available via the state’s Housing Finance Agency.  For the list of HHF states and contact information, visit: d-help/Pages/hhf.aspx Options for Homeowners 

14 Making Home Affordable | August 2014 NameContact Information HAMP Solution Center (866) Fannie Mae (800) 7Fannie KnowYourOptions.com Freddie Mac (800) Freddie, select option 2 FreddieMac.com FHA Loans FHA National Servicing Center FHA National Servicing Center (877) HUD.gov/offices/hsg/sfh/nsc/nschome.cfm USDA RHS Loan Centralized Servicing Center (800) VA Loans (877) HomeLoans.va.gov Resources for Trusted Advisors

15 Making Home Affordable | August 2014 Trusted advisors escalate cases to HMPadmin.com Follow up by phone to (866) Escalate Difficult-to-Resolve Cases

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17 Making Home Affordable | August 2014 U.S. Department of the Treasury Homeownership Preservation Office Discussion/Questions