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List of Possible Workout Options.

There are several types of workouts available to homeowners depending on their investor's or insurer's guidelines. A homeowner's specific workout will be based on their investor's/insurer's hierarchy and is dependent on the hardship and loan qualification for that particular workout. These may include:

  • Informal Repayment Arrangement - An informal repayment arrangement is a verbal agreement acknowledged by a homeowner and lender, providing a defined period of time to reinstate a delinquent mortgage based on a homeowner's financial ability to pay more than the monthly payment amount. The homeowner agrees to include an additional amount with their normal monthly payment to cure the past due payments. Default can be cured in 90 days or less. Example - borrower is one payment delinquent and they can afford to make 1 1/3 payments each month to cure the past due payment.
  • Formal Repayment Arrangement - A formal repayment arrangement is a written agreement, acknowledged by a homeowner and lender, providing a defined period of time to reinstate a delinquent mortgage based on a homeowner's financial ability to pay more than the monthly payment amount. The homeowner agrees to include an additional amount with their normal monthly payment to cure the past due payments. Default can be cured in a period greater than 90 days and less than 18 months. (maximum plan length may differ depending on investor)
  • Forbearance/Special Forbearance - Forbearance is a written agreement to accept a temporary suspension or reduction of payments until customers can make regular payments again and be qualified for a formal workout. Forbearance options vary by investor and usually involve a temporary hardship. May not be available for all investors.
  • Home Affordable Modification Program ("HAMP") - Typically, a government sponsored loan modification program but may be an investor defined version of the HAMP modification program. HAMP modifications usually have a target Principal Interest Tax and Insurance payment based on a percentage of the gross monthly income. There is usually an amount of principal forbearance included in the calculations.
    The loan modification is a written agreement that permanently changes one or more of the original loan terms of the Note. Modifications may include:
    • Change of interest rate
    • Extension of loan term
    • Principal forbearance, if applicable
    • Capitalization of delinquent interest, escrow, and if applicable foreclosure fees and costs
    A loan modification is used when the customer has had a temporary financial hardship but is now able to meet a modified payment and they do not have the ability to enter into a repayment plan. May not be available for all investors.
  • Loan Modification - A loan modification is a written agreement that permanently changes one or more of the original loan terms of the Note. Modifications may include:
    • Change of interest rate
    • Extension of loan term
    • Capitalization of delinquent interest, escrow, and if applicable foreclosure fees and costs
    A loan modification is used when the customer has had a temporary financial hardship but is now able to meet a modified mortgage payment and they do not have the ability to enter into a repayment plan.
  • HUD Partial Claim - Under the HUD Partial Claim Advance option, HUD advances funds on behalf of a homeowner in an amount necessary to reinstate a delinquent loan, up to 30% of their unpaid principal balance for the life of the loan. The borrower will execute a promissory note and subordinate mortgage payable to Department of Housing and Urban Development (HUD).
    • HUD Partial Claim Advances are available on all FHA insured loans, regardless of the investor
    • The promissory note, or HUD Partial Claim Advance note, carries no interest and is not due and payable until the homeowner either pays off the first mortgage or no longer owns the property.

     

    Partial Claim Frequently Asked Questions on FHA HUD website

    HUD link to subordination of Partial Claim liens associated with Federal Housing Administration (FHA) Streamlined Refinances

  • Short Sale - Also known as Pre-Foreclosure Sale and VA Compromise sale. This option allows written consent for the sale of a homeowner's property where the net proceeds from sale are less than total indebtedness. There must be a written offer on the property at the current Fair Market Value (FMV). Depending on financial circumstances, it may require the homeowners to make a financial contribution and will, upon receipt of the sale proceeds, waive deficiency judgment against the borrower and amend the current derogatory credit reporting to reflect an 'agreed settlement'.
  • Deed-in-Lieu - A deed-in-lieu allows a homeowner to voluntarily convey the property in order to avoid foreclosure and be released from all obligations under the mortgage. Investors may require the property to be listed for sale 90-120 consecutive days, at the current Fair Market Value (FMV). May not be available for all investors.
  • Deed-For Lease - A deed-for lease allows qualifying borrowers of properties to remain in their home and community by executing a lease of up to 12 months. May not be available for all investors.

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