Foreclosure Flashcards
Define Delinquent
A borrower is delinquent on the mortgage when all or part of a monthly payment is unpaid after the due date. The mortgage remains delinquent as long as the payment remains due but unpaid.
Define Default
A conventional loan is considered in default when a payment has not been paid after 60-90 days. For FHA loans, a loan is considered delinquent after 30 days.
What are Mortgage Servicing Guidelines?
1: Servicer must make efforts to contact the borrower after 36 days of delinquency.
2: Servicer must send borrower written notice to contact them before 45 days of delinquency and provide info about housing counselors.
3: Servicers must assign personnel to be available to help delinquent borrowers.
4: Servicers must notify borrowers promptly and in writing that a loss mitigation appt. is complete.
True or False: Servicers must make a first notice or filing for foreclosure before the borrower is more than 120 days delinquent.
False
After ____ days, servicers can’t begin the foreclosure process while borrower is being evaluated for a Loss mitigation plan.
120
True or False: Servicers must be able to tell homeowners the circumstances under which the servicer may make a referral to the foreclosure
True
True or False: Servicers are not required to evaluate the borrower for all the foreclosure avoidance options for which the borrower may qualify.
False
What is Judicial Foreclosure?
Judicial foreclosure is a lawsuit, so the process is formalized. To obtain permission for foreclosure, the servicer files a lawsuit in the state court.
Judicial or Non-Judicial: The servicer issues the homeowner a notice of the lawsuit, called a summons or a complaint.
Judicial
What happens in Judicial Foreclosure after the homeowner contests the foreclosure?
The court sets a date for the homeowner and servicer to go before a judge and present arguments. The judge may decide on the case to order a trial if there is a difference of material facts.
What is a Non-Judicial Foreclosure?
Courts are not involved, communication occurs between the homeowner and the servicer or the servicer’s appointed representative in the foreclosure process.
Judicial or Non-Judicial: The servicer issues a Notice of Default.
Non-Judicial
What happens in a Non-Judicial foreclosure, if the delinquency is not cured after the Notice of Delinquency is delivered?
The homeowner receives a Notice of Sale. The NOS gives the homeowner a certain number of days before the house will be sold, which varies by state.
How many days before the sale date in a Non-Judicial Foreclosure does a homeowner typically have to cure delinquency?
5-10 days
What is the Loss Mitigation Submission Process?
1: Determine reason client is behind on mortgage payments.
2: Determine if homeowner wants to remain in the home or transfer out of the home.
3: Determine the type of mortgage
4: Gather required financial documentation and determine affordability
5: Complete the necessary forms to request the loss mitigation option.
6: Submit the request to the servicer
7: Respond to additional requests for information.
8: If request is approved, discuss if it is affordable. If it is denied, determine why.
What is Imminent Default?
Describes a borrower who is not yet in default but is currently delinquent with a high risk of defaulting.
What is a possible indicator that a client won’t be able to remain in the home?
Temporary or permanent disability of the homeowner, which prevents them from working.
True or False: Illness or disability of a family member, which requires the homeowner to stop working is not a sign that your client won’t be able to remain in the home.
False
True or False: Death of an income-earning borrower is an indicator that your client won’t be able to remain in their home
True
What is the purpose of the Home Affordable Modification Program?
To assist homeowners who are struggling to make mortgage payments.
What is the benefit of the Home Affordable Modification Program?
Lowered mortgage payments to make them more affordable and sustainable in the long-term.
What is the purpose of Fannie Mae and Freddie Mac?
To provide an easier, flexible way of helping more borrowers qualify for a loan modification in a changing housing environment.
How can a borrower qualify for Fannie Mae and Freddie Mac?
- Borrower must be 60+ days delinquent and occupy the property as a primary residence.
OR - Be current or less than 60 days delinquent, occupy property as a primary residence, and be in imminent default.
What does a Borrower Response Package include?
- Completed and signed Form 710, Uniform Buyer Assistance Form
- Eligible hardship document
- Documents to verify stable income to support monthly payment
- Imminent default hardship documentation for borrowers less than 60 days delinquent
All servicers that offer FHA-insured mortgages must review retention options first, and are required to consider all options in this order
1: Attempt to bring the mortgage current
2: Determine eligibility for informal and formal forbearance plans.
3: Determine eligibility for Special Forbearance - Unemployment Agreement
4: Determine eligibility for FHA-HAMP Loan Modification
5: Consider a pre-foreclosure sale.
6: Consider a deed-in-lieu
What is the purpose of Informal/Formal Forbearance?
To assist borrowers who are temporarily struggling to make mortgage payments
True or false: One Key Eligibility for Informal/Formal Forbearance is that the borrowers occupy the home as primary residence
True
What is the minimum limit of surplus income for Informal/Formal Forbearance?
85%
What is the purpose of the Special Forbearance-Unemployment Agreement?
To assist unemployed buyers.
What is the benefit of the Special Forbearance-Unemployment Agreement?
Suspends/reduces the current monthly mortgage payment, ensuring that forbearance installments are based on the borrower’s availability to pay.
What is the purpose of the FHA-HAMP Loan Modification?
To assist borrowers who are struggling to make mortgage payments because they are no longer affordable and do not qualify for other FHA options.
What is PITI?
Principal, Interest, Taxes, and Insurance
What is Surplus Income?
Net monthly income - PITI - Expenses = surplus income
What is Surplus Income Percentage
Surplus Income/Net Income = S.I.P.
What are Arrearages?
of mortgage payments missed x PITI = Arrearages
What is Forbearance Qualification Criteria?
Arrearages / (85% x surplus income) = # mo. for payments
What is Foreclosure?
A legal process in which mortgaged property is sold to pay the loan of the defaulting borrower. Foreclosure laws are based on the statutes of each state.
What is a short sale/preforeclosure sale?
Also called a preforeclosure sale, a short sale is a procedure where the mortgage co. allows the homeowner to sell the house for an amount that falls “short” of the amount still owed.
What is deed-in-lieu?
A process that allows homeowners to avoid foreclosure by providing a deed “in-lieu” of foreclosure to the lender.
True or False: A foreclosure will remain on your credit report for up to 7 years and lowers credit score significantly
True
What are benefits to short sale programs?
1: Completely releasing the homeowner from mortgage debt, or deficiency judgment.
2: Has a less negative impact on a credit score than a short sale conducted with only a servicer
3: Might provide homeowners with cash benefits for relocation assistance.
