(a) Any residential mortgage loan refinanced under the HOPE for Homeowners Program of the HOPE for Homeowners Act of 2008 (Title IV of Division A of the Housing and Economic Recovery Act of 2008 (Pub. L.
(b) Any residential mortgage loan refinanced under the Home Affordable Refinance Program announced by the U.S. Department of the Treasury on February 18, 2009, is conclusively presumed to meet the minimum requirements for a loan modification under a comprehensive loan modification plan.
(c) Anticipated Recovery (NPV) Test
(1) For purposes of determining the anticipated recovery from foreclosure and the anticipated recovery from a loan modification, the net present value of the anticipated recovery shall be based on reasonable assumptions regarding discount rates, property values, costs of foreclosure, costs of modification, and ability of borrowers to pay. A servicer shall have internal or external evidence to support the validity of the assumptions in the calculations. The use of the Net Present Value Model Parameters in the Home Affordable Modification Program Guidelines, including applicable discount rates, cure rates and redefault rates, issued by the Department of the Treasury on March 4, 2009, and any amendments thereto, shall meet the requirements of this section and shall not require additional evidence or support. If a servicer's anticipated recovery (NPV) model differs from the Treasury's Net Present Value Model Parameters, a servicer shall explain the differences in the application and set forth a justification for the differences.
(2) Where the net present value of the anticipated recovery from a loan modification meeting the parameters of this section exceeds the net present value of the anticipated recovery from foreclosure, the servicer shall provide a loan modification to eligible borrowers unless:
(A) A borrower is unable to document his or her ability to repay the loan; or
(B) After reducing the interest rate, extending the amortization period, forbearing principal, or modifying the loan in another manner reasonably designed to facilitate repayment of the loan, the servicer is unable to achieve a loan modification for the borrower that results in a borrower's ability to repay the loan, under customary underwriting criteria and analysis or current industry standards.
(d) Debt to Income Ratio of 38% or Less
(1) For purposes of applying the anticipated recovery test, a servicer shall target a 38% housing-related debt to gross income ratio. However, a servicer is not required to meet this ratio for every loan modified under the program. A servicer's loan modifications shall, on an aggregate basis, target a 38% housing-related debt to gross income ratio. A servicer may use any reasonable statistical analysis of loan modifications to establish that its loan modification program targets a 38% housing-related debt to gross income ratio on an aggregate basis, and may, but is not required to, include loan modifications beyond those meeting the minimum eligibility requirements under this article.
(2) For loan modification programs that do not achieve a 38% or lower ratio on an aggregate basis, a servicer shall be able to establish other borrower characteristics that support a borrower's ability to repay the loan. These characteristics may include, but are not limited to, assets, a high income, low consumer debt, or any other borrower characteristics that support a borrower's ability to repay the loan, using customary underwriting criteria or current industry standards. If a servicer's comprehensive loan modification program does not achieve a debt-to-income ratio of 38% or lower on an aggregate basis, the servicer shall explain in the application the reasons for the higher ratio.
(3) For purposes of calculating housing-related debt to gross income, housing-related debt does not include junior liens.
(e) Other Features
(1) A comprehensive loan modification program shall include at least two of the following features:
(A) An interest rate reduction, as needed, for a fixed term of at least 5 years.
(B) An extension of amortization period for the loan term, to no more than 40 years from the original date of the loan.
(C) Deferral of some portion of the principal amount of the unpaid principal balance until maturity of the loan.
(D) Reduction of principal.
(E) Compliance with a federally mandated loan modification program.
(F) Any other factor the Commissioner determines is appropriate, as identified and described in the servicer's application and approved by the Commissioner. Some factors may include, but are not limited to, back-end debt-to-income ratios, elimination of certain delinquency-related charges, modifications for borrowers who are not delinquent, but where such delinquency is reasonably imminent, and other forms of modification that result in a reduction of monthly payments for borrowers.
(2) While a comprehensive loan modification program must include at least two of the features set forth in paragraph (1), each individual loan modification need not include two features.
(3) A servicer shall have criteria in place that define when a borrower qualifies for the potential concessions or modifications.
(f) Long-term Sustainability:
A loan modification shall be presumed to constitute a long-term sustainable modification if it includes at least one of the following characteristics:
(1) The modification provides a reduction in monthly payment for the borrower for at least 5 years;
(2) The modification provides the borrower with a housing-related debt to gross income ratio of 38% or less;
(3) After the modification, the borrower's back-end debt-to-income ratio (as defined in the Home Affordable Modification Program Guidelines issued by the Department of the Treasury on March 4, 2009) is equal to or less than 55%;
(4) The borrower is current under the terms of the modified loan at the end of a 3-month trial period; or
(5) The modification is pursuant to the Home Affordable Modification Program Guidelines, HOPE for Homeowners Program, or another federal program intended to reduce the rate of foreclosures.
Notes
2. New section refiled 12-1-2009 as an emergency; operative 12-1-2009 (Register 2009, No. 49). A Certificate of Compliance must be transmitted to OAL by 3-1-2010 or emergency language will be repealed by operation of law on the following day.
3. Certificate of Compliance as to 12-1-2009 order transmitted to OAL 2-22-2010 and filed 4-6-2010 (Register 2010, No. 15).
Note: Authority cited: Section2923.53(d),Civil Code. Reference: Sections2923.52 and2923.53, CivilCode.
2. New section refiled 12-1-2009 as an emergency; operative 12-1-2009 (Register 2009, No. 49). A Certificate of Compliance must be transmitted to OAL by 3-1-2010 or emergency language will be repealed by operation of law on the following day.
3. Certificate of Compliance as to 12-1-2009 order transmitted to OAL 2-22-2010 and filed 4-6-2010 (Register 2010, No. 15).
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