Current through Register 2024 Notice Reg. No. 38, September 20, 2024
(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. 110-289, 122
Stat. 2654, approved July 30, 2008) as amended, and the rules adopted thereunder) is
conclusively presumed to meet the minimum requirements for a loan modification under
a comprehensive loan modification plan.
(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.
1. New section
filed 6-1-2009 as an emergency; operative 6-1-2009 (Register 2009, No. 23). A
Certificate of Compliance must be transmitted to OAL by 11-30-2009 or emergency
language will be repealed by operation of law on the following day.
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: Section
2923.53(d),
Civil Code. Reference: Sections
2923.52 and
2923.53, Civil
Code.
