Current through Register 2024 Notice Reg. No. 52, December 27, 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.
