Principal Reduction Alternative comes to HAMP

FOR IMMEDIATE RELEASE
(Free-Press-Release.com) November 1, 2010 -- It is even more crucial now that the distressed mortgage owner get the REST Report as an indispensable tool of their mortgage modification application an calculate this option if need be.

The REST Report version 4.0 will now apply the 'waterfall test' to HAMP eligible mortgage modifications, specifically targeting the Principal Reduction Alternative. Basically this 'waterfall test comes after initial qualifications for a HAMP mortgage modification fail. All mortgage modifications, whether HAMP or lender in-house programs, follow the same guidelines: interest reduction, mortgage term extension, and finally, mortgage principal reduction.

The Net Present Value calculations provided in the REST Report will positively influence your mortgage investor in your mortgage modification negotiations. Mortgage modification or short sale - ANYTHING BUT FORECLOSURE!

The REST Report uses the same software platform that the banks use in calculating the terms of any mortgage modification, or even a short sale.

Currently, there is no advantage to paying a third party to negotiate your mortgage modification. Why pay someone to do what you can do yourself? The REST Report calculates an unbiased report as to the best resolution to your distressed mortgage: mortgage modification, short sale, and now, mortgage principal reduction.

TARP (Troubled Asset Reduction Program) was a year late.
HAMP (Home Affordable Mortgage Plan) was a year late.
And now the PRA (Principal Reduction Alternative) is a year late.
The problems with HAMP are not intention, but with federal enforcement. One could expect that will be a problem with PRA. It is up to the distressed homeowner to use the REST Report in the state's courts to ensure application and enforcement for their unique mortgage hardship.

The US Treasury’s new Principal Reduction Alternative (PRA) was scheduled to become effective on October 1, 2010, or whenever version 4.0 of the HAMP NPV is implemented, which ever is later. HAMP’s NPV Version 4.0, was originally scheduled to be released on June 1, 2010. Reportedly, testing of 4.0 was well underway and was scheduled to be released to the servicers in the next couple of weeks. HAMPs version 4.0 is released today, Nov 1, 2010.

Net Present Value, or NPV 4.0 is what drives the PRA, which is a “deferred principal reduction program” that allows the homeowner to earn a principal reduction over a three-year timeframe by making all payments in accordance with the loan’s modified terms. Under the PRA, servicers are required to evaluate the benefit of principal reduction for every HAMP eligible loan with “high negative equity,” which Treasury defines as having a market-to-market loan-to-value ratio greater than 115%, using both the Standard and the Alternative waterfall test.

The crucial aspect here is that servicers are required to evaluate a property's suitability. The REST Report will do that for the homeowner. It ensures that the mortgage servicer is not left to their own proprietary calculations.

There are two 'Waterfall' tests for the lender/servicer to consider.

Mandelman points out that the lender/servicer is free to use their internal calculations to see if there is another, more beneficial in-house lender program available to them as a solution to reconciling a given non-performing asset. This makes possession and inclusion of the REST Report in a mortgage modification application even more critical.

Apparently, this PRA, or Principal Reduction Alternative, is reported to the Internal Revenue Service and may have tax consequences as income. Given the abatement of tax consequences on negotiated mortgage deficiencies on short sales in 2010 and 2011, I'd bet something will be done by then. Basically, if proceeds from a refinance were used to improve the same property, they will not be taxed. If however, proceeds from a refinance went to say, ATVs and a trailer, they will be taxed. Get it?

Second mortgages held by the same lender/servicer are to be treated the same as the first mortgage.

The lender/servicer is required to respond to a complete mortgage modification application within 30 days. This is another critical point that makes the REST Report crucial. The secret here is to make sure complete documentation is mailed USPS certified mail, return receipt requested (with the REST Rport on top); so that the mortgage servicer can't 'misplace' the file or contend that you never sent it. The 30 day requirement clock starts ticking when the mortgage servicer has every required document accounted for.

More responsibility will be placed on the borrower to keep current with negotiated payments. One more reason to not pursue a doomed mortgage modification. If mortgage modification is the best solution, the REST Report will reveal that. Short sale, the same. Principal Reduction, the same.

The Helping Families Save Their Homes Act of 2009 (HFSTHA) established a Servicer Safe Harbor, and TILA was amended for the purpose of providing a safe harbor to enable such mortgage servicers to modify and refinance mortgage loans under a “qualified loss mitigation plan.”

We are seeing specatacular results in the courts when the REST Report is included as part of a foreclosure defense. State judges immediately recognize the unbiased calculation of Net Present Value, as well as all the other myriad calculations, in ruling and requiring mortgage servicers to negotiate a mortgage modification in good faith. We have run approximately 1500 reports with astounding receptiveness.

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