MPF Announcement 2023-88

MPF Traditional - Workout Options Updates

Effective Date: 
Permissible Compliance: January 2, 2024
Required Compliance: March 1, 2024

The MPF Traditional (conventional) workout options are being updated to reflect updated guidance and clarity for certain existing options and adding new options.

NEW GUIDANCE HIGHLIGHTS

All workout options and workout related guidelines will now be found in Chapter 9 of the MPF Traditional Servicing Guide (“New Chapter 9”). Some highlights of the changes include:

• General provisions (See Section “9.1 General Provisions”):
  • MPF Bank approval: prior approval required from MPF Banks only for:
    • Loan modifications where new maturity date exceeds initial maturity date by more than 20 years
    • Short sale
    • Deed in lieu
    • Anything that does not meet MPF Guide requirements
  • Forms: In most instances, Borrower facing workout related forms or their equivalents may be used. Required forms include:
    • Workout Worksheet – Form SG354
    • Fannie Mae Form 3179 (Loan Modifications)
  • Borrower Workout Requests: Unless otherwise provided for, Servicers must obtain a complete Workout Request Package (WRP) from Borrowers in order to evaluate them for applicable workout options. A New Workout Request Application Form (Form SG355) and guidance on determining whether a WRP is complete is included in the new guidance.
  • Evaluating Borrowers: Includes guidance for addressing borrowers in bankruptcy, in foreclosure or imminent default, and provides a workout hierarchy.

• Forbearance Plan (UPDATED) (See Section “9.2.1 Forbearance Plan”):
  • No prior MPF Bank approval needed for reduction or suspension of payments in increments not to exceed 12 months.
• Repayment Plan (UPDATED) (See Section “9.2.2 Repayment Plan”):
  • No prior MPF Bank approval needed for period not to exceed 12 months.
• Payment Deferral (NEW) (See Section “9.2.3 Payment Deferral”):
  • Similar (not identical) to MPF Traditional COVID-19 Payment Deferral Plan
  • No prior MPF Bank approval required
  • Deferral of past-due P&I payments as a non-interest bearing balance, due and payable at:
    • maturity of the mortgage loan,
    • or earlier upon the sale or transfer of the property,
    • refinance of the mortgage loan, or
    • payoff of the interest-bearing UPB
  • More than one payment deferral can be granted but must not exceed cumulative cap of 12 months of past-due P&I payments
• Permanent Loan Modification (NEW) (See Section “9.2.4 Loan Modification”):
  • Similar (not identical) to MPF Traditional COVID-19 Loan Modification Plan
  • Prior MPF Bank approval required only where new maturity date exceeds initial maturity date by more than 20 years
  • Loan must be at least 12 months since origination
  • NOTE: Servicers of MPF Traditional loans owned by FHLB San Francisco must only offer temporary loan modifications that meet the requirements detailed in Exhibit FF and permanent loan modifications will only be considered on an exception basis after all other loss mitigation options have been considered. All other Servicers may only offer the permanent loan modifications as provided for in this section and may NOT offer temporary loan modifications.
• Short Sales (UPDATED) (See Section “9.3.1 Short Sale”):
  • Payments to subordinate lien holder requirements provided.
• Deed in Lieu of Foreclosure (Mortgage Release) (UPDATED) (See Section “9.3.2 Deed in Lieu of Foreclosure (Mortgage Release)”):
  • Transition options allowing up to three-month transition lease with no rent.

For full understanding of all changes, Servicers must familiarize themselves with the provisions of the New Chapter 9 which has been attached to this Announcement. 

FORMS HIGHLIGHTS

In addition, related changes are being made to Forms and Exhibits, including:

• Workout Worksheet - Form SG354 (UPDATED): Streamlined to reduce the amount information and documents required to be submitted.

• Workout Request Application (WRA) - Form SG355 (NEW): Minimum information required to be obtained from Borrower(s) to be considered for workout option.
• Payment Deferral Agreement - Form SG356 (NEW):Minimum information required to be provided to Borrower(s) when granting a Payment Deferral.
• Loan Modification Worksheet - Form SG357 (NEW):Required to be submitted with SG354 for all Loan Modifications.
• Trial Plan Notice - Form SG358 (NEW):Minimum information required to be provided to Borrower(s) when granting a Loan Modification Trial Plan.
• Loan Modification Cover Letter - Form SG359 (NEW): Minimum information required to be provided to Borrower(s) when granting a Loan Modification.
• Loan Modification Interest Rate - Exhibit EE (NEW): Interest rate required to be used when determining new modified mortgage loan terms.
• Temporary Loan modifications (and Forms) - Exhibit FF (NEW): Current temporary loan modification requirements and related forms moved to this Exhibit for use ONLY by Servicers of loans owned by FHLB San Francisco.

For full understanding of all changes, Servicers must familiarize themselves with the provisions of the new forms and exhibits which have all been attached to this Announcement. 

MPF TRADITIONAL SERVICING GUIDE

At a later date, an updated Guide will be published to reflect these changes.  In order to allow Servicer to begin making the changes necessary to their systems, policies and procedures, New Chapter 9, forms and exhibits (other than Exhibit EE and Exhibit FF) are being attached to this announcement.   

New Chapter 9 will supersede the following sections of the current MPF Traditional Servicing Guide:

• 2.13 Short Payoffs (Pre-Foreclosure/Short Sale)
• 8.5 Loss Mitigation
• current Chapter 9

EFFECTIVE DATES

Servicers may start considering borrowers based on the new guidelines for borrower requests they receive as of January 2, 2024, and are required to consider borrowers based on the new guidelines as of borrower requests they receive on or after March 1, 2024. 

NOTE: Servicers implementing the new guidelines prior to March 1, 2024, are required to consider borrowers ONLY based under the new guidelines, meaning the guidelines in New Chapter 9 and none of the current Guide section it supersedes.

MPF TRADITIONAL GOVERNMENT LOANS

No changes are being made at this time to any MPF Traditional Government Loan workout related guidelines.  Those guidelines can now be found in New Chapter 9, Section “9.1.2 Government Loans.”

TRAINING

Given the significant changes this entails, the MPF Program is providing the following training opportunities:

• MPF Traditional Product: Loss Mitigation Workout Options Updates for Conventional Loans: December 14, 2023, 1:00 PM - 2:00 PM CST. Click here to register.
  • As recently announced, the MPF Traditional product workout options for conventional loans are being updated to provide both additional clarity and new options. The purpose of this webinar is to present a high level overview of what is changing, including a look at the new options and forms. This is a great opportunity to become familiar with the changes and establish a foundation for the additional training that is to follow in January
• MPF Traditional Product Workout Options: Permanent Loan Modifications: January 16, 2024, 1:00 PM - 2:00 PM. Click here to register.
  • This webinar is designed to provide servicers of MPF Traditional loans a walkthrough of the new permanent loan modification option. Permanent loan modifications are designed for borrowers who are experiencing a permanent or long-term hardship and can no longer afford to make regular monthly mortgage payments. This session will cover the requirements for offering, processing, and administering a permanent loan modification.

In addition, the webinars will be available on-demand, shortly after the live dates. Click here for On-Demand Webinars.

SUPPORT
For any questions, please contact MPF Service Center at 877-FHLB-MPF.