Delinquent borrowers on mortgages owned or guaranteed by Fannie Mae can now obtain an unsecured loan for their delinquent payments.
Fannie advised servicers yesterday that the HomeSaver Advance is immediately available as one of their loss mitigation options, according to Announcement 08-14. The advances are designed to cure first-mortgage delinquency for borrowers who can afford to continue making regular payments but cannot afford to bring the loan current.
The new option will allow affected loans to remain in mortgage-backed securities pools. Servicers can use the option without prior approval from the secondary lender or mortgage insurance company.
Advances will be in the form of 15-year unsecured loans and will be made for the arrearage amount, including delinquent principal, interest, tax and insurance deposits, escrow advances, as well as foreclosure and bankruptcy fees. Delinquent homeowner association dues required to protect the mortgage may also be included. Borrowers must be unable to cure the late payments over a nine-month period.
The minimum advance is $1000.01 and the maximum advance is the lower of 15 percent of the original unpaid principal balance or $15,000 -- though there is no loan-to-value requirement and appraisals are unnecessary. No payment or accrued interest is required for the first six months.
The new option is available on first liens secured by primary residences, second homes or investor properties where at least six payments have been made by the borrower since the loan closed. The loan must be at least two months delinquent but cannot have been foreclosed on.
If the borrower was already in a modification plan, then at least 12 payments must have been made. Borrowers can only use the advance option once during the loan's lifetime, though advances can be made on up to two separate loans.
While loans insured by the Federal Housing Administration are ineligible for HomeSaver advances, loans guaranteed by the Department of Veterans Affairs are eligible.
Eligible borrowers must have successfully resolved the cause of delinquency and demonstrate a long-term ability to make all payments -- including non-housing payments, Fannie said. Minimum monthly disposable income is $200, though exceptions are possible.
Borrowers in bankruptcy are ineligible. Borrowers who were previously discharged from a bankruptcy involving the mortgage are also ineligible unless they reaffirmed the mortgage debt.
The advances will be serviced by a designated third-party servicer who will receive $600 upon the successful completion of three payments on a HomeSaver Advance.
"HomeSaver Advance is the preferred option to a capitalization-only modification," the announcement stated.
HomeSaver Advance documents are located online at www.efanniemae.com/sf/formsdocs/documents/specialpurpose/.