Friday, July 26, 2013

How Does Chase Service a Foreclosure -- A Playbook

Servicer’s Notifications

Notification of the foreclosure referral date should be submitted to the Buyer electronically. The notification of said action must be in electronic format and include the foreclosure referral date, reason for default, occupancy status, condition of property, date of last property inspection and most current broker’s price opinion if available.

If collection and loss mitigation efforts have exhausted, the servicer should ensure the initiation of foreclosure action occur no later than the 120th day of delinquency. The Servicer must also submit all notices promptly to the primary mortgage insurer as required. A copy of the notice need not be sent to the Buyer but should be made part of the foreclosure records.

Failure to initiate and/or complete the foreclosure action in accordance with the time frame specified will result in a per diem interest penalty assessment at the note rate. During the time that the loan remains in a foreclosure status, the Servicer must provide monthly updates of information.

Assignment to the Mortgage Insurer

Servicer may not make arrangements for the assignment of a delinquent loan to the mortgage insurer without the Buyer’s prior approval. If an assignment is approved, the Servicer will complete the transaction and file the claim. If the insurer declines the assignment of a delinquent loan, the Servicer must request the Buyer’s approval before taking any alternative action.

Deed-In-Lieu of Foreclosure

A deed-in-lieu of foreclosure is usually preferred to foreclosure. If the borrower is willing to execute a voluntary deed-in-lieu of foreclosure, the Servicer should recommend acceptance by the Buyer if the Servicer determines:
  • Such action is in the Buyer’s best interest.
  • Full benefits of any mortgage insurance will be received.
  • Marketable title, free from any liens, will be obtained.
  • The property will be vacant at the time of conveyance.
The following documentation is required when requesting the Buyer’s approval of the acceptance of a
deed-in-lieu of foreclosure: 
  • Hardship letter 
  • Loss Analysis sheet showing benefit of approving deed in lieu versus foreclosure sale
  • Broker’s price opinion
  • Primary mortgage insurer’s approval, if applicable Upon receipt of the Buyer’s written approval, the Servicer or the Servicer’s counsel should prepare any documents necessary to process the deed-in-lieu of foreclosure, following Fannie Mae guidelines to ensure reimbursement of the attorney’s fees and costs. The Servicer must arrange for conveyance of the property. The borrower must agree to assign and transfer to the  Buyer all rents due and to become due. In general, the
  • Servicer should not take title to the mortgaged property until it is vacant. If hardship exists, the Servicer may take title provided the date of possession is agreed upon in advance. The Servicer must email the buyer once the conveyance documents have been sent for recording. Title should be conveyed directly from the borrower to the Buyer’s assignee

Preforeclosure Sale

The Servicer should pursue a preforeclosure sale when a borrower is required to sell his or her home in time of financial hardship, and if it is foreseen that it will be difficult to sell, as the current market value is less than the amount required to satisfy the loan and any sales costs.

The Servicer is responsible to inform the borrower that they are required to maintain the property until it is sold.  The Buyer may require the borrower to contribute funds  if the sale proceeds do not satisfy the loan. Any escrow funds will not be reimbursed to the mortgagor.

The following documentation must be submitted to the Buyer prior to any preforeclosure sale:
  • Copy of primary mortgage insurer’s approval, if applicable
  •  Interior broker’s price opinion or appraisal
  • Loss Analysis sheet showing benefit of approving short sale offer versus REO sale.
  • Estimated HUD-1 settlement statement
The following documentation must be submitted to the Buyer after the preforeclosure sale:
  • Copy of proceeds check or wire confirmation
  • Copy of HUD-I settlement statement
  • Copy of primary claim, if applicable
  • Copy of explanation of benefits form once MI has settled

Modifications

The loan modification process is to provide struggling Borrower’s who have demonstrated a willingness and ability to repay, with an opportunity to change the original terms of their loan based on a demonstrated need  to achieve an affordable and sustainable payment.

Affordability may be achieved through the capitalization of the arrearage, interest rate reduction, step rate or an amortization terms extensions creating a balloon when the loan reaches its maturity date.
The Servicer needs to complete the WMMSC Modification Request (WMMSC 4020). The form needs to be filled out in its entirety in order for WMMSC to provide a decision. The form should be submitted to wmmsc.default@chase.com for review. The broker’s price opinion must be submitted within 90 days of the date the request is being submitted. Please be advised that not all modifications are allowed. Some pooling and servicing agreements (PSAs) have  restrictions and conditions limiting what can be done for a loan in the deal. If you are unsure of what you can offer to the borrower, you may email wmmsc.default@chase.com to see if there are any restrictions the loan may have. WMMSC verifies the proposed modification terms requested from the servicer complies with the investor guidelines.



Institution of Foreclosure

Acceleration of the maturity of a loan must be accomplished in accordance with the terms of the
mortgage instrument and applicable law. The Buyer must be provided with written notification of all
foreclosure actions as provided in Section 206.01. The Servicer should not recommend foreclosure until every reasonable effort has been made to cure the delinquency, as discussed above. Once the Servicer determines no other course of action will cure the default, the Servicer should promptly refer the file to the attorney to commence foreclosure which should be done no later than the 120th day of the delinquency. The Servicer should actively continue all efforts to cure the default and mitigate losses to the Buyer until the Servicer can no longer legally do so under the terms of the mortgage
instruments and federal, state or other applicable governing law or agency requirements. The Servicer
should prepare and forward with the foreclosure notification any necessary papers for the Buyer’s
execution and, when appropriate should ask the Buyer to return the security instrument. If the security instrument is sent to the Servicer, the Servicer will hold it on behalf of, and for the benefit of, the Buyer and its successors and assigns, and must ensure its safe storage and return it to the Buyer promptly when foreclosure is discontinued. The Buyer’s execution of any document submitted by the
Servicer does not imply that the Buyer has reviewed such document for legal compliance. The Servicer maintains this responsibility.

On a FHA/VA reconveyance, the Servicer is responsible for preparing the necessary documents and forwarding them to the Buyer for execution. This should take place no later than two weeks prior to the expected foreclosure sale date. The Servicer shall monitor the foreclosure process to ensure that no unnecessary delays occur. The Servicer will be assessed a per diem interest penalty at the note rate for any late foreclosure referral and for any unnecessary or unsupported delays in the foreclosure
process.

 Foreclosure Processing

The Servicer should take appropriate action during the foreclosure process to protect the property. The Servicer must obtain the Buyer’s approval in advance for any expenditure to protect the property which exceeds $2,500. In any situation where delaying protection  action might result in impairment of the property, the Servicer should call the Buyer for approval of any expenditure in excess of $2,500. The Buyer will send the Servicer a confirmation of the cost and nature of the protective action approved. 

The Servicer should retain the borrower’s escrow funds and all other unapplied funds. The Servicer should obtain bills for, and pay all expenses due under the loan, including taxes, special assessments, ground rents, and other charges which are or may become first liens upon the property as well as hazard and mortgage insurance premiums. If the borrower’s escrow funds are insufficient to pay these items as they become due during the foreclosure, the Servicer must advance funds for the
payment of such expenses to protect the Buyer’s interest. Reimbursement for all approved expenses may be requested on the Statement of Expenses (WMMSC 3001) at the time of final property disposition.                                                                                                                                                              
  • The Servicer must inspect the property at least once a month and more frequently when circumstances warrant. 
  • Notifications of sale results are required within 24 hours after the sale.

Attorney’s/Trustee’s Fees

Servicer should adhere to FNMA guidelines for foreclosure fees and costs allowed. Any exceptions
require the Buyer’s approval

All fees discussed in this section are to be paid by the Servicer and will be reimbursed by the Buyer after the final settlement of the sale of the property and all insurance claim proceeds have been paid. If foreclosure proceedings are discontinued, all fees and costs incurred are to be collected from the borrower unless prohibited by law. In jurisdictions where the collection of attorney’s fees or costs from the borrower is prohibited, the Buyer will share such expenses with the Servicer in proportion to the Buyer’s interest in the loan.

In deed-of-trust jurisdictions, it is the Servicer’s responsibility to ensure a proper individual or entity, free from any conflict of interest, serves as trustee or substitute trustee. The Buyer may select the foreclosure counsel or request substitution of a trustee to whom the case is t o be referred. The Servicer is expected to work closely with the foreclosure counsel, trustee, or substitute trustee to ensure prompt and efficient completion of the foreclosur e proceedings.

Offer of Payment During Foreclosure

If the borrower offers payment of the full delinquency during foreclosure, including advances, legal costs, and oth er foreclosure expenses, the Servicer should determine the total amount of all foreclosure costs and expenses which will be incurred if the offer is accepted. Such an offer may be accepted by the Servicer if the payment offered will cover all costs and expenses. No offer of full payment may be declined without the Buyer’s approval.

If the offer is accepted, after receiving the funds the Servicer must take action to prevent additional
foreclosur e expenses from bein g incurred, pay the foreclosure expenses, and apply the remaining funds to the borrower’s account and return the debt instrument to the Trustee by certified mail .

If the borrower offers to pay an amount less than the full delinquency during foreclosure, the Servicer should determine the total amount of foreclosure costs and expenses which would be incurred if the offer were accepted. The Servicer may decline without requesting the Buyer’s approval, but must obtain the Buyer’s approval before accepting. The Servicer’s recommendation should include an opinion regarding whether the foreclosure action should be suspended or dismissed and how the remaining delinquency will be cured.

 Bidding Instructions

The Servicer must issue bidding instructions to its employee, agent, or the attorney attending the
foreclosure sale unless the Buyer directs otherwise.

The Servicer must comply with all bidding instructions and requirements of the mortgage insurer, when applicable. The Buyer does not need to approve the maximum bid price if it will recover the total indebtedness, including expenses and costs, or if it is the maximum amount permitted by applicable law. If the mortgagor has substantial assets or earning power and state law allows collection of deficiency amounts, the Servicer must preserve the Buyer’s rights to pursue collection and recovery of a deficiency. The Servicer must obtain the Buyer’s prior approval of a maximum
bid which is insufficient to recover the total indebtedness. If the Buyer’s approval of a maximum bid
is required, the request for approval must be accompanied by an estimated market value of the
property in an “as is” condition at least 14 days prior to the actual foreclosure sale date.

Third Party Acquisitions

If the property is disposed of in a third party transaction at the foreclosure sale, all reasonable expenses advanced by the Servicer during the foreclosure process and approved in writing by the Buyer will be netted against the foreclosure sale proceeds. The Buyer’s portion of the proceeds will then be transferred to the Buyer.

Claim Procedures

 Filing a Claim

All mortgage insurance claims must be filed within the time required by the mortgage insurer. If a claim cannot be filed with the mortgage insurer within that time, the Servicer must obtain an extension from the mortgage insurer. The Servicer must forward a copy of the mortgage insurer’s extension approval to the Buyer and must include a written explanation of the reason for the
delay and anticipated date for the claim filing.

The Servicer should complete the claim according to the mortgage insurer’s procedures and forward a copy to the Buyer. The mortgage insurer should make settlement checks payable to the Servicer .

If the primary mortgage insurance was issued by PMI Mortgage Insurance Co., the Servicer must inform PMI that the policy covers a loan purchased by the Buyer.

If the mortgage insurer fails to pay the claim within 60 days, the Servicer must make demand upon the mortgage insurer for immediate payment. The Servicer is responsible for reimbursement for any shortfall in insurance cover age.

If the mortgage insurer reduces the claim due to administrative error, the Servicer will reimburse the
Buyer for the amount of such reduction. All claim reductions or denials must be brought to the attention of the Buyer along with the Servicer ’s response to the reduction or denial

Deposit of Settlement Proceeds

Within 1 business day of receipt of settlement funds, the SeBuyer after the preforeclosure sale: Servicer should immediately deposit the proceeds into the P&I Custodial Account. The servicer should email or fax a copy of the final signed HUD-1 that must match the proceeds received. Gross proceeds along with MI be wired to the buyer within 2 business days. If the loan has MI insurance pending, servicer should not hold funds in their custodial account until the MI claim has been paid. A copy of the explanation of benefits settlement statement should be sent to the Buyer upon receipt of MI funds. Do not delay liquidating a loan due to non receipt of MI proceeds. These can be submitted as a supplemental upon receipt of funds.





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