Q1. "In general when can a purchaser foreclose on a mortgage and when not?"
A1. Section 6.4, of the Loan Sale Agreement sets forth the requirements for "Servicing by Purchaser." Subsection (c) of that section provides general guidelines related to a Mortgagor's default and the Purchaser's right to take actions permitted under the terms of the Mortgage and Mortgage Note, which could include a foreclosure action. In general, a purchaser may foreclose if there is a default under a Payment Plan Agreement and the mortgagor does not either (i) make a full payment to reinstate, or (ii) renegotiate the Payment Plan Agreement under the terms of Section 6.4(c)(v). Reference should be made to Section 6.4(c) for the precise conditions and limitations on foreclosure.
Q2. "Could you explain how the optimization model works, or provide an example that will provide some insight?"
A2. See Tab 4.
Q3. "Can I talk to borrowers?"
A3. No.
Q4. "Does HUD rep. to the first lien status of the mortgages? Is there any exception?"
A4. HUD reps to the valid, enforceable first lien status of the mortgage in Section 8.1(c) of the Loan Sale Agreement, except for (i) liens for real estate taxes, municipal sewer or water charges and special assessments, if any; (ii) liens on personal property or located on, but not affixed to the real property; (iii) covenants, conditions and restrictions, rights of way, easements and other matters of public record; and (iv) other matters to which like properties are commonly subject which do not individually or in the aggregate, materially interfere with the benefits of the security intended to be provided by the mortgage.
Q5. "I got a supplement from Hamilton saying the sale will only include mortgages in Los Angeles, Washington, DC and New Orleans. What happened? I thought this sale was national."
A5. What you received was a package on the Placed-Based Survey. This package indicates the FHA would appreciate all bidders that are bidding on certain Mortgage Loan Blocks located in New Orleans, Washington D.C and Los Angeles to submit answers to the questions provided in the survey. This is not a bid requirement, it is totally voluntary. However, since FHA is seriously considering placed-based lending and disposition alternatives for the future, any firm with any interest in these activities is greatly encouraged to submit ideas now.
Q6. "How do I run the software on the two data diskettes that came with the Bid Package?"
A6. The diskettes containing the FHA NATIONAL SINGLE FAMILY MORTGAGE LOAN SALE # 2 database have been provided with the Bid Package and related supplement. In order to view this file the following is required:
The diskette is not shipped with any means to view or access the database. Once you have determined you have the minimum requirements to view the file, install it as follows.
Q7. "Our bank has a poor CRA rating. Can we improve the rating by buying some of the mortgage loans in this sale?"
A7. If you purchase loans, the collateral of which is located within your assessment area, you will receive "favorable consideration" under the Community Reinvestment Act. If the collateral is outside your assessment area, except in very special circumstances, you will only receive "favorable consideration" if your rating within your assessment area is above average. That is, the regulators are most concerned with how you are doing in your assessment area. In general, the only way you would receive "favorable consideration" for the purchase of loans with collateral outside your assessment area, given a below average rating in your assessment area, is if you can prove to the regulators that there are no low or moderate income investments in your assessment area and the immediate surrounding area. For a more detailed explanation you are encouraged to contact to your CRA regulatory agency.
Q8. "I heard you have a website providing information related to this sale, where can I find it?"
A8. Yes, we do have a website that provides contentbackground and policy on the background and design of the overall FHA Mmortgage loan sSale pProgram and detailed descriptions and results ofon each transaction. It also includes a large number of major press articles on the loan sale programloan sale program. You can access it if you have any web browser (such as Netscape, Mosaic, American Online or Compuserve). The address (URL) is "http://199.29.173.66/fha/".
Q9. "Can HUD confirm that it warrants that a successful bidder can put back a mortgage in case it can not be foreclosed due to statute of limitation?"
A9. If a court of competent jurisdiction were to make a final and unappealable determination that a Mortgage Loan was unenforceable before the Closing Date due to expiration of an applicable Statute of Limitations, HUD's warranty under Section 8.1(d) of the Loan Sale Agreement would be breached. In such case, the purchaser would have the rights set forth in Section 8.5 of the Loan Sale Agreement.
Q10. "Can you provide a detailed description on the payment history for one loan and walk us through what exactly happened to payment, its application and how it is reflected on the payment history table provided on CD-ROM? An example is the loan with W&A control number 207756"
A10. The 36 month payment histories reflect payments received by HUD on the individual loans for 1993, 1994 and 1995. The total amount received is shown along with the way the payment was allocated by HUD among the various categories. Payments are allocated in the order described in the Bid Package dated February 5, 1996 as follows:
Interest on other advances
Interest on special assessments
Interest on tax advances
Other advances
Special assessments
Tax advances
Service charges
Late charges
NSF fees
Escrow
Mortgage interest
Loan principal
Each category must be fully current before any payments will be applied to the next category. For example all amounts due for interest on advances and advances must be paid before any payments will be applied to outstanding service charges due. Similarly, all accrued interest must be paid before any payments will be applied to principal. Thus a loan could have an interest paid-to-date of 1/1/95 and a principal paid-to-date of 1/1/90. The interest must be brought current before funds will be applied to delinquent principal. This application of funds process is followed each month. If a payment is missed, all other delinquent items must be brought current before principal will again begin to amortize.
Any individual payment over $3,000 is immediately credited to the "escrow" account pending review of the nature of the payment. The escrow account is subsequently cleared and the funds are applied as appropriate. On the 36 month payment history, this reversal and subsequent application, as well as other non-cash entries were not shown.
For an example of loan WA-207756 see attached.
Q11. "What constitutes a delinquent loan from the standpoint of the servicer (i.e., how many days)?"
A11. A mortgage loan is delinquent if the payment has not been received as of the 2nd day of the month when it is due. It is in default if the payment has not been received as of the first day of the following month.
Q12. "Normally we provide our lender with the collateral files at closing. Since the collateral files will not be made available until approximately two to three weeks following closing can FHA provide a Bill of Sale or some other arrangement that will satisfy our lender? Also, in those instances where the collateral files are missing is there any way a winning bidder could gain access to the collateral files prior to closing to begin the assignment process?"
A12. Yes. FHA has previously provided potential bidders with a form of Bill of Sale. As to the issue of gaining access to collateral files prior to closing, the answer is no. Assuming that the closing date payment is made, it is possible that FHA would provide access prior to the Mortgage Loan Documents Availability Date, but this is subject to approval by FHA and coordination with the due diligence contractor.
Q13. "Often in other loan sales the name of the broker preparing the Broker's Price Opinion is included on the report but it is not included on the reports for this sale. Can this information be provided?"
A13. As noted in the Bid Package the contractor for Broker's Price Opinions was Equifax Services, Inc. Equifax has a national network of offices throughout the United States. The BPO's were prepared by a licensed real estate agent, broker or appraiser. In the majority of cases the BPO was prepared by someone on Equifax's staff. A third party was used where Equifax did not have a nearby location or where the volume of properties exceeded available resources at the location.
Q14. "Exactly how are the performance categories calculated on the disk provided in the bid package?"
A14. Category A - Performing With No Forbearance Agreement - As of 12/31/95 must have a principal paid to date of 1/1/96 and an interest paid to date of 12/1/95. No forbearance payment as of 12/31/95 in servicing system.
Category B - Past Due > 30 Days But Not More Than 90 Days With No Forbearance Agreement - As of 12/31/95 must have a principal paid to date of 10/1/95 - 12/1/95. No forbearance payment as of 12/31/95 in servicing system.
Category C - Past Due > 90 Days With No Forbearance Agreement - As of 12/31/95 principal paid to date prior to 10/1/95. No forbearance payment as of 12/31/95 in servicing system.
Category D - 90 Days or Less Past Due Under Forbearance Agreement - As of 12/31/95 "Forbearance Total Amount Due" / "Forbearance Payment" = 3 or less. If "3" or less under this calculation, the loan is deemed to be 3 months (90 days) or less past due under the forbearance agreement..
Category E - More Than 90 Days Past Due Under Forbearance Agreement - As of 12/31/95 "Forbearance Total Amount Due" / "Forbearance Payment" > 3. If more than "3" under this calculation, loan is deemed to be more than 3 months (90 days) past due under the forbearance agreement.
Q15. "How do you evaluate all the bids and determine a winner(s)?"
A15. We use AT&T Bell Labs optimization model that evaluates all the different combinations of bids submitted and determines the winning bids which provide the maximum return to the taxpayers. Optimization increases fairness and enhances competition. In the past sale both large and small investors were successful in winning loans and pools of loans. For an example, see attached.
Q16. "How much money do I have to deposit in order to bid on the loans, when is it due and if I am not a successful bidder when do I get my money back?"
A16. "A deposit of 10% of the bid price in the case of an individual bid or, in the case of multiple bids, 10% of the highest bid price. The deposit must be received by FHA during the bid date (note: a specific time period will be designated in the bid package). Deposits will be refunded without interest to unsuccessful bidders via wire transfer within 6 (six) business days of the award date (March 22)."
Q17. "Let me understand, if I submit more bids I have a greater chance of winning and I don't have to submit more of a deposit?"
A17. Yes, the more bids you submit the greater chance you have of winning. Also, we will only require your downpayment to be equivalent to 10% of your highest bid. Moreover, bidders should be as creative as possible when constructing bids. It does not make any sense not to submit as many different bids as possible, you only increase your chances of being successful in an optimization format.