OneWest Bank FSB has announced that it has implemented the Principal Reduction Alternative (PRA) loan modification program as outlined under the Home Affordable Modification Program (HAMP). With this announcement, OneWest becomes one of the first servicers to launch the program. “We are pleased to now offer principal reduction as yet another solution to help more borrowers stay in their homes,” said Steven Mnuchin, OneWest Bank chairman. “OneWest continues to be extremely supportive of both the FDIC’s and the Treasury’s leadership in the loan modification arena and appreciates the opportunity to be an early adopter of this important program.”
During the initial launch of the PRA program, the following loans will be eligible for principal reduction under this program:
►The loan must be owned by OneWest Bank or serviced as part of an investor pool that has given OneWest the authority to implement HAMP.
►Loans that are serviced on behalf of Fannie Mae, Freddie Mac or the Federal Housing Administration and VA loans are currently not eligible for this principal reduction program.
►The loan must be at least 60 days delinquent.
►The home must be owner occupied.
►Qualifying loans must have a loan-to-value (LTV) ratio in excess of 115 percent, determined by a current assessment of the home’s value.
Principal will be forgiven over a three-year period in three equal installments. The amount of the reduction will initially be treated as a principal forbearance and will be non-interest bearing. The following example illustrates how principal is forgiven under the program:
A borrower with a principal loan amount of $200,000 and a property value of $150,000 is eligible for a principal reduction of $27,500. Through the PRA program, the borrower’s loan will be reduced to $172,500 and their loan to value ratio will be reduced from 133.3 percent to 115 percent. As long as the borrower is never behind more than three payments, on each of the first three anniversaries of their modification, 1/3rd of the $27,500 ($9,167) will be permanently forgiven.
This program has been structured to conform to the guidelines of HAMP and therefore, borrowers will continue to be eligible for incentives under HAMP, including an additional principal payment of up to $1,000 for each of the first five years, if the borrower maintains good standing.
Not all borrowers who are HAMP eligible will be eligible for PRA even though they may receive a HAMP modification. Borrowers who submit an application for a HAMP modification but have not previously received a HAMP modification will be evaluated for a PRA; however borrowers who had previously received a HAMP modification are not currently eligible for PRA at this time.
For answers to frequently asked questions on the PRA program please go to https://www.indymacmortgageservicesblog.com.
For more information, visit www.owb.com.