Safeguard Properties - MBA LRA Lender HO Disbursement Agreement & Conference Call 08-29-06 Summary

MBA LRA Lender HO Disbursement Agreement & Conference Call 08-29-06 Summary

Thursday, 31 August 2006

Following is an email request from Vicki Vidal from the MBA following the Industry Call conducted on August 29 (summary and attachments below)

Subject: REQUEST FOR CONTACTS for execution of the MOU and more
Date: Wed, 30 Aug 2006 11:32:46 -0400
From: <VVidal@mortgagebankers.org>

Hello everyone, we had a call yesterday to bring everyone up to speed on the status of the LA Road Home process. As noted earlier, the documents are final and the State has asked that lenders execute the Memorandum of Understanding by next Friday (Sept 8). So that the State can send the MOU request to the right person and to provide First American and the State with the necessary contacts to close grants, I would appreciate getting your company's individual contact information for the following requests:

1. Who should receive and execute the Memorandum of Understanding?

2. Who should receive subordination requests from First American?

3. Who will handle short sale requests and questions?

4. Who will handle receipt of pay-off requests?

5. Who can the state or First Am staff contact with general questions of any nature?

6. Please provide a phone number and individual's name (if appropriate) that the state or First American can distribute widely to homeowners if homeowners have questions of any nature.

I need, name, title, company, street address, city and state (important re time zone) and zip code; phone, fax and especially email addresses..
I am distributing the contact information I have to date. Please make any corrections if necessary and return to me and Malikah Crable at mcrable@mortgagebankers.org (she is cc'd on this email). Please respond to this request ASAP.

Also please note that only the response to Question #6 will be distributed to homeonwers, the other contact information is for the State and First American's use only. Please ignore that some names are in red.

Thanks.
Following are highlights of the Industry Call conducted on 8/29 by Vicki Vidal of the MBA.

Highlights of the call:
Road Home Program Servicing Agreements
The call was held to review the Road Home Program (RHP) and the closing process, in particular the Memorandum of Understanding (Servicing Agreement), the Best Practices Guideline, and the Covenants.

The LRA completed a pilot program and have already closed two loans, with more scheduled for closing over the next few days.

Program questions can be sent to Vicki Vidal at VVidal@mortgagebankers.org . She will send the comprehensive list to the correct parties to be addressed.

Memorandum of Understanding
The Memorandum of Understanding (MOU) provides guidance from the state regarding their process of disbursing funds and how the funds are to be utilized by the servicer and mutual expectations. This is not a formal contract, and therefore no formal penalty exists for failing to abide by the covenants. In the event the servicer is also holding insurance proceeds in an escrow account, the MOU requires insurance proceeds to be disbursed to mortgagors before grant money is disbursed.

RHP is focused on identifying the correct contact person within each servicer's office to send a complete set of the final documents. The MOU must be signed by participating servicers and returned by Friday, Sept. 8. Then the covenant, disperse and final disperse documents will be handled individually for each loan.

The MBA, Louisiana Banker's Association, Freddie Mac, and Fannie Mae will work together to identify their servicer contacts to sign the MOU and try to establish a master list of contacts for the RHP. Anita Rechler, of ICF, who is running the RHP for the state of Louisiana and the working group will continue to discuss how to list these individuals and make the final documents available.

The MOU requires servicers to subordinate their lien to that of the LRA.

Covenant Agreements
The covenants were created with the intention of re-populating the damaged areas with people committed to living in and rebuilding the areas. The covenants require the property must be owned and occupied by the grant recipient for at least three years following execution of the agreement. The program is designed to prevent Investors from purchasing these properties and using them as a rental property for income.

Financial penalties, essentially reimbursement of the grant funds, will be applied if the homeowner does not abide by the grant requirements. Mortgagors that buy properties in the disaster areas, where grant founds were awarded, will not be held responsible for the grant recipients failure to comply with the covenants of the grant agreement. Servicers may be required to pay the penalties in the event of foreclosure prior to the three-year requirement expiring.

The servicers are required to treat grant funds in accordance with general industry practices regarding hazard insurance proceeds. Grant funds will be held in an interest bearing escrow/disbursement account and disbursed throughout the repair process. Servicers are required to release 10% of the grant funds, up to $7, 500, but not less than $2,500, to the home owner upon execution of a repair contract. The remaining payments will be issued upon completion of repairs, one-third at a time.

Issues
Anita Rechler also advised they are reviewing ways to ensure the investor/servicer listed by the mortgagor is correct, as the lien holder and servicer can be different. RHP will be releasing a guide for handling grant funds when a mortgagor has provided incorrect servicer information. First American will be completing the title research prior to closing and diligently following up to ensure the lien holder is also the listed on the mortgage of record with the county and vice versa. The program has not yet determined how to handle grant funds awarded to pay off a lien that has been settled. Anita advised they will continue to review this issue and determine a solution. Title issues, such as grants requested for a property owned by mortgagor that is deceased with no official title transfer to heirs, have not been fully resolved. Anita Rechler advised RHP has not yet developed an anticipated grant application volume, and therefore does not know if delays in releasing grant money will exist. The state is reviewing ways to provide information to the servicers regarding mortgagors that have received grant monies. This will prevent the servicers from filing foreclosure on a property that has been awarded funding. However, privacy laws must be taken into consideration.