HSBC is rolling out a new program in the next 90 days. Please note that this applies to HFC and Beneficial loans. Below is more detailed information as outlined by Bruce Dorpalen, Executive Director of the National Housing Resource Center (NHRC):
“We have made substantial progress with HSBC on their Household Finance (HFC) and Beneficial portfolios.
Six month forbearances eliminated: The six month forbearance program (which they insisted on calling a modification even though the homeowner owed the full forbearance amount at the end of the six months) will be ended within 90 days. All people will be evaluated for a longer term modification, with a minimum of two years at the lower rate and possible principal reduction.
40% upfront cash for getting a modification eliminated: Homeowners who were in foreclosure were required to pay 40% of the delinquency upfront to get a modification. This requirement has been changed to a lump sum payment of the equivalent of three months of trial payments. In most cases, this will be substantially less money, but it is still an upfront payment for people who are in financial crisis. We asked HSBC to replace the lump sum with a three months of trial payment and they agreed to reconsider this option (but will implement the 3 month lump sum while they are considering the trial mod alternative). The payment will be a requirement only if the homeowner is approved for a modification and the homeowner will have 30 days to come up with the money.
Modification Underwriting Terms: We learned some of the HSBC loss mitigation terms, which will be helpful for counselors and attorneys to determine if they are getting the appropriate modification. While they use an automated modification formula, they are working toward a 31% affordability housing DTI based on PITI. They maintained that they subtract $5000 from the NPV valuation to include more properties and they do not run an NPV test for a permanent hardship (which was the standard back when I started in the counseling business in the 80’s and 90’s when a spouse died or other serious hardship).
What to do between now and the start of these changes in 90 days: HSBC agreed to consider on a “one off” basis cases where people are still charged the 40% upfront cash before the 90 days to change the system is completed. If you have a client who will be charged a 40% up front cash payment or who is going to foreclosure sale because they could not pay the 40%, escalate the case to this email address: firstname.lastname@example.org and in the first sentence of the email state you are escalating the case for “review for exception” and feel free to reference the January 17, 2014 conference call with Kathryn Madison, Patrick Burke, Beth Rejman, and Loretta Abrams from HSBC where HSBC agreed to require three months of the modification amount upfront on an exception basis in place of the 40% upfront cash. If there are problems with this, please let me know asap.
One extra note of good news: As a result of the HSBC reviews of our cases, Aubrey Washington from Newark/Essex Foreclosure Taskforce had a success story on an HSBC case: ” I did have good response on the case submitted to HSBC for review and my borrower will receive a perm mod if they meet their 3 TPP over the next 3 months. HSBC has proposed a 3% reduction in interest, lower payment by $1,000 and principal reduction of $75,000.” HSBC said there are other success stories, so let us know if you had a case which received a great resolution as a result of these discussions.
HSBC Contact List: Here is the HSBC loss mitigation contact list with escalation contacts. This is to be used only by housing counselors and attorneys.”
If you have any questions, contact your HOPP Regional Coordinator.