Loss Mitigation Policy

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If you have concerns about making a payment or that you might not have sufficient funds to repay your note, please review our Loss Mitigation Policy below and reach out to info@homesbycfe.org as soon as possible.

The City First Homes (CFH) Legacy Program was intended to help low to moderate-income individuals purchase properties in the District of Columbia through a 0% interest, second trust loan (the “CFH Loan”). The CFH Loan did not require monthly payments and was only repayable upon the borrower’s property sale. The CFH Loan allowed the borrowers to purchase homes in the District of Columbia that might otherwise have been out of reach. The monthly savings provided by the CFH Loan generally allowed homeowners to buy a home for a price significantly less than renting while also enjoying the benefits of homeownership. Improving access to homeownership for low- and moderate-income households is a core principle behind the CFH Legacy Program. 

Before a CFH homeowner decides to sell their home, the homeowner needs to consider how their finances will be impacted. Regardless of whether homeowners participate in the CFH Legacy Program, all homeowners must consider market conditions, the current first trust loan balance, and potential closing costs (including realtor fees, transfer taxes, etc.) when deciding to sell. Before listing a home for sale, it is vital that the homeowner contact CFH (now Homes by CFE) to obtain a resale estimate. Homes by CFE will assist the borrower in walking through the above financial factors if necessary. The resale estimate considers the following items to determine the seller’s proceeds: 

  • Listing price (usually set by an appraisal) 
  • First-trust loan balance 
  • CFH second-trust loan balance 
  • Any additional support received (EPAP, HPAP, etc.) 
  • Shared appreciation (contract price at sale minus appraised value at purchase) 
  • Closing costs 

Under the CFH Legacy Program, the property’s sales price is set by the appraised value and/or thorough examination of comps in the area. Each homeowner should communicate with Homes by CFE regarding the listing price of their home before listing on the market. After notification of the borrower’s intent to sell, we prepare the resale calculation for discussion with each homeowner. 

If, during the process of drafting the resale calculation for the unit, our team discovers that a homeowner may not be able to cover their first trust loan and/or the CFH Loan, the borrower may request that we accept a discounted or “short” payoff of the CFH Loan to facilitate the sale. In such instances, we may, but are not required to, consider the request. In so doing, Homes by CFE will take the following steps to assess the extent of loss mitigation for both parties. Homes by CFE will: 

  1. Have an initial conversation with the seller to discuss the resale calculation and advise the homeowner of the possibility of negative equity. 
  2. Analyze the loan documentation from its inception; this includes the loan type the borrower received from the first trust lender, the amount of the down payment, and the amount of the second trust loan. 
  3. Request the homeowner submit a hardship letter and financial documentation, including the last three months of personal bank statements, the previous two years of tax returns, a current statement of assets and liabilities, and a current mortgage statement from your first trust lender. 
  4. Based on the documents provided, we will review the borrower’s financials and discuss potential solutions to minimize any financial distress the homeowner may face in selling at a loss. Items that will also be considered include the length of time in the property and the ability to sell the unit at a price that would cover both the first and second trust mortgages. 
  5. Proactively work with the borrower in a potential short sale scenario and consider several factors, including the unit’s sales price, market conditions, and closing costs , to identify the appropriate solution for each borrower. If the borrower chooses to list the property without consulting Homes by CFE, our options to remedy will be limited. 

Homes by CFE will work directly with the borrower to discuss possible ways to minimize the risk to the borrower and our organization. Each homeowner’s financial condition will vary, as will the tools and guidance our team will provide in each scenario. Due to the unique nature of each situation, no single solution will work for every homeowner. We are committed to working together to find a solution for each circumstance. 

Each homeowner is advised to contact us for questions about this policy or for additional information. We are here to support homeowners through the sale process.