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 firstname.lastname@example.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 any monthly payments and was only repayable upon the borrower’s sale of the property. The CFH Loan provided the borrowers with the ability 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 purchase a home for a price that was 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, it is important for the homeowner to consider how their finances will be impacted. All homeowners, regardless of whether they participate in the CFH Legacy Program, must consider market conditions, the current first trust loan balance, and potential closing costs (including, realtor fees, transfer taxes, etc.) when deciding to sell. Prior to 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 sales price of the property 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 prior to 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 in order 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 any loss mitigation for both parties. Homes by CFE will:
- have an initial conversation with the seller to discuss the resale calculation and advise the homeowner of the possibility of negative equity.
- analyze the loan documentation from inception of the loan; this includes the loan type the borrower received from the first trust lender, amount of down payment and the amount of the second trust loan.
- request that the homeowner submit a hardship letter and financial documentation including the last three months of personal bank statements, last two years of tax returns, a current statement of assets and liabilities, and a current mortgage statement from your first trust lender.
- review the borrower’s financials based on the documents provided. We will discuss potential solutions to minimize any financial distress the homeowner may potentially face in selling at a loss. Items that will also be considered include 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.
- proactively work with the borrower in a potential short sale scenario and take several factors into consideration, including the sales price of the unit, 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 the possible paths forward to minimize the risk to both the borrower and our organization. Each homeowner’s financial condition will vary, as will the tools and guidance that our team will provide in each scenario. Due to the unique nature of each situation, there is not a single solution that will work for every homeowner. We are committed to working together to find a solution that fits each circumstance.
For questions about this policy or for additional information, each homeowner is advised to reach out to us. We are here to support homeowners through the sale process.