Homeowner with negative or minimal equity, behind on payments, evaluating loan modification, short sale, or deed-in-lieu. High financial stress.
MB-02 is the loss-mitigation archetype: borrowers behind on payments or holding near-zero equity, where the testing surface is RESPA Reg X loss-mitigation timing, FDCPA debt-collection conduct, and the cascade from forbearance through modification, short sale, and deed-in-lieu.
MB-02 exists because servicing and default flows fail in ways that origination flows don't, and the regulatory perimeter is denser. RESPA Regulation X §1024.41 governs the loss-mitigation process — the five-business-day acknowledgment of a complete application, the 30-day evaluation window, dual-tracking prohibitions, and the appeal right when a modification is denied. Layered on top are FDCPA constraints when the servicer is also a debt collector, Fair Housing Act fair-servicing scrutiny on modification denials, and IRC §108 cancellation-of-indebtedness income on any principal forgiven through modification or short sale (the Mortgage Forgiveness Debt Relief Act exclusion expired and re-extended in patterns servicers' tax-reporting flows still get wrong). Credit-bureau reporting under FCRA shifts as the loan moves through 30/60/90/120 day buckets, charge-off, and post-modification re-aging.
The structural story is a household where the mortgage liability dwarfs the equity and the cash-flow margin has gone negative or thin. Median income is $66k against a median net worth of $119k that is fragile — the mean net worth ($193k) is dragged up by a few households whose equity recovered. Liquid net worth ($68k median) is the runway against missed payments; once it depletes, the file enters loss mitigation. Goals shift away from accumulation: emergency fund, debt payoff, and home purchase (in the short-sale 'next house' sense) appear together with retirement, and every household carries credit-card debt alongside the troubled mortgage.
What sets MB-02 apart from neighbouring archetypes is that the file is past the origination decision and inside the servicing perimeter. The household may have been a healthy MB-01 file two years earlier; the diagnostic question is what trigger event — income loss, divorce, medical, taxes — moved it here, and whether the workout is a Flex Modification, an FHA partial claim, or a short sale. Distress can co-occur with S-01 (divorce) or S-03 (medical debt), but MB-02 is selected when the mortgage is the load-bearing problem on the balance sheet.
Aggregated across the 12 MB-02 households in the shipped v3 corpus corpus. Numbers describe the corpus, not population claims.
Brandon and Michelle look prosperous on paper — $737k net worth, $385k liquid — but the diagnostic is the gap between $67k of gross income and $325k of total liabilities concentrated in a mortgage whose payment now consumes the cash-flow margin. They are the MB-02 corner case: high asset base, retirement balances that arithmetically could be tapped, but every advisor flow has to handle the 10% early-withdrawal penalty and the IRC §72(t) exception logic before recommending a tap. The 'on track for home purchase' flag reflects a contemplated next-house move; retirement is off track because the working assumption of the file is that the modification will succeed.
Every MB-02 household ships with — at minimum — these JSON fields populated. The full schema is documented in the data set you purchase.
Servicing platforms use MB-02 to validate Reg X §1024.41 timer-driven workflows — the 5-business-day acknowledgement, the 30-day evaluation, dual-tracking gates, and the 14-day appeal window. Default-management vendors and special servicers use it for waterfall-modeling regression: Flex Mod inputs, FHA partial-claim eligibility, and short-sale net-proceeds projections. Tax-software teams use it for IRC §108 COD-income reporting and Form 1099-C / 1099-A flow into Schedule 1, including the qualified-principal-residence exclusion logic (where applicable). Credit-bureau and FCRA-compliance teams use it to validate tradeline transitions across modification, short sale, and charge-off.
MB-02 is selected when the mortgage is the load-bearing distress on the balance sheet. Households where credit-card or medical debt is the primary driver belong in S-02 (bankruptcy recovery) or S-03 (medical debt crisis), even if the mortgage is also troubled. Distress driven by divorce — where the home is the asset being divided rather than the asset being lost — is S-01. Reverse-mortgage default and HECM tax-and-insurance default scenarios are excluded by design; the corpus assumes a forward mortgage. Investor-owned property in distress (DSCR default, rental-cashflow failure) is MB-03, not MB-02, because the loss-mit perimeter and disclosure regime are entirely different for non-owner-occupied. Households whose distress co-occurs with disability-driven income loss may be cross-referenced against HC-02.
Income and equity-position bands during v3 synthesis were informed by CFPB consumer credit panel snapshots and HMDA action-taken-by-modification follow-on data, with state distribution lightly weighted toward judicial-foreclosure states (NY, SC) where Reg X timer disputes most often arise. The corpus is intentionally small (12 households) because distressed-mortgage realism requires denser life-event context than other archetypes — synthesis is harder to keep honest at scale. Per CLAUDE.md §9 the corpus is FROZEN; the priors above describe the synthesis intent, not an auditable distribution fit. No specific snapshot date is asserted for foreclosure timelines or modification approval rates.
MB-01 is origination; MB-02 is default servicing on a loan that previously closed. Use MB-01 when the testing surface is TRID, HMDA, or AUS findings rather than Reg X loss-mit.
S-02 covers bankruptcy recovery where the mortgage may be one of several discharged or reaffirmed debts. Reach for S-02 when Chapter 7/13 process and means-testing dominate the file.
S-03 is medical-debt crisis. Use it when collection activity and medical-debt FCRA rules (paid medical removal, $500 threshold) are the diagnostic surface, even if a mortgage is also distressed.
S-01 is divorce in progress. Use it when the home is being divided as part of equitable distribution rather than lost to default.
MB-02 — Distressed Mortgage / Underwater Homeowner represents borrowers in or near default on a primary-residence mortgage: delinquent, holding minimal or negative equity, and inside the loss-mitigation perimeter under RESPA Reg X §1024.41. It is the archetype for servicing, loss-mit, FCRA tradeline reporting, and IRC §108 COD-income testing.
The 12 shipped MB-02 households have a combined gross income median of $66,277, with a 25th-to-75th-percentile range of $60,258 to $72,113. Median net worth is $118,979 but is fragile — concentrated in home equity that the underwater position threatens.
The corpus captures households at the loss-mit decision point with cash-flow and equity profiles consistent with Flex Mod, FHA-HAMP, and short-sale candidates. Specific waterfall outcomes are a downstream computation against the household data, not an attribute pre-baked into every record.
MB-02 is selected when the mortgage is the load-bearing distress on the balance sheet. S-02 is selected when Chapter 7 or 13 process — means testing, discharge, reaffirmation — dominates the file even if a mortgage is also troubled. The two archetypes can overlap in real life but the testing surfaces diverge.
Yes. The corpus is built to surface 1099-C / 1099-A flow into Schedule 1 with §108 exclusion logic — qualified principal residence indebtedness (subject to its statutory sunsets), insolvency exception, and Title 11 exception — as a downstream tax-software testing scenario.
No. The shipped v3 corpus is frozen and not regenerable from current code (drift confirmed 2026-05-09). Improvements to distressed-mortgage synthesis land in a future v4 release.
Download households matching this archetype as part of a Wealth Data Set.
Browse Data Sets