FHA Changes Should Help Most Owners Keep Their Home
WASHINGTON – The Federal Housing Administration (FHA) announced additional measures (Mortgagee Letter 2020-22) to help homeowners with single-family mortgages keep their home. The updated measures help homeowners financially impacted by the COVID-19 pandemic to bring a mortgage current at the end of their COVID-19 forbearance.
FHA says mortgage servicers now have “an expanded menu of loss mitigation tools, known as a ‘waterfall,’ to assess homeowners’ eligibility for other options to bring their mortgages current if they do not qualify for FHA’s COVID-19 National Emergency Standalone Partial Claim.” The options are available for homeowners whose mortgages were current or less than 30 days past due as of March 1, 2020.
“Our goal throughout this crisis has been to prevent American homeowners from losing their homes through no fault of their own,” says Department of Housing and Urban Development (HUD) Secretary Ben Carson.
A waterfall requires loan servicers of FHA-backed single-family homes to assess homeowners for the following, at or before the end of their forbearance period:
- The COVID-19 National Emergency Standalone Partial Claim takes all past due mortgage amounts and puts them in a separate, junior lien of up to 30% of the mortgage’s unpaid principal balance. This junior lien is only repayable when the mortgage ends, which, for most borrowers, is when they refinance or sell the home.
- The COVID-19 Owner-Occupant Loan Modification is for homeowners who do not qualify for the COVID-19 Standalone Partial Claim. It modifies the rate and term of the existing mortgage.
- The COVID-19 Combination Partial Claim and Loan Modification is for homeowners who are not eligible for either of the first two solutions. It allows for a partial claim up to 30% of the unpaid principal balance. Other amounts owed are handled through a mortgage modification.
- The COVID-19 FHA HAMP Combination Loan Modification and Partial Claim is for homeowners who aren’t eligible for any other home retention solution by reducing the amount of documentation needed to obtain a COVID-19 FHA HAMP Combination Loan Modification and Partial Claim.
“This comprehensive set of measures will help virtually every homeowner who has requested COVID-19 forbearance,” says Acting FHA Commissioner Len Wolfson. “It also provides servicers with the tailored and streamlined capabilities they need to provide assistance to homeowners as quickly and as efficiently as possible.”
For borrowers who don’t currently occupy their FHA-insured single-family property, FHA announced the COVID-19 Non-Occupant Loan Modification. It allows non-occupant borrowers who have received COVID-19 forbearance to obtain a modification to their mortgage rate and term.
No FHA home retention measure requires a borrower to make a lump-sum payment at the end of the forbearance period. Additionally, servicers are not allowed to charge fees or penalties for missed mortgage payments while the borrower is in forbearance.
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