The Federal Housing Administration (FHA) has announced more ways to help single-family homeowners who are financially impacted by the pandemic to bring their mortgage current at the end of their COVID-19 forbearance.
Effective immediately, mortgage servicers will be able to use 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.
These 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,” Department of Housing & Urban Development (HUD) Secretary Ben Carson said in a news release. “Providing more solutions now to save homes in the future is part of the administration’s unprecedented response to the crisis and will contribute to the larger economic recovery already underway.”
FHA’s waterfall for homeowners who occupy their FHA-insured single-family residences now includes requiring servicers 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 percent of the mortgage’s unpaid principal balance. This junior lien is repayable only when the mortgage ends, which, for most borrowers, is when they refinance or sell their 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 are for homeowners who are not eligible for either of the first two solutions. It allows for the use of a partial claim up to 30 percent of the unpaid principal balance; any other amounts owed are handled through a mortgage modification.
- The COVID-19 FHA HAMP Combination Loan Modification and Partial Claim are for homeowners who are not eligible for any other home retention solution. It reduces 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,” acting FHA Commissioner Len Wolfson said in the release. “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 do not currently occupy their FHA-insured single family property, FHA announced the COVID-19 Non-Occupant Loan Modification, which allows non-occupant borrowers who have received COVID-19 forbearance to obtain a modification to their mortgage rate and term.
None of FHA’s home retention measures require a borrower to make a lump-sum payment at the end of the forbearance period. Additionally, servicers are not permitted to charge fees or penalties for missed mortgage payments while the borrower is in a forbearance period.