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Financial Services Law Insights and Observations

HUD issues mortgage relief for FHA single-family homeowners

Federal Issues Covid-19 HUD FHA Debt Relief Mortgages CARES Act FCRA

Federal Issues

On April 1, HUD issued guidance detailing mortgage relief options for single-family homeowners with FHA mortgages impacted by Covid-19. HUD explains that the CARES Act requires mortgage servicers to provide mortgage relief to borrowers with options for payment deferral or payment forbearance “for up to six months, and must provide an additional six months of forbearance if requested by the borrower.” In addition, Mortgagee Letter 2020-06 states that borrowers with forbearance plans will have all late charges, fees, and penalties waived as long as the plans are in effect. Although servicers are required to comply with the FCRA, the Mortgagee Letter instructs servicers not to report a borrower as delinquent if the borrower is in a Covid-19 forbearance plan and “performing as agreed,” and further suggests that servicers should “consider the impacts” of Covid-19 “on Borrowers’ financial situations and any flexibilities a Servicer may have under the FCRA.” The Mortgagee Letter also provides a mortgage relief option for “seniors with Home Equity Conversion Mortgages” who can request an extension of up to six months initially, which may be extended up to an additional six months. This mortgage relief option also requires that all late fees, charges, and penalties be waived during the extension period. Borrowers with owner-occupied properties who are granted forbearance plans must also be evaluated for a “C[ovid]-19 National Emergency Standalone Partial Claim” prior to the end of the plan. This option will allow borrowers to reinstate their loans after the plan ends.