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FHA expands Covid-19 loss-mitigation options

Federal Issues Covid-19 FHA HUD Loss Mitigation Mortgages

Federal Issues

On July 8, the FHA announced additional home retention measures to assist homeowners with FHA-insured mortgages who are financially impacted by the Covid-19 pandemic. According to Mortgagee Letter 2020-22, effective immediately, mortgage servicers are able to offer a new suit of loss mitigation “waterfall” options to homeowners whose mortgages were current or less than 30 days past due as of March 1. ML 2020-22 updates existing options previously outlined in ML 2020-06 (covered by InfoBytes here) and introduces several new measures including (i) a standalone partial claim, not to exceed the 30 percent maximum statutory value; (ii) an owner-occupant loan modification (for homeowners who do not qualify for a standalone partial claim) that will modify the rate and term of the existing mortgage at the end of the Covid-19 forbearance period; (iii) a combination partial clam and loan modification (for homeowners who are ineligible for either of the first two options); and (iv) a FHA Home Affordable Modification Program combination loan modification and partial claim with reduced documentation, which may include principal deferment and is for homeowners who are ineligible for the other home retention solutions. ML 2020-22 also provides that borrowers who do not currently occupy their FHA-insurance single family property may obtain a modification to their mortgage rates and terms under a Covid-19 non-occupant loan modification.

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