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FHA expands mortgage eligibility for Covid-affected borrowers
On July 7, FHA announced expanded mortgage eligibility for qualifying borrowers who previously experienced employment gaps or loss of income due to the Covid-19 pandemic. Under Mortgagee Letter (ML) 2022-09, salaried and hourly wage-earners, as well as self-employed individuals impacted by a Covid-19 related economic event (defined “as a temporary loss of employment, temporary reduction of income, or temporary reduction of hours worked during the Presidentially Declared COVID-19 National Emergency”), who now have stable income will have a greater opportunity to purchase a home using affordable FHA-insured mortgage financing. Specifically, ML 2022-09 updates calculation guidelines for a borrower’s effective income under certain sections in the Single-Family Housing Policy Handbook 4000.1. While ML 2022-09’s provisions are effective for all case numbers assigned on or after September 5, 2022, lenders may begin using the policies immediately. According to FHA Commissioner Julia Gordon, the changes further agency efforts “to facilitate recovery from COVID-19 and support access to homeownership, particularly for populations most deeply impacted by the pandemic.” Gordon noted that the pandemic impacted “the livelihoods of tens of millions of workers in this country, particularly workers of color and those at the lower end of the wage scale.”
FHA issues temporary partial waivers for specific HECM policies
On June 23, FHA announced FHA INFO 2022-64 to issue the following temporary partial waivers to its Home Equity Conversion Mortgage (HECM) policies for senior homeowners impacted by the Covid-19 pandemic who continue to experience significant financial difficulties. Specifically, the first temporary partial waiver concerns Mortgagee Letter 2015-11. FHA notes that its waiver “allows mortgagees to offer repayment plans to HECM borrowers with unpaid property charges regardless of their total outstanding arrearage." The second waiver—concerning Mortgagee Letter 2016-07—“permits mortgagees to seek assignment of a HECM immediately after using their own funds to pay property taxes and insurance on or after March 1, 2020, by temporarily eliminating the three-year waiting period for such assignments.” Both waivers are effective through December 31.
FDIC, HUD announce New Mexico wildfire disaster relief
On May 9, the FDIC issued FIL-19-2022 to provide regulatory relief to financial institutions and help facilitate recovery in areas of New Mexico affected by wildfires and straight-line winds that began on April 5. In the guidance, the FDIC writes that, in supervising institutions affected by the wildfires, it will consider the unusual circumstances those institutions face. The guidance suggests that institutions work with impacted borrowers to, among other things, (i) extend repayment terms; (ii) restructure existing loans; or (iii) ease terms for new loans to those affected by the severe weather, provided the measures are done “in a manner consistent with sound banking practices.” Additionally, the FDIC notes that institutions may receive favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery. The FDIC will also consider relief from certain reporting and publishing requirements.
Separately, on May 6, HUD announced disaster assistance available to certain counties impacted by the New Mexico wildfires and straight-line winds, providing foreclosure relief and other assistance to affected homeowners. Specifically, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties and is making FHA insurance available to those victims whose homes were destroyed or severely damaged. Additionally, HUD’s Section 203(k) loan program will allow individuals who have lost homes to finance the purchase of a house, or refinance an existing house and the costs of repair, through a single mortgage. The program also allows homeowners with damaged property to finance the repair of their existing single-family homes. Furthermore, HUD is allowing administrative flexibilities to community planning and development grantees, as well as to public housing agencies and Tribes.
HUD announces Massachusetts disaster relief
On April 20, HUD announced disaster assistance for certain areas in Massachusetts impacted by a severe winter storm from January 28 to January 29. The disaster assistance follows President Biden’s major disaster declarations on April 18. According to the announcement, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties effective April 18 and is making FHA insurance available to victims whose homes were destroyed or severely damaged, such that “reconstruction or replacement is necessary.” HUD’s Section 203(k) loan program enables individuals who have lost homes to finance a home purchase or to refinance a home to include repair costs through a single mortgage. The program also allows homeowners with damaged property to finance the repair of their existing single-family homes. Furthermore, HUD is allowing administrative flexibilities to community planning and development grantees, as well as to public housing agencies and Tribes.
HUD offers 40-year mortgage modification
On April 18, HUD issued Mortgagee Letter 2022-07, which establishes a 40-year loan modification as part of the Covid-19 Recovery Loss Mitigation Options. According to HUD, the new option is “designed to help those borrowers who cannot achieve a minimum targeted 25 percent reduction in the Principal and Interest portion of their mortgage payment through FHA’s existing 30-year mortgage modification with a partial claim.” Mortgage servicers may start implementing the new 40-year modification with partial claim option immediately; however, servicers must offer this solution to eligible borrowers with FHA-insured Title II forward mortgages, except those funded through Mortgage Revenue Bonds under certain circumstances, within 90 calendar days. As previously covered by InfoBytes, HUD published a proposed rule to increase the maximum term limit allowable on loan modifications for FHA-insured mortgages from 360 to 480 months. Comments are due by May 31.
HUD outlines plan for reducing the racial homeownership gap
On April 14, HUD released its first ever Equity Action Plan (the Plan) to address procurement and resources for the agency’s Office of Fair Housing and Equal Opportunity in coordination with President Biden’s 2021 Executive Order 13985 on “Advancing Racial Equity and Support for Underserved Communities Through the Federal Government.” Among other things, the Plan requests funding increases to process, investigate, and resolve fair housing complaints and “to improve capacity to pursue Secretary-initiated investigations and compliance reviews” that do not necessarily stem from public complaints. The Plan also outlines HUD’s approach to reducing the racial homeownership gap, including future rulemakings to implement the Fair Housing Act’s mandate to Affirmatively Further Fair Housing (covered by InfoBytes here) as well as other actions to promote equity. HUD also plans to engage in a range of actions in partnership with federal and non-federal organization to maximize homeownership for creditworthy first-time homebuyers and preserve homeownership for existing homeowners. This includes (i) “improving the efficiency of the [Federal Housing Administration] program by leveraging technologies and removing perceived bias of the program so individuals, lenders, and others can use it more with first time, lower income home buyers”; (ii) increasing outreach to non-traditional lenders; and (iii) considering ways “to increase the availability of small-dollar mortgage loans by addressing the financial and operational barriers limiting origination of these loans.” HUD intends to continue to monitor data on borrowers to determine statistical changes in Black and Hispanic households that access FHA-insured loans and the rest of the mortgage market, and will track FHA lending activity in underserved markets.
HUD proposes 40-year term for loan modifications
On April 1, HUD published a proposed rule in the Federal Register to increase the maximum term limit allowable on loan modifications for FHA-insured mortgages from 360 to 480 months. According to the proposed rule, the update would allow mortgagees to provide a 40-year loan modification option to borrowers who may not qualify for loss mitigation options and is intended to help borrowers experiencing a financial hardship, including those impacted by the Covid-19 pandemic, obtain affordable monthly payments. The proposed rule noted that “[i]ncreasing the maximum term limit to 480 months would allow mortgagees to further reduce the borrower’s monthly payment as the outstanding balance would be spread over a longer time frame, providing more borrowers with FHA-insured mortgages the ability to retain their homes after default.” Additionally, the proposal would align FHA with Fannie Mae and Freddie Mac, “which both currently provide a 40-year loan modification option.” Comments are due by May 31.
HUD offers disaster relief for homeowners in Puerto Rico
On March 29, HUD announced disaster assistance for certain areas in Puerto Rico impacted by a severe storm, flooding, and landslides from February 4 to February 6. The disaster assistance follows President Biden’s major disaster declarations on March 29. According to the announcements, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties and is making FHA insurance available to victims whose homes were destroyed or severely damaged, such that “reconstruction or replacement is necessary.” HUD’s Section 203(k) loan program enables individuals who have lost homes to finance a home purchase or to refinance a home to include repair costs through a single mortgage. The program also allows homeowners with damaged property to finance the repair of their existing single-family homes. Furthermore, HUD is allowing administrative flexibilities to community planning and development grantees, as well as to public housing agencies.
District Court denies defendants summary judgment over FCA violations
On March 16, the U.S. District Court for the Eastern District of Texas denied a motion for summary judgment by a mortgage servicer relating to False Claims Act (FCA) claims alleging false certifications of compliance to obtain payment under three different government programs: Treasury’s Home Affordable Modification Program (HAMP), FHA HAMP, and VA HAMP. According to the memorandum opinion and order, the relator, a former loss-mitigation specialist at the mortgage servicer, alleged that the mortgage servicer engaged in widespread dual tracking, continuously moving homeowners’ mortgages through the foreclosure process even as the defendants were supposed to be evaluating the mortgages for loss mitigation options and HAMP. The plaintiff further alleged that “the dual tracking led many homeowners to lose their homes in foreclosure when foreclosure should have been suspended during the resolution of modification and other workout processes,” and that the defendants “knowingly lacked adequate HAMP systems, processes, staffing, and training.”
The defendants argued that, “notwithstanding industrywide difficulties, publicly available service assessments and third-party reviews show that [the mortgage servicer was] one of the highest-rated servicers participating in HAMP []. Further, though Treasury had the power to withhold incentives for HAMP non-compliance, Treasury never did so and consistently paid HAMP incentive payments to [the mortgage servicer] until the program expired.” The mortgage servicer also argued that summary judgment was appropriate for several reasons; (i) the court lacks jurisdiction to consider any of the relator’s claims under the FCA’s first-to-file bar; (ii) the relator’s claims fail because he cannot establish one or more of the required elements as to each claim; and (iii) the relator’s VA claim fails because the he cannot cite to any evidence of a certification by the mortgage servicer to the VA, and thus cannot demonstrate a false statement or fraudulent conduct. The court held that, pursuant to Fifth Circuit precedent, the first-to-file rule is inapplicable here because this case was filed by the same relator in a New York district court. With respect to the remaining claims, the court held that summary judgment is inappropriate where, as here, there exist genuine issues of material fact.
HUD announces disaster relief for homeowners in several states
On March 16, HUD announced disaster assistance for certain areas in Virginia and Tennessee (see here and here) impacted by severe winter storms. The disaster assistance follows President Biden’s major disaster declarations on March 11. According to the announcements, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties and is making FHA insurance available to victims whose homes were destroyed or severely damaged, such that “reconstruction or replacement is necessary.” HUD’s Section 203(k) loan program enables individuals who have lost homes to finance a home purchase or to refinance a home to include repair costs through a single mortgage. The program also allows homeowners with damaged property to finance the repair of their existing single-family homes. Furthermore, HUD is allowing administrative flexibilities to community planning and development grantees, as well as to public housing agencies and Tribes.
On March 18, HUD announced disaster assistance for certain areas in Maine impacted by a severe storm and flooding. The disaster assistance follows President Biden’s major disaster declarations on March 15. According to the announcements, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties and is making FHA insurance available to victims whose homes were destroyed or severely damaged, such that “reconstruction or replacement is necessary.” HUD’s Section 203(k) loan program enables individuals who have lost homes to finance a home purchase or to refinance a home to include repair costs through a single mortgage. The program also allows homeowners with damaged property to finance the repair of their existing single-family homes. Furthermore, HUD is allowing administrative flexibilities to community planning and development grantees, as well as to public housing agencies and Tribes.