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FHA, FHFA Announce Extended Assistance for Homeowners

The Federal Housing Finance Agency (FHFA) announced that the GSEs—Fannie Mae and Freddie Mac—will extend several loan origination flexibilities until August 31.

These flexibilities were set to expire on July 31, 2020.

Extended flexibilities include:

  • Alternative appraisals on purchase and rate term refinance loans;
  • Alternative methods for documenting income and verifying employment before loan closing; and
  • Expanding the use of power of attorney and remote online notarizations to assist with loan closings.

Additionally, the Federal Housing Administration (FHA) announced several options for homeowners whose COVID-19 forbearance is coming to an end.

FHA clarified that none of its home retention options in the waterfall of solutions require a borrower to submit their missed payments immediately in a lump sum. The administration also clarified that servicers may not charge fees or penalties for any payments missed during a COVID-19-related forbearance.

Homeowners who were current or less than 30 days past due on their loans at the start of March and entered forbearance during the COVID-19 emergency may qualify for one of four home retention plans under the new options.

The first option is the COVID-19 National Emergency Standalone Partial Claim. This compiles all unpaid payments into a junior lien, which can be up to 30% of the total unpaid principal balance of the mortgage loan. This lien is to be paid at the end of the mortgage—when a homeowner sells or refinances their home.

The second option is the COVID-19 Owner-Occupant Loan Modification, which revises the rate and term of the existing mortgage loan.

If a borrower is not eligible for either of the first two options, the COVID-19 Combination Partial Claim and Loan Modification help homeowners by allowing a partial claim up to 30% of the unpaid principal balance and a mortgage modification to address the remaining unpaid balance.

Lastly, for borrowers who cannot be helped through the first three options in the waterfall, the COVID-19 FHA HAMP Combination Loan Modification, and Partial Claim offers modification with reduced documentation requirements.

These options are all available for owner-occupied FHA-insured loans. For FHA-insured loans that are not owner-occupied, the FHA will offer another loan modification option.

“This comprehensive set of measures will help virtually every homeowner who has requested COVID-19 forbearance,” said Acting Federal Housing 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.”

“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,” said HUD Secretary Ben Carson.

About Author: Krista F. Brock

Krista Franks Brock is a professional writer and editor who has covered the mortgage banking and default servicing sectors since 2011. Previously, she served as managing editor of DS News and Southern Distinction, a regional lifestyle publication. Her work has appeared in a variety of print and online publications, including Consumers Digest, Dallas Style and Design, DS News and DSNews.com, MReport and theMReport.com. She holds degrees in journalism and art from the University of Georgia.
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