The Federal Housing Administration (FHA) Friday issued updated options for homeowners with FHA-backed mortgages who have suffered financially as a result of the coronavirus pandemic. Representatives from the administration say these streamlined recovery options will help bring homeowners' mortgages up to date and keep people in their homes by allowing mortgage servicers to offer eligible homeowners who cannot resume making their mortgage payments a reduction in the principal and interest portion of their monthly payments.
As stated in a press release from the Department of Housing and Urban Development (HUD) and FHA, the changes announced today will provide those most in danger of losing their homes—"including lower income individuals, families of color, and young, first-time homeowners who have disproportionately suffered economic hardships due to the pandemic"—"a path to sustained recovery."
Note that, for homeowners able to resume making their existing monthly mortgage payments, FHA has established a revised COVID-19 Recovery Standalone Partial Claim, which allows mortgage payment arrearages to be placed in a zero interest subordinate lien against the property that is repaid when the mortgage terminates, usually when the homeowner refinances or sells the home.
FHA also reiterated its previous announcement that President Biden’s American Rescue Plan Homeowner Assistance Funds (HAF), administered to the States by the Department of Treasury, may be used in connection with FHA-insured mortgages or subordinate mortgages "as permitted by the jurisdiction’s HAF program" and other requirements.
“Immediately upon taking office, President Biden prioritized the nation’s public health and economic crises by passing the American Rescue Plan,” HUD Secretary Marcia Fudge elaborated. “As Americans get back to work and our economy continues to recover, we are taking targeted steps to make sure homeowners impacted financially by COVID-19 have the support they need to remain in their homes. Housing affordability is at its worst and losing your home now would devastate households. These options for FHA borrowers will ensure equitable relief and recovery to people who need it most.”
The FHA reports that its new FHA COVID-19 Recovery waterfall streamlines and revises FHA’s previous options for struggling homeowners, reduces required documentation, and allows mortgage servicers to provide greater payment reduction for eligible homeowners with FHA-insured Single Family Title II forward mortgages. Those options are intended for properties that are occupied as the homeowner’s primary residence.
For properties that are not occupied by the owner, mortgage servicers must offer eligible homeowners FHA’s COVID-19 Recovery Non-Occupant Loan Modification, which extends the term of the mortgage to 360 months, or less if requested by the homeowner, at a fixed interest rate.
Servicers may begin offering the updated options as soon as operationally feasible but must begin using the new waterfall for eligible homeowners within 90 days. Servicers must also re-review homeowners for the new COVID-19 Recovery options in circumstances where an existing home retention option has not been completed, where the homeowner was previously ineligible for a COVID-19 home retention option, or if the homeowner has re-defaulted after a COVID-19 home retention option.
Please see HUD/FHA's complete list of loss mitigation tools here and the Friday's news release in full at HUD.gov.