Loss mitigation options will be expanded and enhanced for borrowers struggling to pay on their Federal Housing Administration-(FHA) insured mortgages. Specifically, the temporary COVID-19 recovery loss mitigation options will be extended to all eligible borrowers, including non-occupant borrowers, regardless of their claimed hardship, according to an FHA release.
Beginning April 30, servicers will be required to assess all borrowers who are in default or who are at risk of defaulting using these options.
Another policy change to help borrowers was updating the partial claim components of both FHA’s COVID-19 recovery standalone partial claim and the COVID-19 recovery modification by raising the maximum partial claim amount from 25 percent of the mortgage’s unpaid principal to the maximum 30 percent allowed by statute. This will help more borrowers who cannot return to making their current mortgage payment reduce their mortgage balance to a level that permits them to achieve a target payment reduction of at least 25 percent, the agency stated.
“We are committed to ensuring that no FHA borrower experiences foreclosure unnecessarily,” Assistant Secretary for Housing and Federal Housing Commissioner Julia Gordon said in a release. “FHA’s COVID-19 forbearances and streamlined COVID-19 loss mitigation options have successfully helped millions of struggling borrowers in the last two fiscal years alone. Our action today lets us capitalize on what we have learned through the pandemic to continue helping borrowers avoid foreclosure, regardless of the nature of their hardship.”
Other enhancements to the FHA loss mitigation options include extending their ability for 18 months past the April 30 mandatory effective date, expanding the definition of imminent default to include borrowers who qualified or used U.S. Department of the Treasury’s Homeowner Assistance Funds, and providing incentive payments to servicers for successful completion of the COVID-19 recovery options.