FHA expands mortgage payment assistance options

The Federal Housing Administration (FHA) announced it is expanding and enhancing its set of loss mitigation options used to help borrowers struggling to make payments on their FHA-insured mortgages. These expansions are derived from loss mitigation options made available during the COVID-19 pandemic.

For all FHA-insured Single Family Title II forward mortgages, FHA will:

• Extend temporary COVID-19 recovery loss mitigations options to all eligible borrowers, including non-occupant borrowers, regardless of the nature of their hardship. Servicers will be required to assess all borrowers who are in default or who are at risk of defaulting using FHA’s COVID-19 recovery loss mitigation “waterfall” of options.
• Update 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 balance to the maximum 30 percent allowed by federal statute.
• Extend the availability of FHA’s COVID-19 recovery loss mitigation options for 18 months past the April 30, mandatory effective date for servicers. The temporary COVID-19 recovery options were set to expire at the official end of the COVID-19 national emergency. This change removes the uncertainties associated with the timing of the end of the national emergency.
• Expand the definition of imminent default to include borrowers who qualified for or used the Treasury Department’s Homeowner Assistance Funds (HAF). With this change, servicers will be able to offer loss mitigation options to borrowers who qualified for or used HAF funds and may no longer technically be delinquent but require further assistance to avoid redefault.
• Provide incentive payments to servicers for the successful completion of COVID-19 recovery options. Incentive payments are part of FHA’s standard loss mitigation options but are not currently available to servicers for COVID-19 recovery options. These incentives are meant to help compensate servicers for the cost and effort of assisting borrowers with COVID-19 recovery loss mitigation options.

“We are committed to ensuring that no FHA borrower experiences foreclosure unnecessarily,” said Assistant Secretary for Housing and Federal Housing Commissioner Julia Gordon. “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.”

The mandatory effective date of these changes is April 30, but mortgage servicers are able to begin offering these options to borrowers immediately.