July 17, 2020
The FHA and HUD have proposed an overhaul of its single-family mortgage loan program with an eye on “expediting homeowner assistance and achieving operational efficiencies” designed to lower the costs of servicing FHA mortgages.
The FHA has proposed a set of policies that–while not currently adapted and are under a review and industry comment period–are designed to “remove unnecessary barriers for homeowners seeking mortgage payment relief,” according to an FHA press release as well as “achieve operational consistency with industry standard best practices”, details of which are listed below.
These proposed alterations come at a time of increased uncertainty as coronavirus outbreaks have increased across a large number of states and the threat of extended or additional lockdown measures looking large.
The FHA and HUD seek to improve the ability of borrowers to keep their homes during an economic and health-related crisis.
FHA policies have been temporarily modified during COVID-19, but the continued problems with the pandemic are forcing many agencies to find ways to further refine existing policy to get through the public health emergency.
“Our proposed policy changes will strengthen servicers’ ability to keep families experiencing financial challenges in their homes. They reduce the unnecessary barriers that often impede the delivery of timely borrower assistance,” according to Acting Federal Housing Commissioner Len Wolfson.
These changes are currently in draft form and would be (if approved) added to HUD 4000.1, the FHA Single Family Home Loan Handbook. The additions/revisions would include:
- Revising the standard “servicing loss mitigation home retention waterfall” to ensure borrowers are assessed for the solution that is most likely to best help them avoid foreclosure;
- Eliminating unnecessary and time-consuming borrower documentation requirements for Trial Payment Plans;
- Modifying other servicing and operational policies, including the allowable fee structures, that provide more consistency between FHA policies and those used by the private market and the Government Sponsored Enterprises.
FHA officials went on the record about these changes, saying the latest proposal is part of the FHA’s goal to update loan servicing guidelines to maintain efficiency while protecting the program from financial risk.
FHA Deputy Assistant Secretary for Single Family Housing Joe Gormley is quoted on the FHA official site, saying, “These revisions, if implemented, will address key challenges our business stakeholders, industry groups, and borrowers have communicated to us over the last several years.”
At the time of this writing, what is proposed is not effective policy, and does not impact FHA’s special COVID-19 home retention options. To give feedback on the proposals, “Interested stakeholders must submit feedback using the instructions and submission method posted on FHA’s Single Family Housing Drafting Table” found on the FHA/HUD official site.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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