August 30, 2016
The FHA has issued a press release announcing changes to its loss mitigation program guidelines to help borrowers avoid foreclosure and remain in their homes in times of financial difficulty.
According to HUDNo.16-127, “The Federal Housing Administration (FHA) today announced new procedures to strengthen the process mortgage servicers use to help struggling families avoid foreclosure and remain in their homes. FHA is streamlining its loss mitigation protocols that servicers must use when evaluating and deploying home retention options, foreclosure alternatives that allow delinquent borrowers to retain their home.”
By way of background, the FHA official site (in Mortgagee Letter 2016-14) explains, “The evolution of FHAs loss mitigation guidance has also led to improved consumer engagement, the streamlining of FHAs Pre-Foreclosure Sale option, and a new loan modification by which Mortgagees provide borrowers with a more sustainable monthly mortgage payment.”
The loss mitigation program referred to above was created in 2009, “at the height of the economic crisis”, and is known as the FHA Home Affordable Modification Program or FHA-HAMP mortgage.
Under the new guidelines, the goals include an effort to “reduce the number of steps that a servicer and borrower must take to resolve a delinquency and enter into a loss mitigation home retention product. In addition, FHA is removing certain obstacles that will allow servicers greater flexibility for evaluating an unemployed borrower for a special forbearance agreement” according to HUDNo.16-127.
How will it all work? According to the press release, the FHA will:
-Require servicers to convert successful 3-month trial modifications into permanent modifications within 60 days instead of the average four-to-six months;
-Allow borrowers with three missed mortgage payments to qualify for a partial claim to bring their arrearages current versus the previous requirement for a minimum of four missed payments;
-End the traditional stand-alone Loan Modification option so struggling borrowers can access the FHA-HAMP option, with its greater payment relief, sooner; and
-Eliminate the required 12-month term for FHAs special forbearance option. This will allow servicers to offer this option to more unemployed households.
We’ll provide further information about the FHA HAMP program in a future blog post. You can also browse the FHA official site’s HAMP page at http://portal.hud.gov/hudportal/HUD?src=/hudprograms/fhahamp
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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