FHA Provides COVID-19 Restoration Choices For Ahead And Reverse Debtors
The Federal Housing Administration announced additional COVID-19 recovery options to help homeowners in distress due to the pandemic.
According to the FHA, the simplified COVID-19 recovery waterfall enables mortgage service providers to offer eligible homeowners who cannot resume their mortgage payments a reduction in the principal and interest portion of their monthly payments. The recent changes will provide guidance to deep and sustainable recovery for those most at risk of losing their homes, including those on low incomes, colored families, and young homeowners who have first faced economic hardship from the pandemic .
For homeowners who can resume their existing monthly mortgage payments, the FHA has introduced a revised standalone partial entitlement for COVID-19 recovery. In addition, the FHA affirms today that President Biden’s American Rescue Plan Homeowner Assistance Fund (HAF), administered by the State Treasury, can be used in conjunction with FHA-insured or subordinated mortgages, such as the HAF program the jurisdiction allows and other requirements.
“Immediately after taking office, President Biden made public health and the country’s economic crisis a priority by adopting the US rescue plan,” said Marcia L. Fudge, Secretary of State for Housing and Urban Development. “As Americans return to work and our economy continues to recover, we are taking targeted steps to ensure homeowners financially affected by COVID-19 get the support they need to stay in their homes. Housing affordability is worst, and losing your home would devastate households. These FHA borrower options will ensure equitable relief and recovery for the people who need them most. ”
The new waterfall to recover from COVID-19 includes a separate partial claim to recover from COVID-19. This is for homeowners who can resume their ongoing mortgage payments. The COVID-19 Recovery Standalone Part Claim allows mortgage arrears to be placed in an interest-free subordinated lien on the property that is repaid when the mortgage ends, usually when the homeowner refinances or sells the home, according to the FHA.
Additionally, the COVID-19 recovery modification is intended for homeowners who cannot resume their current monthly mortgage payments. The COVID-19 Recovery Modification extends the term of the mortgage to 360 months at a fixed rate and aims to reduce the borrower’s monthly principal and interest portion of his monthly mortgage payment. The COVID-19 recovery change must include a partial claim if the homeowner has funds for partial claims.
The administration also urges those who are behind with their mortgage payments or are having difficulty meeting the terms of their reverse mortgage or Home Equity Conversion Mortgage (HECM) and who have not yet contacted their mortgage servicer to do so immediately.
Homeowners can get a mortgage deferral or HECM extension simply by contacting their administrator. For FHA forward mortgages, the FHA is also asking homeowners to look out for notices from their mortgage manager regarding the new COVID-19 ALM or their mortgage update.
Read about the FHA’s new COVID-19 recovery options for forward and reverse mortgage borrowers.