FHA Restates COVID-19 Reduction Choices for Reverse, Ahead Mortgage Debtors
The Federal Housing Administration (FHA) released a new informational notice on Friday about relief for FHA-insured mortgage borrowers affected by the COVID-19 coronavirus pandemic, offering new guidance specifically for forward mortgage borrowers while ensuring that that reverse mortgage borrower know all of the options that are available to them.
The agency reiterated the expansion of the loss-limiting options initially introduced by the White House before it was passed by the U.S. Department of Housing and Urban Development (HUD) and the FHA, and also announced that in addition to the release, new loss-limiting options specifically for forward mortgage borrowers a new mortgage letter (ML) will be provided. The new ML is reorganizing the FHA COVID-19 Recovery Waterfall by streamlining the FHA’s previous options for troubled homeowners.
This will help reduce the documentation required and allow mortgage service providers to provide a greater reduction in payments to eligible homeowners with FHA-insured single-family Title II forward mortgages.
Options available for HECM borrowers
A fact sheet reiterating the options available to mortgage borrower reversal is reminding servicers of FHA-insured HECMs that if the homeowner provides such assistance, they must offer an extension to homeowners suffering financially from COVID-19 requested. The FHA extended the time frame for homeowners to request an extension from their mortgage administrator through September 30, 2021.
The FHA also previously extended the maximum allowable time frames for COVID-19 renewals based on the date of the original application. For all requested extensions from March 1, 2020 to June 30, 2021, there is both an initial extension period of 6 months and an additional extension period of up to a further 6 months for those who request this. For extensions requested between July 1 and September 30, 2021, only the initial extension period of up to 6 months is permitted. There is no additional period of six months available for such borrowers.
In addition, according to the FTA, no extension period may go beyond June 30, 2022, according to the leaflet.
In a guide specifically for mortgage borrowers, the FHA requires financially affected borrowers to contact their loan service provider immediately if they need help with any of these outlined extensions.
“The FHA urges those who are in arrears with their mortgage payments or are having difficulty meeting the terms of their reverse mortgage or Home Equity Conversion Mortgage (HECM) who have not yet contacted their mortgage servicer to do so immediately,” says FHA in its newly released factsheet. “By contacting their manager, homeowners can obtain a mortgage deferral or HECM extension.”
Late last month, Joe Biden’s administration announced that a moratorium on foreclosures and evictions, which expired in late June, would be extended for an additional 30 days through July 31, 2021 for Veterans Affairs (VA), U.S. Department of Agriculture (USDA) and Consumer Financial Protection Bureau (CFPB) in coordination with the White House.
Shortly thereafter, HUD announced an extension of the foreclosure and eviction moratorium for borrowers with FHA-insured single-family mortgages through July 31, as well as another extension of the start dates of the original COVID-19 forbearance and HECM extensions to provide additional COVID-19 forbearance and HECM extension for certain borrowers. For HECM borrowers who continue to be negatively affected by the effects of the pandemic, the FHA is extending the schedule for such homeowners to request an extension of the status of a loan before a servicer can call it.
For HECM borrowers with loans already due and payable by the servicer, the homeowner’s renewal requests must be approved by that servicer for any deadline related to foreclosure, “and the application of up to six months if the application between July 1, 2021 and September 30, 2021, “stated FHA in ML 2021-15.
For HECMs that have already received an extension between July 1 and September 30, 2020, the FHA will provide an additional, individual three-month extension period if necessary and especially if a borrower requests such an extension from the servicer.
HUD expanded an additional form of relief shortly thereafter, this time to give industry partners additional opportunity to follow flexible guidelines on self employment verification and rental income verification for single-family Title II forward mortgage and HECM programs ML 2021 to use. 16.
Servicers have praised the federal response
With initial moratoriums in place last March at the start of the pandemic and the emergency declared by then-President Donald Trump, servicers have largely praised the government’s efforts to support HECM borrowers while emphasizing the need for lenders to convey the importance to their customers to contact their service providers if the available reliefs are necessary for their personal financial situation.
“When the COVID-19 Forbearance was first issued in April 2020, we all had hopes that the pandemic would be well under control long before that,” said Leslie Flynne, SVP of Loan Servicing at Reverse Mortgage Solutions (RMS) in January after at RMD the Biden government introduced their first forms of HECM aid. “The fact that it has now been extended […] shows that our borrowers are not safe from this virus and that HUD reacts appropriately. “
HUD and FHA insist that they will continue to monitor the evolving pandemic situation and provide assistance as necessary, according to FHA Deputy Assistant Secretary for Single Family Homes Julienne Joseph.
“FHA and mortgage service providers share a common goal of helping as many homeowners as possible return to sustainable home ownership and the FHA team will continue to closely monitor the performance of our loss mitigation options to ensure that our policies successfully meet the needs of the affected homeowners through COVID-19, “Joseph said in a statement.