Mortgagee Letter 2019-14, published by the Federal Housing Administration, revises loss mitigation options offered to those with FHA-insured mortgage loans whose property and/or place of employment is located within a Presidentially-Declared Major Disaster Area (PDMDA). FHA clarified, “The ML is designed to provide immediate loss mitigation and other relief options to FHA borrowers in all PDMDAs and help them stay in their homes while mitigating losses to FHA’s Mutual Mortgage Insurance Fund (MMIF).”
FHA will now make permanent:
- The Disaster Standalone Partial Claim option to help eligible borrowers on a forbearance plan resume their pre-disaster mortgage payments and avoid payment shock;
- Streamlined income documentation and revised loss mitigation procedures for a Disaster Loan Modification option and Disaster Standalone Partial Claim option; and
- A Trial Payment Plan as an alternative to providing income documentation for these disaster loss mitigation options.
Among other items, the following handbook sections have been revised:
Eligibility for Loan Modification without Financial Evaluation
Mortgagees may now use a recent payment, W-2, bank statement or other documentation to confirm borrower employment and income. Alternatively, in lieu of providing documentation, the borrower can complete a three month Trial Payment Plan (TPP) to evidence that their income has returned to pre-disaster levels.
Terms of the Loan Modification
The TPP requirement has been eliminated, the term of the modified mortgage may be less than 360 months from the modification effective date and the interest rate is allowed to be equal to or less than the Market Rate.
Disaster Standalone Partial Claim
In order to provide a streamlined alternative solution for disaster-affected borrowers who do not qualify for a Disaster Loan Modification, mortgagees may use the Disaster Standalone Partial Claim. A signed TPP is no longer required. Borrowers can make three consecutive monthly mortgage payments as an alternative to income and employment documentation.
Disaster Loss Mitigation Permanent Retention Options
Borrowers can now only receive one Permanent Loss Mitigation Home Retention Option for a PDMDA.
Required Financial Evaluation for other Loss Mitigation Home Retention Options
Section was modified to apply to borrowers who do not qualify for either the Disaster Loan Modification or Disaster Standalone Partial Claim Options
This guidance may be implemented immediately; however, these provisions must be implemented no later than November 30, 2019. Updates will be incorporated into the HUD Single Family Housing Policy Handbook 4000.1.
Proctor will continue to monitor these topics and provide updates as they occur.