WASHINGTON – 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. Read FHA’s mortgagee letter.
FHA’s revised procedures streamlines the process servicers use to engage borrowers, specifically when evaluating them for the FHA-Home Affordable Modification Program (FHA-HAMP). These changes will 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’s financial condition and special forbearance agreements.
Specifically, 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 four-month minimum;
- End the traditional stand-alone Loan Modification option so borrowers can access the FHA-HAMP option, with its greater payment relief, sooner; and
- Eliminate the minimum 12-month delinquency term to qualify for FHA’s special forbearance option. This will allow servicers extend this option to unemployed households sooner in their delinquency.