housing

Homeowners getting additional help from FHA because of COVID-19

By Anthony SanFilippo
July 2020

The Federal Housing Administration (FHA) recently announced measures to help some homeowners overcome financial barriers that were brought on by the COVID-19 pandemic.

These home retention measures, which are immediately effective, will assist homeowners with FHA-insured single-family mortgages and help them to get current on their mortgage at the end of the COVID-19 forbearance period – assuming they were current on their mortgage as of March 1, 2020 – or were less than 30 days past due.

“Our goal throughout this crisis has been to prevent American homeowners from losing their homes through no fault of their own,” said HUD Secretary Ben Carson in a press release. “Providing more solutions now to save homes in the future is part of the Administration’s unprecedented response to the crisis and will contribute to the larger economic recovery already underway.”

Mortgage servicers are now able to use additional loss mitigation tools known as a “waterfall” to assess a homeowner’s eligibility for other retention options if they don’t qualify for FHA’s COVID-19 National Emergency Standalone Partial Claim.

That claim takes all past due amounts and puts them into a separate junior lien on the property, maxing out at 30 percent of the mortgage’s unpaid principal balance. This lien is only repayable at the end of the mortgage, which in most cases occurs during a refinancing of the mortgage, or when a home is sold.

The mortgage servicers are required to assess homeowners using this waterfall either before or at the end of their forbearance period.

For those not qualifying for the Standalone Partial Claim, homeowners may still qualify for the following:

  • COVID-19 Owner-Occupant Loan Modification – this modifies the rate and the term of the existing mortgage, giving homeowners more time and potentially a more affordable rate to pay their mortgage.
  • COVID-19 Combination Partial Claim and Loan Modification – This allows for a partial claim of up to 30 percent of the unpaid principal. Any additional money owed can be handled via the above listed mortgage modification.
  • COVID-19 FHA HAMP Combination Loan Modification and Partial Claim – this is for all homeowners who don’t qualify for any of the previous measures. It reduces the amount of documentation needed to obtain the claim.

“This comprehensive set of measures will help virtually every homeowner who has requested COVID-19 forbearance,” acting Federal Housing Commissioner Len Wolfson said in a statement. “It also provides servicers with the tailored and streamlined capabilities they need to provide assistance to homeowners as quickly and as efficiently as possible.”

The FHA is also helping homeowners who don’t occupy an FHA-insured single-family property.

For those folks, they created the COVID-19 Non-Occupant Loan Modification. This allows non-occupant borrowers who have received COVID-19 forbearance to obtain a modification to their mortgage rate and term.

None of these retention measures will require a homeowner to make a lump-sum payment at the end of the forbearance period, nor are servicers allowed to charge fees or penalties for missed mortgage payments during the borrower’s forbearance period.


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