FHA falling behind on helping seriously delinquent borrowers
While the Federal Housing Administration prepares to roll out its new loss mitigation guidelines for servicers, it's falling behind this year on the number of seriously delinquent borrowers it will help with early intervention.
Through the end of May, or eight months into its fiscal year 2012, the FHA placed about 84,023 seriously delinquency borrowers into loss mitigation program designed to reinstate their loans, according to Sharon Lundstrom, director of the National Servicing Center at the Department of Housing and Urban Development. At a rate of around 10,503 per month, the FHA will help 126,035 its full fiscal year, which ends in Sept 30.
In fiscal year 2011, the FHA’s loss mitigation program helped 212,890 seriously delinquent borrowers, 69% more than the current year’s projected total, with early delinquency intervention such as a loan modification or selling the loan.
Non-seriously delinquency borrowers placed into FHA loss mitigation program totaled 187,275 through the end of May, meaning that number will probably hit 280,913 for the entire fiscal year 2012 based on monthly output so far. Last year, 282,794 were placed into the program, about the same as this year’s estimated total.
Speaking at a SourceMedia loss mitigation conference in Dallas, Lundstrom said the FHA’s new guidelines will reduce losses to its insurance fund by defining parameters for each loss mitigation action and by establishing standards for minimum payment relief for loan modifications.
Lundstrom said the new home retention options could roll out as early as the end of July or mid-August.
The new guidelines eliminate the 12-month restriction on the amount of principal, interest, taxes and insurance that can be included in partial claims. More borrowers will be eligible for loss mitigation assistance. The guidelines also permit borrowers who were initially unsuccessful in completing trial payment plans to reapply for standard loan modifications or if their financial circumstances changed.
The inventory of repossessed homes held by HUD reached a three-year low because of servicing and foreclosure delays. But the more than 707,000 severely delinquent FHA-backed mortgages hovered around a record high since the start of the year.
So to give borrowers more options to stay in their homes than government programs currently allow, the FHA announced it will sell 5,000 mortgages in the foreclosure process every quarter beginning in September.