Mortgage

FHA expands on foreclosure relief for 2017 disaster victims

Offers additional options across various disaster states

The Federal Housing Administration announced Thursday it is extending its foreclosure relief for the victims of 2017’s natural disasters.

It plans to expand mortgage relief to FHA-insured homeowners who live or work in areas impacted by Hurricanes Harvey, Irma and Maria as well as the California wildfires and subsequent flooding and mudslides.

The FHA is instructing mortgage servicers to offer additional options to disaster victims in Texas, Louisiana, Georgia, Florida, South Carolina, California, Puerto Rico and the U.S. Virgin Islands. The options will allow them to remain in their homes while reducing losses that would have impacted the FHA’s Mutual Mortgage Insurance Fund.

The FHA is introducing its new Disaster Standalone Partial Claim option, which would help struggling borrowers to resume their mortgage payments without a payment shock. The option wraps up to 12 months of missed mortgage payments into an interest-free second loan on the mortgage. The second loan is then payable when the borrower sells their home or refinances.

“It’s clear that FHA homeowners in these areas need more help to get back on their feet as they recover from these storms,” said Ben Carson, U.S. Department of Housing and Urban Development secretary. “Today, we offer immediate relief to these borrowers which will allow them to resume their mortgage payments without crippling payment shock and fees while protecting our insurance fund in the process.”

The new option requires no trial period or balloon payment, allowing borrowers to keep their existing low interest rate and loan terms as well as their existing monthly mortgage payment.

The expanded loss mitigation will streamline income documentation and other requirements to expedite relief to homeowners struggling to pay their mortgage while recovering from last year’s disasters.

The FHA’s new partial claim option is available to borrowers who live and work in presidentially declared major disaster areas and who became delinquent on their mortgage payments because of last year’s disasters, and whose initial mortgage forbearance periods are ending. Other requirements include:

  • Borrowers were current on their mortgage payments at the date of the disaster
  • Borrower’s income is equal to or more than their pre-disaster income
  • Property is owner-occupied

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