Mortgage

FHA pushing to provide foreclosure relief to Puerto Rico, Virgin Islands hurricane victims

Extends foreclosure moratorium deadline one last time

The foreclosure moratorium for 2017 hurricane victims in Puerto Rico and the U.S. Virgin Islands whose mortgages are guaranteed by the Federal Housing Administration was due to end this week, but the FHA announced Thursday that it is extending the foreclosure freeze again – for the last time.

But that’s not all.

As part of a push to get more affected borrowers to take advantage of the FHA’s foreclosure prevention options, the FHA is also making a change to its disaster-related policy for borrowers in Puerto Rico and the U.S. Virgin Islands.

The FHA said Thursday that its Disaster Standalone Partial Claim option, a foreclosure mitigation option that was first introduced in February and was initially supposed to be the foreclosure prevention option of last resort, is now the first option for struggling borrowers.

The Disaster Standalone Partial Claim is designed to help struggling borrowers 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, which is payable when the borrower sells their home or refinances.

The Disaster Standalone Partial Claim also streamlines income documentation and other requirements as to expedite relief to homeowners who are struggling to pay their mortgage while recovering from the storms.

According to the FHA, this option was initially intended to be used only if all other home retention options had been tried, but beginning now, the Disaster Standalone Partial Claim is the first mortgage relief option available for hurricane victims in those affected areas.

“While some borrowers have already received payment relief in the form of a permanent loss mitigation, there are others in need of a permanent resolution who have not contacted their servicer for help or are on a temporary forbearance,” the FHA said in a statement. 

“The updated Disaster Standalone Partial Claim provides these borrowers with an opportunity to be immediately evaluated for a permanent loss mitigation solution that is affordable and sustainable,” the FHA continued. “This option is the best solution for many borrowers seeking to cure arrearages and resume making payments without modifying their loan and re-amortizing the loan term.”

According to the FHA, borrowers may qualify for the updated Disaster Standalone Partial Claim if they meet the following conditions:

  • They live within the geographic boundaries of the applicable presidentially declared disaster area in Puerto Rico and the U.S. Virgin Islands
  • Their ability to make mortgage payments is directly or substantially affected by the disaster
  • Their mortgage was no more than 60 days past due prior to the date of the presidentially declared major disaster
  • They have not already been approved for a forbearance or other loss mitigation option(s)

As stated above, the FHA is also extending its foreclosure moratorium to help ensure that all borrowers who need assistance can get it.

The foreclosure moratorium was initially supposed to last 180 days, but the FHA extending it two previous times this year, first in March and again in May.

The moratorium was supposed to end on August 16, but the FHA is now extending the deadline out 30 more days. The foreclosure moratorium now ends on September 16.

According to the FHA, this will be the last extension of the moratorium period.

“FHA does not intend to further extend the foreclosure moratoriums after this date, so FHA borrowers in the eligible areas needing assistance are strongly urged to contact their mortgage servicer immediately,” the FHA said in a statement.

As the FHA notes, there are several other foreclosure prevention options, including: forbearance and loan modification options; FHA-insured mortgage for disaster victims; and FHA-insured mortgage for home rehabilitation.

“We need borrowers to contact their servicers right away and begin the process of finding a permanent solution to their mortgage situation,” FHA Commissioner Brian Montgomery said. 

“We have a lot of options available to help FHA-insured families keep their homes but every day we wait, those options become more limited,” Montgomery added. “Meanwhile, we intend to monitor our servicers very closely to make sure eligible families get the mortgage relief they qualify for.” 

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