FHA Restates COVID-19 Relief Options for Reverse, Forward Mortgage Borrowers

The Federal Housing Administration (FHA) on Friday released a new informational notice about relief options for FHA-insured mortgage borrowers affected by the COVID-19 coronavirus pandemic, offering up new guidance specific to forward mortgage borrowers while also aiming to ensure that reverse mortgage borrowers are aware of all the options which are available to them.

Reiterating the extension of loss mitigation options first introduced by the White House before being adopted by the U.S. Department of Housing and Urban Development (HUD) and FHA, the agency also announced new loss mitigation options being made available specifically to forward mortgage borrowers alongside the publication of a new Mortgagee Letter (ML). The new ML reorganizes the “FHA COVID-19 Recovery waterfall” by streamlining FHA’s previous options for struggling homeowners.

This will help to reduce required documentation, and allows mortgage servicers to provide greater payment reduction for eligible homeowners with FHA-insured Single Family Title II forward mortgages.

Options available for HECM borrowers

In an informational fact sheet reiterating the options available to reverse mortgage borrowers, servicers of FHA-insured HECMs are reminded that they are required to offer homeowners suffering financially due to COVID-19 an extension when the homeowner requests such assistance. FHA extended the timeframe for homeowners to request an extension from their mortgage servicer through September 30, 2021.

FHA also previously extended the maximum allowable timeframes for COVID-19 extensions based on the date of the initial request. For all requested extensions made from March 1, 2020 to June 30, 2021, there is both an initial extension period of 6 months and an additional extension period of up to another period of 6 months for those who request it. For extensions requested between July 1 and September 30, 2021, the initial extension period of up to 6 months is all that is permitted. No additional six month period is available for such borrowers.

Additionally, no extension period as outlined by FHA may extend beyond June 30, 2022 according to the fact sheet.

In guidance specifically to reverse mortgage borrowers, FHA is imploring that financially impacted borrowers contact their loan servicer immediately if they require assistance through one of these outlined extensions.

“FHA urges those who are behind on their mortgage payments or are having difficulty complying with the terms of their reverse mortgage or Home Equity Conversion Mortgage (HECM), and have not yet contacted their mortgage servicer, to do so immediately,” FHA says in its newly-published fact sheet. “By contacting their servicer, homeowners can obtain a mortgage payment forbearance or a HECM extension.”

Recent relief

Late last month, The Joe Biden administration announced that a moratorium on foreclosures and evictions, set to expire at the end of June, would be extended another 30 days to July 31, 2021 in a series of announcements issued by federal agencies including HUD, the Department of Veterans Affairs (VA), the U.S. Department of Agriculture (USDA) and the Consumer Financial Protection Bureau (CFPB) in concert with the White House.

Shortly thereafter, HUD announced an extension to the foreclosure and eviction moratorium for borrowers with FHA- insured single family mortgages through July 31, as well as a further extension of the start dates of the initial COVID-19 Forbearance and HECM Extension to provide additional COVID-19 Forbearance and HECM Extension for certain borrowers. For HECM borrowers who remain negatively impacted by the effects of the pandemic, FHA is further extending the timetable for such homeowners to request an extension on the status of a loan before a servicer can call it due and payable.

For HECM borrowers with loans that have already been called due and payable by the servicer, homeowner requests for an extension must be approved by that servicer for any deadline related to foreclosure, “and claim submission of up to six months when the request is received between July 1, 2021, and September 30, 2021,” FHA explained in ML 2021-15.

For HECMs that have already received an extension at any time between July 1 and September 30, 2020, FHA will provide an additional, single three-month extension period if needed, and specifically if a borrower requests such an extension from the servicer.

HUD soon after extended an additional form of relief, this time to allow industry partners additional opportunity to leverage flexible guidance related to verification of self-employment and verification of rental income for single family Title II forward mortgage and HECM programs, according to ML 2021-16.

Servicers have lauded federal response

Since initial moratoriums were handed down last March at the onset of the pandemic and the emergency as declared by then-President Donald Trump, servicers have largely lauded the government’s efforts to support HECM borrowers while emphasizing the need for lenders to communicate to their clients the importance of getting in touch with their servicers if the available relief is required for their personal financial situations.

“When the COVID-19 forbearance was first issued in April of 2020 we all had hopes that the pandemic would be well controlled long before now,” said Leslie Flynne, SVP of loan servicing at Reverse Mortgage Solutions (RMS) to RMD in January after the Biden administration introduced its initial forms of HECM relief. “The fact it has now been extended […] demonstrates that our borrowers are not out of danger from this virus and HUD is responding appropriately.”

HUD and FHA remain adamant that they will continue to monitor the evolving situation of the pandemic and will issue relief as appropriate, according to FHA Deputy Assistant Secretary for Single Family Housing Julienne Joseph.

“FHA and mortgage servicers have a shared goal of helping as many homeowners as possible to return to sustainable homeownership, and the FHA team will continue to monitor closely the performance of our loss mitigation options to ensure that our policies successfully meet the needs of homeowners impacted by COVID-19,” Joseph said in a statement.

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