FHA COVID-19 Loan Modification Program for Mortgage Borrowers

FHA offers a loan modification option for homeowners affected by COVID-19.

By , Attorney · University of Denver Sturm College of Law

Legal Update: As of April 30, 2023, mortgage servicers must evaluate all eligible borrowers with FHA-insured mortgages who are in default or facing imminent default using the COVID-19 loss mitigation waterfall process, regardless of the cause of the borrowers' financial difficulties. The COVID-19 loss mitigation waterfall temporarily replaces the general FHA waterfall process. These temporary options, which were previously scheduled to expire at the end of the COVID-19 national emergency, will be available through April 30, 2025..

The Federal Housing Administration (FHA), part of the U.S. Department of Housing and Urban Development (HUD), offers protections and options to homeowners who've been affected by COVID-19 and are facing foreclosure.

Under a HUD directive, loan servicers have to evaluate borrowers with FHA-insured loans for a COVID-19 Advance Loan Modification (COVID-19 ALM) if the loan is 90 or more days delinquent. .

How the COVID-19 ALM Program Works

Under the COVID-19 ALM program, eligible borrowers get a minimum 25% reduction in their monthly mortgage payment's principal and interest portion.

The COVID-19 ALM program is automatic: servicers must review eligible borrowers for this option and provide loan modification documents that will significantly reduce the borrowers' monthly payments. Borrowers don't need to contact their lender or servicer to get this modification.

Eligibility Requirements for a COVID-19 ALM

To qualify, the property may be owner-occupied or non-owner occupied, and the borrower must be 90 or more days delinquent.

If eligible, the servicer must prepare and send loan modification documents to the borrower, along with a cover letter that includes:

  • an explanation of terms, including the modified mortgage payment amount
  • the date the next payment is due
  • a statement that no lump-sum payment is required
  • a statement that if the borrower doesn't accept this offer, the borrower might qualify for another loss mitigation option to bring their mortgage current (servicers must evaluate borrowers who don't qualify for the COVID-19 ALM for other COVID-19 loss mitigation options)
  • a statement that the borrower must sign and return the loan modification documents within 30 days of getting them, and
  • information for the borrower to contact the servicer, if needed.

What If I'm In a COVID-19 Forbearance?

Servicers have to evaluate all borrowers on a COVID-19 forbearance for a COVID-19 ALM within 30 days of a forbearance expiring.

More Information

To learn more about loss mitigation options for FHA-backed loans, see HUD's Loss Mitigation Services for FHA Homeowners website. You may also call the FHA Resource Center at 800-CALL FHA (800-225-5342), go to the online FHA Resource Center, or email the FHA Resource Center at answers@hud.gov.

Contact your loan servicer directly to learn what options are available in your particular situation. Be sure to mention you have an FHA-backed loan.

If you need help dealing with your loan servicer, want more information about different ways to avoid foreclosure, or are seeking information about how to fight a foreclosure, consider talking to a foreclosure attorney. Talking to a (free) HUD-approved housing counselor is also a good idea.