The Federal Housing Administration (FHA) announced that its many COVID-19 mortgage relief options (such as those described below), including certain loan modifications and a special partial claim option, are now available to all eligible borrowers with FHA-insured loans who get behind on their mortgage payments, regardless of what caused their delinquency.
Loan servicers must begin offering these options to eligible borrowers starting April 30, 2023. But servicers may begin offering them immediately.
In addition, FHA is extending the availability of its COVID-19 mortgage relief options until October 30, 2023. These temporary COVID-19 options were previously set to expire when the COVID-19 national emergency ends on May 11, 2023.
Homeowners affected by COVID-19 are eligible for a COVID-19 forbearance. If you don't qualify for a COVID-19 forbearance, you might be eligible for a different type of forbearance.
During the forbearance period, the servicer can't add fees or penalties to your account, or charge interest beyond the amounts scheduled or calculated as if you made all contractual payments on time and in full under the terms of the mortgage contract.
To get a forbearance, contact your loan servicer.
Following a forbearance, homeowners with FHA-insured loans have access to a number of loss mitigation alternatives through FHA's "waterfall" process. Under the FHA's waterfall process, you can most likely avoid having to pay all of the overdue amounts right away when a forbearance ends.
In this process, the servicer must, subject to a few exceptions, evaluate the borrower to determine which, if any, of the below alternatives are appropriate. The servicer must evaluate the borrower for these options in a specific order. Once a borrower qualifies for a particular option, the evaluation concludes.
On June 25, 2021, HUD established the COVID-19 Advance Loan Modification (COVID-19 ALM). Under this modification program, eligible borrowers get a minimum 25% reduction of their monthly mortgage payment's principal and interest portion.
The program is automatic and is a pre-waterfall step: lenders 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.
To qualify, the property may be owner-occupied or non-owner-occupied, and the borrower must be 90 or more days delinquent. Borrowers who don't qualify for the COVID-19 ALM must be evaluated for the other COVID-19 loss mitigation options described below.
If the borrower indicates an ability to resume making their pre-hardship mortgage payment, say, after their existing COVID-19 forbearance ends, servicers must review the borrower for a COVID-19 Recovery Standalone Partial Claim.
A partial claim is an interest-free loan from HUD that brings a first mortgage current by paying the overdue amounts. You don't have to repay the loan until the first mortgage is paid off, like when you sell the property. Sometimes, the servicer will complete a partial claim along with a modification.
The COVID-19 Recovery Standalone Partial Claim is limited to 30% of the borrower's unpaid principal balance.
If the borrower can't afford the monthly payment amount and needs a loan modification, the servicer must evaluate the borrower for a COVID-19 Recovery Modification.
This modification aims to reduce the principal and interest portion of the monthly mortgage payment by at least 25%. The COVID-19 Recovery Modification is a 360-month modification and includes a partial claim, if available.
This modification is available to owner-occupied properties and properties that are not owner-occupied, like rental properties, secondary residences, and vacation homes.
If you don't qualify for any of the previous options, you might be eligible for a "preforeclosure sale" (short sale). This is when the borrower sells the home for less than the outstanding loan balance. The lender can't get a deficiency judgment after an FHA preforeclosure sale.
Or you might qualify for a "deed in lieu of foreclosure." With this option, the borrower trades the home's deed to HUD in exchange for a release from all obligations under the mortgage. Like with a pre-foreclosure sale, the lender can't get a deficiency judgment after a deed in lieu.
The easiest way to find out what kind of loan you have is to call your loan servicer.
You could also look for an FHA case number on your mortgage contract. Sometimes, though, loans lose their FHA-insured status. Call your servicer or HUD's National Servicing Center at 877-622-8525 if you have questions about your loan's status.
You can also check your billing statement to see if you pay a mortgage insurance premium (MIP). "MIP" is what FHA calls its mortgage insurance. If you're paying MIP, then you have an FHA-insured loan.
To learn about different ways to avoid a foreclosure, consider talking to a (free) HUD-approved housing counselor. A housing counselor can help you understand the options available if FHA insures your loan or another entity owns or guarantees your home loan. You can also call your servicer to learn about available relief.
Talk to a foreclosure attorney to learn about foreclosure laws and procedures in your state, including how long the process takes.
If you don't have an FHA-insured loan, most servicers (on behalf of the loan owner) offer various alternatives to help homeowners, like forbearance agreements and modifications.
Effective date: January 30, 2023