FHA Strengthens Relief Options for Borrowers in Major Disasters

On August 29, 2019, FHA issued Mortgagee Letter 2019-14, which implements expanded procedures to streamline and make permanent its Loss Mitigation Home Retention Options for borrowers whose FHA-insured mortgages or employment are affected by natural disasters in a Presidentially-Declared Major Disaster Area (PDMDA). Lenders may use the new procedures immediately, but must implement them no later than November 30, 2019.

Under the new Loss Mitigation procedures, FHA added relief options and improved several existing ones that were originally implemented in 2018 as temporary policies for specific PDMDA’s. Effective immediately, FHA will make permanent:

• The Disaster Standalone Partial Claim option to help eligible borrowers on a forbearance plan resume their pre-disaster mortgage payments and avoid payment shock;
• Streamlined income documentation and revised loss mitigation procedures for a Disaster Loan Modification option and Disaster Standalone Partial Claim option; and
• A Trial Payment Plan as an alternative to providing income documentation for these disaster loss mitigation options.
  

In addition, the requirement to suspend credit reporting and waive late charges for borrowers on forbearance plans or who are paying according to agreed-upon loss-mitigation options will be incorporated into permanent guidance.

FHA’s single Family Housing Policy Handbook 4000.1 will be amended to include the new policies.