FHA Seeks Feedback on Proposed Payment Supplemental Partial Claim Loss Mitigation Option

Recently, FHA posted a draft of Mortgagee Letter (ML), Payment Supplemental Partial Claim, on its Single Family House Drafting Table and is requesting feedback from interested stakeholders.  The draft ML provides a new loss mitigation option, the Payment Supplement Partial Claim, to help delinquent borrowers who are late on their payments and unable to receive a significant payment reduction from other options already available.  The proposed policy is intended to help borrowers avoid foreclosures by helping them bring their mortgages current and reducing their monthly payments.  

The draft ML would allow mortgagees to use available partial claim funds to cure arrearages on mortgages insured by FHA and temporarily reduce the principal amount of the borrower’s monthly mortgage payments for three to five years.  After the three-to-five-year period ends, borrowers would once again be responsible for the full monthly mortgage payments.  The borrower will be required to repay the Payment Supplement PC note, which is secured by a subordinate mortgage, after the termination or refinance of FHA-insured first mortgage or selling the property. 

If the COVID-19 Recovery Modification option does not meet the target payment reduction, then mortgagees will be required to evaluate eligible borrowers for the Payment Supplement PC loss mitigation option.  FHA also provided a Payment Supplement Partial Claim Worksheet to aid in reviewing the draft ML.  

Stakeholders can review the draft ML and provide feedback until June 30, 2023.