On July 23, 2021, FHA published Mortgagee Letter 2021-18 (ML 2021-18), which amends its COVID-19 Loss Mitigation policies for borrowers with FHA-insured forward mortgages that have been impacted by the COVID-19 pandemic. ML 2021-18 most notably introduces a loss mitigation options “waterfall” for homeowners’ owner-occupied primary residences, including: (1) the COVID-19 Recovery Standalone Partial Claim (which replaces the COVID-19 Standalone Partial Claim), and (2) the COVID-19 Recovery Modification (which replaces various COVID-19 Home Retention Options). It also includes the COVID-19 Recovery Non-Occupant Loan Modification (which replaces the COVID-19 Non-Occupant Loan Modification), among other changes related to COVID-19 relief efforts. These new options may be offered as soon as operationally feasible, but must be used for eligible homeowners no later than 90 days from the date of publication of ML 2021-18. However, the letter clarifies that it does not impact the effective dates previously announced for the COVID-19 Advance Loan Modification (from Mortgagee Letter 2021-15). The letter further provides for circumstances in which mortgagees must re-review homeowners for the new recovery options.
As covered in various prior WBK articles (such as those addressing timing of review, advance loan modifications, and introduced COVID-19-related loss mitigation options), the guidance that ML 2021-18 provides is the latest in a series of announcements clarifying the details of loss mitigation options for FHA borrowers and builds upon previous guidance concerning the issue of FHA loss mitigation home retention efforts as a result of the COVID-19 pandemic.