FHA Streamlines Loss Mitigation Protocols for Delinquent Homeowners

FHA yesterday issued a Mortgagee Letter outlining new procedures for mortgage servicers engaging in loss mitigation processes under the Home Affordable Modification Program.  

Mortgagee Letter 2016-14 (http://portal.hud.gov/hudportal/documents/huddoc?id=16-14ml.pdf) streamlines FHA’s loss mitigation protocols that servicers must use when evaluating and deploying “home retention options”–foreclosure alternatives that allow delinquent borrowers to retain their home  

Specifically, Mortgagee Letter 2016-14:  

–Requires servicers to convert successful three-month trial modifications into permanent modifications within 60 days instead of the average four to six months;

–Allows borrowers with three missed mortgage payments to qualify for a partial claim to bring their arrearages current versus the previous four-month minimum;

–Ends the traditional stand-alone Loan Modification option so borrowers can access the FHA-HAMP option, with its greater payment relief, sooner; and

–Eliminates the minimum 12-month delinquency term to qualify for FHA’s special forbearance option. FHA said this allows servicers extend this option to unemployed households sooner in their delinquency.  

These changes will reduce the number of steps that a servicer and borrower must take to resolve a delinquency and enter into a loss mitigation home retention product,” FHA said.  

In addition, FHA said it removed certain obstacles that will allow servicers greater flexibility for evaluating an unemployed borrower’s financial condition and special forbearance agreements.