Removing Barriers Blog

FHA Announces Updated Loss Mitigation Procedures for Hurricane-Affected Areas
Posted August 16, 2018 by CUNA Advocacy

In a Mortgagee Letter dated August 15, the Federal Housing Administration (FHA) announced new policies to prevent foreclosures in areas affected by Hurricane Maria.

Specifically, servicers of FHA loans in Presidentially-Declared Major Disaster Areas (PDMDAs) in Puerto Rico and the U.S. Virgin Islands are asked to evaluate borrowers’ eligibility for relief under the FHA’s disaster Loss Mitigation Waterfall where the following criteria are met:

1. The Mortgage was current or less than 60 days past due as of the date of the applicable Disaster Declaration;

2. The Mortgagee confirms that the Borrower’s income (e.g., wages, social security, pension, annuity, etc.) is equal to or greater than it was prior to the Disaster;

3. The Borrower demonstrates the ability to resume total monthly mortgage payments of Principal, Interest, Taxes, and Insurance (PITI);

4. The dwelling is owner-occupied;

5. The total Principal and Interest (P&I) amount of a Borrower’s monthly Mortgage Payment does not change;

6. The Mortgagee waives the Borrower’s accumulated late fees; and

7. The Disaster Standalone Partial Claim is subject to the maximum statutory value of all Partial Claims for an FHA-insured Mortgage.

Borrowers who meet these criteria are eligible for enhanced loss mitigation which would (1) allow them to maintain their pre-disaster monthly mortgage payment of principal and interest; (2) not change the interest rate and term of the FHA-insured Mortgage; and (3) secure repayment of the arrearages with a second note mortgage lien that is not repaid until the maturity of the FHA-insured Mortgage, the sale of the property, or the payoff or non-FHA refinancing of the FHA-insured Mortgage.

Per Mortgagee Letter 2018-05, questions regarding this Mortgagee Letter may be directed to the HUD National Servicing Center at 1-877- 622-8525.