On Thursday, the Federal Housing Administration [1] (FHA) announced that it was updating its menu of foreclosure prevention options to allow borrowers affected by the natural disasters of 2017 with delinquent FHA-insured mortgages easier access to bring their mortgages current without increasing their interest rates or monthly payments.
The updated policy is aimed at helping struggling borrowers in Puerto Rico and the U.S. Virgin Island impacted by Hurricanes Irma and Maria. The FHA is also providing a final 30-day extension of its foreclosure moratorium to allow distressed FHA-insured homeowners in Puerto Rico and the U.S. Virgin Islands an opportunity to find a permanent mortgage resolution.
“We need borrowers to contact their servicers right away and begin the process of finding a permanent solution to their mortgage situation,” said Brian Montgomery, FHA Commissioner. “We have a lot of options available to help FHA-insured families keep their homes but every day we wait, those options become more limited. Meanwhile, we intend to monitor our servicers very closely to make sure eligible families get the mortgage relief they qualify for.”
In a letter to mortgage servicers [2], the FHA said that it "intended to reduce foreclosures and minimize losses to the Insurance Fund by expanding certain loss mitigation assistance to borrowers in default." Additionally, the FHA said that the mortgagee letter also provided a 30-day disaster foreclosure moratorium for certain FHA-insured mortgages in affected counties in Puerto Rico and the U.S. Virgin Islands.
The FHA said that borrowers could qualify for the updated Disaster Standalone Partial Claim if they met the following conditions:
- They live within the geographic boundaries of the applicable Presidentially declared disaster areas in Puerto Rico and the U.S. Virgin Islands;
- Their ability to make mortgage payments is directly or substantially affected by the disaster;
- Their mortgage was no more than 60-days past due prior to the date of the Presidentially declared major disaster; and
- They have not already been approved for a forbearance or other loss mitigation option(s).
In February, FHA introduced the Disaster Standalone Partial Claim [3] option to help struggling borrowers impacted by 2017 natural disasters to resume their pre-disaster mortgage payments without payment shock. This option was intended to be used if all other home retention options were exhausted. Effectively immediately, FHA’s “Disaster Standalone Partial Claim” will now be the first mortgage relief option available for hurricane victims with FHA-insured homes located in Puerto Rico and the U.S. Virgin Islands.