HUD ML 2010-04 Press Release
January 25th, 2010
The Department of U.S. Housing and Urban Development (HUD) has issued a press release discussing Mortgagee Letter 2010-04.
FHA TO PROVIDE EARLY RELIEF TO STRUGGLING HOMEOWNERS
WASHINGTON – Homeowners with FHA-insured mortgage loans who are experiencing financial hardship are now eligible for loss mitigation assistance before they fall behind on their mortgage payments. Previously, these homeowners were not eligible for such assistance until after they had missed payments.
The Helping Families Save Their Home Act of 2009 signed into law by President Obama expanded FHA’s authority to use its loss mitigation tools to assist FHA borrowers avoid foreclosure to include those facing ”imminent default” as defined by the Secretary. FHA today issued guidance to FHA-approved loan servicers on how to assist these FHA borrowers.
“Loss mitigation assistance is beneficial to both borrowers and FHA because it helps borrowers retain their homes while protecting the FHA insurance fund from unnecessary losses,” said FHA Commissioner David Stevens. “FHA has always required lenders to establish early contact with delinquent borrowers to discuss the reason for missing a payment and to evaluate reinstatement options. Now servicers will have additional options for those borrowers who seek help before they go delinquent, which increases the likelihood that the borrower will be able to retain their home.”
- A forbearance agreement is an agreement by the loan servicer to postpone, reduce or suspend payments due on a loan for a limited and specific time period.
- FHA-HAMP allows qualified FHA-insured borrowers to reduce their monthly mortgage payment to an affordable level by permanently reducing the payment through the use of a partial claim combined with a loan modification. The partial claim defers the repayment of a portion of the mortgage principal through an interest-free subordinate mortgage that is not due until the first mortgage is paid off. The remaining balance is then modified through re-amortization and in some cases, an interest rate reduction.
The borrower must be able to document the cause of the imminent default which may include, but is not limited to, one or more of the following types of hardship:
- A reduction in or loss of income that was supporting the mortgage loan, e.g., unemployment, reduced job hours, reduced pay, or a decline in self-employed business earnings. A scheduled temporary shutdown of the employer, (such as for a scheduled vacation), would not in and by itself be adequate to support an imminent default.
- A change in household financial circumstances, e.g., death in family, serious or chronic illness, permanent or short-term disability.
Loan servicers must document the basis for its determination that a payment default is imminent and retain all documentation used to reach its conclusion. The servicer’s documentation must also include information on the borrower’s financial condition.
Additional information and guidance can be found on HUD’s website.
To view the online press release, please click here
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Safeguard Properties is the largest privately held field services company in the country. Located in Cleveland, Ohio and founded in 1990 by Robert Klein, Safeguard has grown from a regional preservation company with a few employees and a handful of contractors performing services in the Midwest, to a national company with over 700 employees. Safeguard is supported by a nationwide network of subcontractors able to perform any requested superintendence, preservation, and maintenance functions, as well as numerous ancillary services in the U.S., the Virgin Islands, and Puerto Rico