While these changes are designed to address borrowers who are facing serious defaults, most delinquencies can and should be resolved through early intervention.  Mortgagees are reminded of the critical importance of early and constructive contact with delinquent borrowers and the requirement to notify borrowers of the availability of default counseling by HUD-approved counseling agencies. 

Loss Mitigation Program Changes

This Mortgagee Letter announces three changes to the existing Loss Mitigation program designed to give mortgagees additional latitude to help borrowers cure defaults and retain homeownership.  The changes noted below are effective immediately.  

• With respect to Loan Modifications, mortgagees may use the Treasury 10-year constant maturity as a basis for establishing the maximum interest rate for loan modifications.  The maximum interest allowable should be calculated as 200 basis points above the monthly average yield on United States Treasury Securities, adjusted to a constant maturity of 10 years.  Mortgagees shall refer to the rate that is in effect as of the date of execution of the loan modification.  For information on the 10-year monthly constant maturities, please refer to the statistical release H.15, which is available on the following web site: http://www.federalreserve.gov/releases/h15/data.htm  
• Where loss mitigation is being attempted after foreclosure has been initiated, mortgage servicers and mortgagors have advised that foreclosure related costs and legal fees are often impediments to successful loss mitigation.  Many mortgagors who are able to resume making monthly mortgage payments frequently do not have sufficient funds to reimburse the mortgagee the legal fees and foreclosure costs incurred prior to qualifying for loss mitigation and therefore are denied participation. Effective with this Mortgagee Letter, the Department will begin allowing legal fees and foreclosure costs related to a canceled foreclosure action to be incorporated into either the Loan Modification or the Partial Claim subject to the specific requirements described in the full Mortgagee Letter.
• Finally, in response to the industry’s request to provide adequate time for the mortgagee to complete all required actions related to a loan modification, the Department provides the following clarification.  When establishing a loan modification, it is acceptable for mortgagees to include all payments due including an additional month in the loan modification. 

To view the Mortgagee letter in its entirety, please click here. 

Any questions regarding this Mortgagee Letter or requirements for use of the partial claim and loan modification authorities may be directed to HUD's National Servicing Center (NSC) at 888-297-8685 or hsg-lossmit@hud.gov

About Safeguard
Safeguard Properties is the largest privately held field services company in the country. Located in Cleveland, OH  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 500 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.