FHA Expands COVID-19 Reverse Mortgage Benefit and Abstinence Extension in New Guidelines

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In the wake of new action taken by the administration just the day before regarding homeowner loss mitigation options, the Federal Housing Authority (FHA) on Friday announced an extension of the foreclosure and eviction moratorium for borrowers with FHA-insured single-family mortgages for a period of Additional period until July 31, 2021, as well as further extension of the start dates for the initial COVID-19 abstinence and HECM mortgage extension to provide some borrowers with an additional grace period from COVID-19 and the HECM extension.

This is in line with the guidance provided in Pledgee Letter (ML) 2021-15, and press releases and public statements from US Department of Housing and Urban Development (HUD) officials accompanying the release of the document.

Reverse Mortgage Guide

There are fewer provisions specific to the HECM program than more general provisions. For HECM borrowers who continue to be negatively affected by the pandemic, the FHA is expanding the schedule for such homeowners to request an extension of the loan before the maintenance staff can call it payable.

“For renewal requests received between July 1, 2021 and September 30, 2021, service companies must provide homeowners with an extension of up to six months,” FHA explains.

For HECM borrowers with loans whose maturity has already been announced by the service agent, homeowner’s renewal requests must be approved by that service agent for any foreclosure deadline, “and filing a claim for up to six months if the request is received between 1 July 2021 and September 30, 2021, ”explains FHA.

For HECMs that have already received an extension anytime between July 1 and September 30, 2020, FHA will provide an additional three-month extension period if necessary, and in particular if the borrower requests such an extension from the service provider.

This relief was originally provided for cancellation of mortgage borrowers with publication ML 2020-06 in early April 2020 and renewed two more times. In ML 2020-34 published in October of that year, the Trump administration extended the exemption until the end of that year. It was expanded again into ML. 2021-05 by the Biden administration until June 30, and now, under the new ML, will last until September.

Extension of the moratorium, deadlines for submission of requests for abstinence

While the White House is public announced intending to extend the relevant seizure and eviction moratoriums the day before the new ML is published, the new Letter codifies the original guidance, making it official to HUD and FHA policies. However, the letter goes even further and aims to provide the necessary assistance to mortgage servants who are making efforts to help needy homeowners.

“This automatic renewal is an additional one month guarantee for those struggling to stay in their homes as the country moves from relief to recovery,” HUD said in a statement. “In addition, the FHA is continuing to extend the deadline for the first lawsuit and reasonable due diligence by 180 days after July 31, 2021, to give service providers the extra time they need to focus their work on helping homeowners in need. This extension excludes unoccupied or abandoned properties. “

The new guidance is also extending the time frame that homeowners can start new abstinence plans through September 30, 2021 to accommodate the ongoing housing and financial hardships caused by the pandemic.

“Homeowners who have not previously been exposed to COVID-19 can request a suspension or reduction in mortgage payments,” HUD said in a statement. “The COVID-19 abstinence for homeowners who recently applied for help between July 1, 2021 and September 30, 2021 is six months.”

For homeowners who have already received a grace period from their mortgage service between July 1 and September 30, 2020, FHA will provide an additional three month grace period for anyone who requests additional financial recovery time before resuming their regular mortgage payments.

New form of help from COVID-19

ML is also establishing a new form of COVID-19 retention relief, which the FHA calls the COVID-19 Advance Loan Modification (COVID-19 ALM). Designed to provide what the FHA describes as “significant benefit relief for eligible homeowners,” the COVID-19 ALM will be offered to borrowers that are at least 90 days overdue or beyond the COVID-19 abstinence period.

It is designed for homeowners who can upgrade with a 30 year rate and term mortgage change and who will reduce the principal and percentage of their monthly mortgage payment by at least 25%.

“Mortgage Services should review their FHA service portfolio and offer a new COVID-19 ALM to distressed homeowners with FHA-insured mortgages facing COVID-19 difficulties,” the FHA said in a statement. “To accept the change, borrowers only need to sign and return the mortgage change documents to their service staff.”

All other loss mitigation options previously described by HUD and FHA will remain available to eligible borrowers who do not accept ALM COVID-19 “for any reason,” FHA explains.

HUD and FHA response

RMD has contacted HUD and FHA officials, but the statements that were made when ML were originally announced Friday were mentioned.

Official HUD portrait of Lopa P. Colluri, First Deputy Assistant Secretary of Housing and FHA HUD | CC0
Lopa P. Colluri, First Deputy Assistant Secretary for Housing and FHA

“Since President Biden took office, COVID-19 cases and deaths have dropped by nearly 90% and the economy is recovering rapidly,” said HUD Secretary Marcia Fudge. “It is important to note that we must continue to take action to ensure that those who may have experienced the hardships caused by COVID-19 receive the support they need to stay in their homes. I am delighted that the FHA is taking additional steps to address this unprecedented challenge and ensure a fair and equitable recovery. ”

On the FHA side, currently the most senior official says Americans’ housing conditions will continue to be assessed to see if further relief is needed in the future beyond the measures taken this week.

“These measures are important steps we must take to ensure that individuals and families who continue to experience financial hardship due to COVID-19 have access to effective and meaningful recovery options,” said FHA First Deputy Assistant Secretary Lopa Colluri. “We will continue to evaluate complementary solutions to help homeowners in distress preserve their homes and avoid future foreclosures where possible.”

Earlier on Friday, the White House also announced key appointments to the FHA and HUD, including the FHA Commissioner; and the appointment of the current Acting Director of the Consumer Financial Protection Bureau (CFPB) to a position with HUD. In addition to HUD and FHA, the Centers for Disease Control and Prevention (CDC) has also extended their eviction moratorium until July 31st.

To read ML 2021-15 in the HUD.

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