The Federal Housing Administration (FHA) has published Mortgagee Letter 2012-23 to help families with FHA-insured mortgages struggling to repair or rebuild their homes in the wake of major disasters like Hurricane Sandy. Mortgagee Letter 2012-23 reinforces the FHA’s long-standing policy of extending foreclosure relief and directs lenders to release insurance proceeds to borrowers rather than to apply those payouts to bring delinquent mortgages current.
FHA is also providing consumer-friendly advice to homeowners with FHA-insured mortgages whose homes were damaged or destroyed. Read more about disaster relief options for FHA homeowners.
“These guidelines provide clarity to the lending community and ultimately help families with FHA-insured mortgages to recover from major disasters,” said Acting FHA Commissioner Carol Galante of Mortgagee Letter 2012-23. “Whether it’s giving delinquent borrowers more time to get back on their feet or making sure lenders don’t misuse insurance payouts, our goal is to make sure we put these families on the path to recovery as quickly as possible.”
FHA's Mortgagee Letter 2012-23:
►Outlines the 90-day moratorium of foreclosures on properties located in the Presidentially-declared disaster areas;
►Asks servicers to consider a full range of benefits for the affected borrowers. This includes mortgage modifications, partial claims, use of FHA HAMP or other refinance options; and a waiver of late charges;
►Directs lenders to release homeowners’ insurance proceeds to the borrower rather than retaining such proceeds to make up for missed payments; and
►Summarizes HUD’s special Section 203(h) mortgage insurance product to assist disaster victims and references HUD’s Section 203(k) Rehabilitation Mortgage Insurance Product.