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The Federal Housing Administration announced additional COVID-19 recovery options to help both forward and reverse homeowners who are facing hardships as a result of the pandemic.
According to the FHA, simplified COVID-19 Recovery waterfall allows mortgage servicers to offer eligible homeowners who cannot resume making their mortgage payments a reduction in the principal and interest portion of their monthly payments. The recent changes will provide those most in danger of losing their homes a guide to deep and sustained recovery, including lower-income individuals, families of color, and young, first-time homeowners who have disproportionately suffered economic hardships due to the pandemic.
For homeowners who can resume making their existing monthly mortgage payments, FHA has established a revised COVID-19 Recovery Standalone Partial Claim. Additionally, the FHA is reinforcing today that President Biden’s American Rescue Plan Homeowner Assistance Funds (HAF), administered to the States by the Department of Treasury, may be used in connection with FHA-insured mortgages or subordinate mortgages as permitted by the jurisdiction’s HAF program and other requirements.
“Immediately upon taking office, President Biden prioritized the nation’s public health and economic crises by passing the American Rescue Plan,” said Housing and Urban Development Secretary Marcia L. Fudge. “As Americans get back to work and our economy continues to recover, we are taking targeted steps to make sure homeowners impacted financially by COVID-19 have the support they need to remain in their homes. Housing affordability is at its worst and losing your home now would devastate households. These options for FHA borrowers will ensure equitable relief and recovery to people who need it most.”
The new COVID-19 recovery waterfall includes a COVID-19 Recovery Standalone Partial Claim. This is for homeowners who can resume making their current mortgage payments, the COVID-19 Recovery Standalone Partial Claim allows mortgage payment arrearages to be placed in a zero-interest subordinate lien against the property that is repaid when the mortgage terminates, usually when the homeowner refinances or sells the home, according to the FHA.
Additionally, the COVID-19 Recovery Modification is for homeowners who cannot resume making their current monthly mortgage payments. The COVID-19 Recovery Modification extends the term of the mortgage to 360 months at a fixed rate and targets reducing the borrower’s monthly principal and interest portion of their monthly mortgage payment. The COVID-19 Recovery Modification must include a Partial Claim if the homeowner has Partial Claim funds available.
The administration is also urging those who are behind on their mortgage payments or are having difficulty complying with the terms of their reverse mortgage or Home Equity Conversion Mortgage (HECM), and have not yet contacted their mortgage servicer, to do so immediately.
Homeowners can obtain a mortgage payment forbearance or a HECM extension simply by contacting their servicer. For FHA forward mortgages, the FHA also urges homeowners look out for communications from their mortgage servicer regarding the new COVID-19 ALM or how to bring their mortgage current.