The Federal Housing Administration (FHA) is offering foreclosure relief by expanding mortgage relief to FHA-insured homeowners who live or work in areas impacted by Hurricanes Harvey, Irma and Maria as well as California wildfires and subsequent flooding and mudslides. According to HUD, “FHA is instructing mortgage servicers to offer additional options to eligible disaster victims in Texas, Louisiana, Georgia, Florida, South Carolina, California, Puerto Rico and the U.S. Virgin Islands, allowing them to remain in their homes while reducing losses that would otherwise negatively impact FHA’s Mutual Mortgage Insurance Fund.”
FHA has added a “Disaster Standalone Partial Claim” option. The idea is to help borrowers who are struggling to get back on their feet. This foreclosure relief option covers 12-months of missed mortgage payments via “an interest-free second loan.” That loan would be payable when the borrower sells the home or refinances their mortgage. There is no trial period or balloon payment. The option also allows the borrowers to keep their existing interest rate, loan term and monthly mortgage payment.
“It’s clear that FHA homeowners in these areas need more help to get back on their feet as they recover from these storms,” said HUD Secretary Ben Carson. “Today, we offer immediate relief to these borrowers which will allow them to resume their mortgage payments without crippling payment shock and fees while protecting our insurance fund in the process.”
The foreclosure relief is available to “certain borrowers who live and work in Presidentially Declared Major Disaster Areas and who became delinquent on their mortgage payments because of last year’s disasters, and whose initial mortgage forbearance periods are ending.” Here is a list of the other requirements:
- Borrowers were current on their mortgage payments at the date of the disaster;
- Borrower’s income is equal to or more than their pre-disaster income; and
- Property is owner-occupied.
It’s possible for those who do not qualify under these requirements to get a loan modification under FHA-HAMP.
Read FHA’s mortgagee letter.
