The regular FHA HAMP loss mitigation programs will remain in suspension until October 30, 2024 – next year! All foreclosure sales are to be suspended until the same date. Same with Deed in Lieu negotiations.
So what does that mean?
All borrowers who are already in default or at risk of imminent default are supposed to be evaluated under the expanded guidelines of the Covid 19 Recovery Option program. These provisions could be terminated early by Congressional action, executive or agency rules.
But for now, expanded options exist. This includes a biggie: income documentation is not required to determine monthly payments. Most trial payments are being waived. Late charges and penalties are being waived.
There are several programs available, depending on the Borrower’s circumstances, including forbearances to temporarily stop the bleeding, standalone partial claims if the Borrower is back on his/her feet and just needs a way to catch up, and extended repayment terms (30-40 yrs). The ultimate goal being to bring the mortgage current (including all legal/bankruptcy fees), reduce the P&I payment by a minimum of 25% and avoid foreclosures (as those put additional financial burdens on the lenders and their bottom line).
Read that again: Reduction of Principal and Interest by a minimum of 25%.
Why you ask?
This administration does not want a repeat of the last foreclosure crisis. Right now roughly 100,000 are in foreclosure. Back in 2008, there were 900,000 in foreclosure — a statistic that continued for 2-3 years before slowly coming down. What if you are behind several months or even longer? Increasing interest rates may be ‘impeding the effectiveness of COVID-19 Recovery Modification”, therefore they are expanding the ‘standalone recovery claim’ to 30% of the mortgage balance, as of the date of default, which is a one-time sum to bring the mortgage current if the Borrower can state that they can make timely payments going forward. This standalone claim is an amount available to get the Borrower back on track.
None of this exists under the regular HAMP rules.
So what if you’ve managed to pay your mortgage all this time, but are now experiencing a hardship with a higher cost of living, higher insurance bills, student loan payments restarting, and credit card interest and balances at an all time high?
You would potentially qualify for a mortgage modification under the Covid 19 rules to catch up on your mortgage and to reduce P&I by at least 25%. That’s a big deal and worth investigating wouldn’t you say. Details of how to qualify is contained in a February 13, 2023 Mortgagee Letter from HUD which can be found here: chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.hud.gov/sites/dfiles/OCHCO/documents/2023-03hsgml.pdf