FHA Strengthens Permanent Disaster Loss Mitigation Options
On August 29, 2019, the Federal Housing Administration (FHA) published Mortgagee Letter (ML) 2019-14, Updates to FHA’s Loss Mitigation Options for Borrowers in Presidentially-Declared Major Disaster Areas (PDMDA). This ML strengthens and expands FHA’s loss mitigation options to homeowners located in all PDMDAs by adding new options and improving several existing options that were originally put in place in 2018 as temporary provisions for specific PDMDAs. Read HUD's Press Release for more on the topic.
Effective immediately, FHA will now make permanent:
- The Disaster Standalone Partial Claim option to help eligible borrowers on a forbearance plan resume their pre-disaster mortgage payments and avoid payment shock
- Streamlined income documentation and revised loss mitigation procedures for a Disaster Loan Modification option and Disaster Standalone Partial Claim option
- A Trial Payment Plan as an alternative to providing income documentation for these disaster loss mitigation options
This ML is designed to provide immediate loss mitigation and other relief options to FHA borrowers in all PDMDAs and help them stay in their homes while mitigating losses to FHA’s Mutual Mortgage Insurance Fund (MMIF). Further, the addition of these provisions to the Single Family Housing Policy Handbook 4000.1 creates clear and consistent policy applicable to borrowers whose FHA-insured property or place of employment is in a PDMDA.
Servicers may begin implementing these new policies immediately; however, they must begin implementing them no later than November 30, 2019.