Guidance for FHA-Approved Mortgagees and Servicers Regarding Presidentially-Declared Major Disaster Areas and HUD-FHA Revised Loss Mitigation Options
Guidance for FHA-Approved Mortgagees and Servicers Regarding Presidentially-Declared Major Disaster Areas:
The Federal Housing Administration (FHA) is issuing this reminder to mortgagees about its guidance for originating and/or servicing FHA-insured forward and reverse mortgages in locations in the U.S. and its territories when the President declares it a major disaster area. This declaration is made when natural or other events are of such severity that it is beyond the combined capabilities of state and local governments to respond. The following guidance applies to all areas covered by a Presidentially-Declared Major Disaster Area (PDMDA):
- FHA-insured mortgages secured by properties in a PDMDA are subject to a 90-day foreclosure moratorium following the disaster.
- FHA-insured reverse mortgages (HECMs) that become due and payable for reasons other than the death of the last surviving borrower and eligible nonborrowing spouse are subject to a 90-day extension of HECM foreclosure timelines.
- In PDMDAs only, HUD provides mortgagees an automatic 90-day extension from the date of the foreclosure moratorium expiration date to commence or recommence foreclosure action or evaluate the borrower under HUD’s loss mitigation program.
Mortgagees should review complete servicing guidance in the Single Family Housing Policy Handbook 4000.1 (SF Handbook), Sections III.A.2 and III.A.3.c relating to the servicing of mortgages in PDMDAs.
Mortgagees are reminded that they should begin reaching out to affected borrowers who may require loss mitigation assistance as soon as possible post-disaster. In preparation for assisting homeowners with longer-term recovery efforts, mortgagees should also review:
- FHA’s 203(h) Mortgage Insurance for Disaster Victims requirements in Section II.A.8.b of the SF Handbook. The 203(h) program allows FHA to insure mortgages for victims of a major disaster who have lost their homes and are in the process of rebuilding or buying another home.
- FHA’s 203(k) Rehabilitation Mortgage Insurance Program requirements in Section II.A.8.a of the SF Handbook. The 203(k) program provides mortgage financing or refinancing which includes the cost of home repairs both structural and non-structural – into the loan amount.
Mortgagees can find more information about the policies referenced above and other FHA PDMDA policies on the FHA Resource Center’s Online Knowledge Base.
Mortgagee Letter 2018-05 - Guidance for Borrowers Affected by Hurricane Maria:
On August 15, 2018, FHA announced the publication of Mortgagee Letter (ML) 2018-05, which revises the order of loss mitigation options for borrowers with FHA-insured mortgages whose property and/or place of employment is in the PDMDAs of Puerto Rico Hurricane Maria (DR-4339) or U.S. Virgin Islands Hurricane Maria (DR-4340). Read HUD's press release.
This ML changes existing policy by allowing mortgagees to evaluate borrowers in the affected areas for the Disaster Standalone Partial Claim before the disaster loan modification. FHA believes this change will enable more borrowers impacted by those specific disasters to get into a permanent loss mitigation solution and keep their mortgage in good standing.
Additionally, the ML provides a final 30-day foreclosure moratorium for certain FHA-insured mortgages in affected counties in Puerto Rico and the U.S. Virgin Islands that are still recovering from the devastation caused by Hurricane Maria. This moratorium will provide additional time for mortgagees to evaluate borrowers for the Disaster Standalone Partial Claim and other loss mitigation solutions in the waterfall.
Servicers are reminded of their obligation under HUD Regulation 24 CFR § 203.501 to evaluate borrowers for the full range of loss mitigation options permitted under FHA policy. FHA will continue to monitor servicers for compliance with this regulation.
Borrowers Considered for Disaster Standalone Partial Claim Before Disaster Loan Modification:
The new policy announced under the ML permitting servicers to evaluate borrowers for a Disaster Standalone Partial Claim before a disaster loan modification provides for the following:
- allows borrowers to maintain their pre-disaster monthly principal and interest payment;
- retains their current interest rate and term of the FHA-insured mortgage;
- provides for the repayment of arrearages with a subordinate mortgage lien that is not repaid until the maturity of the FHA-insured mortgage, the sale of the property, or the payoff or non-FHA refinancing of the FHA-insured mortgage; and
- expands the borrower eligibility criteria for the Disaster Standalone Partial Claim first announced in ML 2018-01, dated February 22, 2018.
This guidance applies to all FHA Title II forward mortgages for those disaster-affected borrowers whose property and/or place of employment is in the following PDMDAs:
- Puerto Rico – Hurricane Maria (DR-4339); and
- U.S. Virgin Islands – Hurricane Maria (DR-4340).
FHA-approved mortgagees may immediately begin implementing the revised guidance in 2018-05; however, they must implement these policies no later than September 15, 2018. Additionally, the provisions in this ML may no longer be offered to borrowers on or after the MLs’ May 1, 2019, Sunset Date.
30-Day Foreclosure Moratorium:
The ML also provides a 30-day foreclosure moratorium for certain FHA-insured mortgages secured by properties located in PDMDAs in Puerto Rico and the U.S. Virgin Islands that the Federal Emergency Management Agency (FEMA) has identified as “affected counties” resulting from Hurricane Maria.
This 30-day foreclosure moratorium is effective immediately and applies to the initiation of foreclosures and foreclosures already in process.
Mortgagees should carefully read ML 2018-05 for eligibility and other requirements.
- View Mortgagee Letter 2018-05 and other Mortgagee Letters
- View current and archived Press Releases
- View the status of Incident Periods on the FEMA Disasters web page
- View Disaster Recovery Resources for Housing Counselors
Please send your questions to firstname.lastname@example.org. Please type “Disaster Assistance” in the subject line.