Following new measures taken just a day earlier by the administration regarding homeowner mitigation opportunities, the Federal Housing Administration (FHA) announced on Friday an extension of the foreclosure and eviction moratorium for borrowers with FHA-insured single-family mortgages for an additional period by July 31, 2021, plus a further extension of the start dates of the initial COVID-19 Forbearance and Home Equity Conversion Mortgage (HECM) extension to provide additional COVID-19 forbearance and HECM extensions to certain borrowers.
This is in line with the guidance given in the Mortgage Letter (ML) 2021-15, as well as the press releases and public statements from officials at the US Department of Housing and Urban Development (HUD) accompanying the release of the document.
Reverse Mortgage Specific Guide
Provisions specific to the HECM program are less numerous than more general provisions. For HECM borrowers who continue to be negatively affected by the effects of the pandemic, the FHA is extending the schedule for such homeowners to request an extension of the status of a loan before a servicer can call it.
“For extension requests received between July 1, 2021 and September 30, 2021, servicers must grant homeowners an extension of up to six months,” explains FHA.
For HECM borrowers with loans already due by the servicer, the homeowner’s renewal requests must be approved by that servicer for any deadline related to foreclosure, “and the application of up to six months if the request is between July 1, 2021 and September 30, 2021, ”explains FHA.
For HECMs that have already received an extension between July 1 and September 30, 2020, the FHA will provide an additional, individual three-month extension period if necessary and especially if a borrower requests such an extension from the servicer.
That relief was originally granted Mortgage Debtors with the release of ML 2020-06 in early April 2020 and has been renewed twice. In ML 2020-34 Released in October of that year, the Trump administration extended the relief until the end of the year. It was expanded again in ML 2021-05 from the Biden administration until June 30th and now lasts until September according to the new ML.
Extension of the moratorium, deadlines for requests for deferral
While the White House is public announced Its intention to extend relevant foreclosure and eviction moratoriums one day before the new ML is released, the new letter codifies the initial guidelines and makes it official for HUD and FHA policies. The letter goes a step further, however, and aims to provide the relief they need to mortgage servants struggling to help homeowners in need.
“This auto-renewal is an additional one month of protection for those struggling to stay in their homes as the nation moves from emergency relief to recovery,” a HUD statement said. In addition, the FHA is extending the legal action deadline and reasonable due diligence by 180 days after July 31, 2021 to give service providers the extra time they need to do their job of assisting homeowners in need focus. This extension excludes vacant or abandoned properties. “
The new policy also extends the deadline for homeowners to start new cease and desist plans to September 30, 2021 to accommodate the ongoing housing and financial hardship caused by the pandemic.
“Homeowners who have not previously been in COVID-19 forbearance can request this break or reduction in mortgage payments,” HUD said in its statement. “The COVID-19 forbearance for homeowners who apply for a new estate allowance between July 1, 2021 and September 30, 2021 is valid for six months.”
For homeowners who have already received a deferral from their mortgage administrator between July 1 and September 30, 2020, FHA will grant anyone who needs additional time for financial recovery an additional three-month deferral extension before resuming their regular mortgage payments.
New form of COVID-19 aid
The ML is also creating a new form of home ownership relief specifically tailored to address the aftermath of the COVID-19 pandemic, which the FHA calls “COVID-19 Advance Loan Modification (COVID-19 ALM)”. The COVID-19 ALM is designed to provide what the FHA calls “Significant Payment Facilitation” for eligible homeowners and is offered to borrowers currently at least 90 days in arrears or at the end of their COVID-19 forbearance.
It is intended for homeowners who can be brought up to date with a 30 year interest rate and term change and who reduce the principal and interest portion of their monthly mortgage payment by at least 25%.
“Mortgage service providers need to review their FHA service portfolio and offer the new COVID-19 ALM to distressed homeowners with FHA-insured mortgages who have faced COVID-19 hardship,” the FHA announcement said. “To accept the change, borrowers only need to sign the mortgage modification documents and send them back to their mortgage service provider.”
All of the other loss mitigation options previously outlined by the HUD and FHA remain available to eligible borrowers who do not accept a COVID-19 ALM “for any reason,” FHA explains.
HUD and FHA response
RMD reached out to officials with the HUD and FHA but was directed to statements made when the ML first announced on Friday.
“Since President Biden took office, COVID-19 cases and deaths have decreased by nearly 90% and the economy is recovering strongly,” said HUD Secretary Marcia Fudge. “What is important is that we must continue to take steps to ensure that those who may have experienced difficulties caused by COVID-19 receive the support they need to stay in their homes. I am pleased that the FHA is implementing additional measures to meet this unprecedented challenge and ensure a fair and equitable recovery. “
On the FHA side, the current senior official says the housing situation of Americans will continue to be assessed to see if any additional relief beyond this week’s measures is needed in the future.
“These measures are important steps we must take to ensure that individuals and families who continue to have financial problems due to COVID-19 have access to effective and meaningful recovery options,” said FHA Deputy Assistant Secretary Lopa Kolluri. “We will continue to explore additional solutions to help homeowners in need keep their homes and avoid future foreclosures whenever possible.”
Earlier on Friday also the White House announced major appointments to the FHA and HUD, including the FHA commissioner, and the appointment of the current acting director of the Consumer Financial Protection Bureau (CFPB) to a position with the HUD. In addition to the HUD and FHA, the Centers for Disease Control and Prevention (CDC) extended their own eviction moratorium until July 31.
Read ML 2021-15 at HUD.