COVID-19: May the Mortgagee grant an extension or release funds from the 203(k) escrow if the borrower is in forbearance due to COVID-19?

The following information, published in Mortgagee Letter (ML) 2020-24 and extended in MLs 2020-40, 2020-46 and 2021-07 is effective immediately for open escrow accounts through June 30, 2021. 
Yes, FHA is providing temporary flexibility regarding the requirements in the Single Family Housing Policy Handbook 4000.1 (II.A.8.a.xvii(B) – Extension Requests, and II.A.8.a.xx – Servicing) to allow Mortgagees to continue administering the 203(k) Rehabilitation Escrow Account, including the approval of extension requests and release of funds, for mortgages where the Borrower is in forbearance due to the impacts of COVID-19.    
When reviewing an extension request, the Mortgagee is still required to obtain:
  • An explanation for the delay from the Borrower, contractor, or 203(k) Consultant; and
  • A new estimated completion date.
For additional information see:



All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.

Topic Number: KA-01577