COVID-19: Can a mortgage be submitted for endorsement if a Borrower requests or is granted a forbearance due to experiencing a financial hardship due, directly or indirectly, to COVID-19?

As announced in Mortgagee Letter (ML) 2020-16, HUD is providing Mortgagees the ability to endorse mortgages that have closed in accordance with FHA requirements and where the borrower is subsequently affected by a financial hardship due; directly or indirectly to COVID-19.    

Eligibility Requirements:
A Mortgagee may submit an eligible mortgage involving a borrower experiencing a financial hardship due, directly or indirectly, to COVID-19 who has requested or has been granted a forbearance agreement as a result of COVID-19 for insurance endorsement if:

  • the borrower has requested forbearance, or the mortgage is subject to a forbearance agreement for one or more payments due to relief provided to borrowers impacted by COVID-19;
  • at the time the forbearance was initiated the mortgage was current;
  • at the time of the mortgage closing the mortgage satisfied all requirements for FHA insurance; and
  • the Mortgagee executes a two-year partial indemnification agreement.
 
Additionally, forbearance provided to borrowers experiencing a financial hardship due, directly or indirectly, to COVID-19 is not considered the provision of funds by a Mortgagee to bring and/or keep the mortgage current or to provide the appearance of an acceptable payment history.
 
Modification Statement to the Mortgagee’s Certification on form HUD 92900-A:
For mortgages submitted for endorsement pursuant to ML 2020-16, Mortgagees may provide a modified statement to the Mortgagee’s Certification on form HUD 92900-A. Where a Mortgagee is made aware of a change in a borrower’s employment status due to COVID-19 after the closing of the mortgage, the Mortgagee may provide a separate addendum to the Mortgagee’s Certification stating that “the executed Mortgagee’s Certification excludes certification of knowledge of the borrower’s employment status as provided in the Form HUD 92900-A, page 4, paragraph (a).”
 
Endorsement Processing:
Where a Mortgagee seeks to obtain insurance endorsement of a mortgage involving a borrower experiencing a financial hardship due, directly or indirectly, to COVID-19 in accordance with the requirements in ML 2020-16, the Mortgagee must execute a two-year partial indemnification agreement.
 
FHA Connection (FHAC) is being modified to identify mortgages endorsed under the requirements in ML 2020-16. Where a Mortgagee seeks to obtain insurance endorsement for a loan granted forbearance in accordance with the requirements in ML 2020-16, the Mortgagee must indicate that the mortgage is subject to forbearance in FHAC by selecting the “forbearance” tab under the drop down for the “Current Payments” field.
 
Applications for insurance where the mortgage is subject to forbearance as indicated in FHAC will be issued a Severe Case warning.
 
Mortgagees with Lender Insurance (LI) authority must submit the executed two-year partial indemnification agreement to the jurisdictional Homeownership Center in accordance with the Severe Case Warnings requirements in Handbook 4000.1, section II.A.7.d.vii, as amended by ML 2020-07, FHA Catalyst: Case Binder Module – Single Family Forward and Home Equity Conversion Mortgage (HECM) Electronic Endorsement Submission.
 
Mortgagees without LI authority must submit the executed two-year partial indemnification agreement with the case binder in accordance with the requirements in Handbook 4000.1, section II.A.7.iii, as amended by ML 2020-07.
 
Mortgagees must ensure that upon insurance endorsement, any previously provided forbearance complies with, or is converted to comply with, FHA’s requirements in Handbook 4000.1, section III.A.3.d Presidentially-Declared COVID-19 National Emergency established in ML 2020-06, FHA’s Loss Mitigation Options for Single Family Borrowers Affected by the Presidentially-Declared COVID-19 National Emergency in Accordance with the CARES Act.
 
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-05535