Eligibility for the COVID-19 Owner-Occupant Loan Modification
The Mortgagee must ensure that Borrowers and the FHA-insured Mortgage meet the following requirements for a COVID-19 Owner-Occupant Loan Modification:
- The Borrower indicates they have the ability to make the modified Mortgage Payment; and
- The Property is Owner-Occupied.
The Mortgagee must modify the Mortgage as follows:
- All Late Charges, fees, and penalties must be waived except that Mortgagees are not required to waive Late Charges, fees, and penalties, if any, accumulated prior to March 1, 2020;
- The Mortgagee must only capitalize into a COVID-19 Owner-Occupant Loan Modification:
- arrearages for unpaid accrued interest,
- Mortgagee advances for escrowed item, and
- an escrow shortage that falls below the target balance, calculated during an escrow analysis, that exceeds the amount of the Mortgagee’s advances already capitalized in the modified mortgage.
- The Mortgagee must ensure that the COVID-19 Owner-Occupant Loan Modification fully reinstates the Mortgage.
- The Mortgagee must ensure that the modified Mortgage, including Adjustable Rate Mortgage (ARM), Graduated Payment Mortgage (GPM) or Growing Equity Mortgage (GEM), is modified to a fixed rate Mortgage.
- The Mortgagee must ensure that the interest rate is no greater than the Market Rate as defined by HUD.
- The Mortgagee must ensure that the term for the modified Mortgage is 360 months.
- The term may be less than 360 months if requested by the Borrower.
- The Borrower’s Principal and Interest (P&I) may not increase under the COVID-19 Owner-Occupant Loan Modification unless:
- The Borrower has exhausted the 30 percent maximum statutory value of all Partial Claims for an FHA-insured Mortgage.
- HUD does not provide a model for COVID-19 Loan Modification documents, but the Mortgagee must ensure the FHA-insured Mortgage remains in first lien position and is legally enforceable.
- Handbook 4000.1 III.A.3.d.iv(B) available at: https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh
- Mortgagee Letter 2021-05 available at: https://www.hud.gov/program_offices/administration/hudclips/letters/mortgagee