COVID-19: How does a Mortgagee use a COVID-19 FHA-HAMP Combined Loan Modification and Partial Claim with Reduced Documentation?

Borrowers may provide income documentation to be reviewed for an affordable monthly payment under a COVID-19 FHA-HAMP Combination Loan Modification and Partial Claim with Reduced Documentation, which may include a principal deferment.
 
The Mortgagee must ensure that Borrowers and the FHA-insured Mortgage meet the following requirements for a COVID-19 FHA-HAMP Combination Loan Modification and Partial Claim with Reduced Documentation.

Eligibility 
The Mortgagee must ensure that:

  • The Property is owner-occupied;
  • The Borrower has not exhausted the 30 percent statutory maximum value of all Partial Claims for an FHA-insured Mortgage; and
  • The Borrower is not eligible for the COVID-19 Home Retention Options due to the following:
    • the Borrower is not eligible for the COVID-19 Standalone Partial Claim because the Borrower indicates they are unable to resume the existing monthly Mortgage Payments after the COVID-19 Forbearance; or
    • the Borrower is not eligible for the COVID-19 Combination Partial Claim and Loan Modification (Non-FHA-HAMP) because the Borrower indicates they are unable to make the modified monthly Mortgage Payment under the COVID-19 Combination Partial Claim and Loan Modification (Non-FHA-HAMP).
 
Terms 
The Mortgagee must review the Borrower for an affordable monthly Mortgage Payment using the FHA-HAMP calculations in Step 5 of the Loss Mitigation Home Retention Waterfall Options (III.A.2.j.iii).
 
If required, a principal deferment may be utilized. No portion of the Partial Claim may be used to bring the modified Principal, Interest, Taxes, and Insurance (PITI) monthly payment below the targeted payment.
The following reduced income documentation requirements are adequate to review the Borrower for a COVID-19 FHA-HAMP Combination Loan Modification and Partial Claim with Reduced Documentation:
  • the Borrower’s most recent pay stub for wage income reflecting year-to-date earnings; or
  • the Borrower’s most recent bank statement reflecting deposits of income amounts from applicable sources; or
  • other documentation (e.g., monthly statement of Social Security benefits, monthly pension statement) reflecting the amount of income.
The Mortgagee must:
    • ensure that all accumulated Late Charges, fees, and penalties are waived except that Mortgagees are not required to waive Late Charges, fees, and penalties, if any, accumulated prior to March 1, 2020;  
    • only capitalize into the modified Mortgage,
    • arrearages for unpaid accrued interest,
    • Mortgagee advances for escrowed items, 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 determine the maximum Partial Claim amount available that does not exceed the 30 percent maximum statutory value of all Partial Claims for an FHA-insured Mortgage, as listed in Statutory Maximum for Partial Claims (III.A.2.k.v(F).
    • The Mortgagee must ensure that the COVID-19 FHA-HAMP Combination Loan Modification and Partial Claim fully reinstates the Mortgage.
    • The Mortgagee must ensure that the modified Mortgage, including ARM, GPM, or 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 Borrower’s monthly Mortgage Payment may increase.
    • HUD does not provide a model for COVID-19 Loan Modification documents, but the Mortgagee must ensure the FHA-insured modified Mortgage remains in first lien position and is legally enforceable.

To allow adequate time to complete the COVID-19 FHA-HAMP Combination Loan Modification and Partial Claim with Reduced Documentation, obtain all required signatures and provide adequate notice to the Borrower of the new payment, Mortgagees may include an additional month in the total outstanding debt to be resolved. The Mortgagee must not provide the Borrower with any cash from the COVID-19 FHA-HAMP Combination Loan Modification and Partial Claim with Reduced Documentation.

A Trial Payment Plan (TPP) is not required.

Required Documentation
The Mortgagee must submit all required documentation for COVID-19 Partial Claims as listed under Delivery of Partial Claim Documents (III.A.2.k.v(H)(6)).
 
The Mortgagee is automatically granted a 90-Day extension to the six-month deadline for the recorded Mortgage.
 
If a Mortgagee experiences additional delays out of their control, including past the automatic 90-Day extension for the recorded Mortgage, that impact delivery of the Partial Claim documents, Mortgagees may file requests for an additional extension in accordance with Requests for Extensions of Time for Delivery of Partial Claim Documents (III.A.2.k.v(H)(7)).

 


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-05569