The Mortgagee must review Non-Occupant Borrowers for a COVID-19 Recovery Non-Occupant Loan Modification, which modifies the rate and term of the Mortgage.
Eligibility
The Mortgagee must ensure that:
- The Borrower indicates they have the ability to make the modified Mortgage Payments; and
- The Property is not owner-occupied. The Property can be used as a Rental Property, Secondary Residence, or Vacation Home for the Borrower.
The Mortgagee must modify the Mortgage as follows:
- The Mortgagee must ensure that all 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;
- The Mortgagee must only capitalize into a COVID-19 Recovery Non-Occupant Loan Modification:
- arrearages for unpaid accrued interest;
- Mortgagee advances for escrowed items;
- An escrow shortage that falls below the target balance, calculated during an escrow analysis that exceeds the amount of the Mortgage’s advances already capitalized in the modified Mortgage; and
- related legal fees and foreclosure and bankruptcy costs not higher than the foreclosure-related fees and costs HUD has identified as customary and reasonable.
- The Mortgagee must ensure that the COVID-19 Recovery Non-Occupant Loan Modification fully reinstates the Mortgage.
- The Mortgagee must ensure that the modified Mortgage is a fixed rate Mortgage.
- 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 total monthly Mortgage Payment may increase.
- HUD does not provide a model for COVID-19 Recovery Non-Occupant Loan Modification documents, but the Mortgagee must ensure the FHA-insured Mortgage remains in first lien position and is legally enforceable.
If Borrowers re-default due to COVID-19, they may receive more than one COVID-19 Recovery Non-Occupant Loan Modification.
Required Documentation
The Mortgagee must retain the following in the Servicing File:
- a copy of the rental agreement for each rental unit, if applicable;
- a written statement from the Borrower stating:
- that they are the landlord of the Property and their renter is impacted, directly or indirectly, by the COVID-19 pandemic and is either unable to make rent payments or has vacated the Property; or
- that the Property is used as a Secondary Residence or a Vacation Home for the Borrower; and
- evidence that the Mortgage was timely submitted for recording.
For additional information, see:
- Handbook 4000.1 III.A.2.o.iii(C)(3) at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh