COVID-19: What loss mitigation options are available to FHA borrowers who are unable to make their mortgage payments due to COVID-19?

FHA has a variety of Loss Mitigation options to assist Borrowers who are unable to make their mortgage payments due to the COVID-19 National Emergency.  All of FHA’s loss mitigation options are coordinated through the mortgage loan servicer (servicer).  If you are experiencing a financial hardship due to COVID-19 which is impacting your ability to make on-time Mortgage Payments, contact your servicer as soon as possible and discuss your situation with a loss mitigation specialist. Your servicer’s ability to respond quickly may be impacted as a result of the COVID-19 pandemic.
 
COVID-19 Forbearance
Upon request from the Borrower, the servicer must offer a COVID-19 Forbearance regardless of the delinquency status of the mortgage. The Borrower is not required to provide any documents to support the need for the COVID-19 Forbearance.
 
The COVID-19 Forbearance allows for one or more periods of reduced or suspended payments without specific terms of repayment. The initial COVID-19 Forbearance Period may be up to 6 months. If needed, you may request and extension of the COVID-19 Forbearance Period for up to an additional 6 months which must be granted by the servicer.  A borrower can, at any time, shorten the COVID-19 Forbearance Period.
 
During the COVID-19 Forbearance Period the servicer must waive all Late Charges, fees and penalties.
The COVID-19 Home Retention Options provide options to reinstate the Mortgage after the expiration of the COVID-19 Forbearance period.
Borrowers who are able to resume the monthly or the modified monthly Mortgage payments, where the Mortgage was current or less than 30 Days past due as of March 1, 2020, are eligible to be reviewed for the following COVID-19 Home Retention Options, in the following order:
 
OWNER-OCCUPANT BORROWERS
  • COVID-19 Standalone Partial Claim
    A Partial Claim is a no interest junior lien secured by the property which is used to pay the balance owed for the suspended mortgage payments. No payments are due on the COVID-19 Standalone Partial Claim until the payoff, maturity or acceleration of the FHA-insured Mortgage, including the sale of the Property, a refinance, or the termination of FHA insurance on the Mortgage.
  • COVID-19 Owner-Occupant Loan Modification
    A COVID-19 Owner-Occupant Loan Modification may be used to modify the rate and term of the Mortgage.
  • COVID-19 Combination Partial Claim and Loan Modification (Non-FHA-HAMP)
    Mortgages which could not be reinstated by a COVID-19 Standalone Partial Claim or COVID-19 Owner-Occupant Loan Modification may be able to be reinstated through the COVID-19 Combination Partial Claim and Loan Modification option.
  • COVID-19 FHA Home Affordable Modification Program (FHA-HAMP) Combination 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.
NON-OCCUPANT BORROWERS
Non-Occupant Borrowers are eligible to be reviewed for the COVID-19 Non-Occupant Loan Modification, which modifies the rate and term of the Mortgage.
 
COVID-19 LOSS MITIGATION HOME DISPOSITION OPTIONS
COVID-19 Home Disposition Options provide options for the disposition of a Property if the Owner-Occupant or Non-Occupant Borrower:
  • Was current or less than 30 days past due as of March 1, 2020 and do not qualify for any of the COVID-19 Home Retention Options.
  • Is unable to reinstate the Mortgage, and
  • Meets eligibility requirements
The following COVID-19 Home Disposition Options may be available to Owner-Occupant and Non-Occupant Borrowers:
  • COVID-19 Pre-Foreclosure Sale (PFS);
    If the Borrower does not qualify for any of the COVID-19 Home Retention Options and the property's sales value is not enough to pay the loan in full, the mortgage loan servicer (servicer) may be able to accept less than full amount owed.
  • COVID-19 Deed-in-Lieu (DIL) of Foreclosure.
    If the Borrower is unable to complete a COVID-19 PFS transaction at the expiration of the PFS marketing period, they may be able to voluntarily offer to deed (“give back”) the property to HUD in exchange for a release from all obligations under the Mortgage.
BORROWERS MORE THAN 30 DAYS DELINQUENT AS OF MARCH 1, 2020   
Borrowers who are not eligible for COVID-19 Loss Mitigation Options because they were more than 30 Days past due as of March 1, 2020, must be evaluated by the mortgage loan servicer for the standard FHA Loss Mitigation Options which may include a Loan Modification, Partial Claim or Combination Loan Modification and Partial Claim under the FHA-Home Affordable Modification Program (FHA-HAMP).
 
All requests for additional information or clarification related to loss mitigation should be directed to your servicer.
 
Mortgagees must offer eligible borrowers the COVID-19 Loss Mitigation Options and procedures set forth in Mortgagee Letter 2020-22 no later than 90 days from July 8, 2020, but may begin offering the new options immediately.
 
You may wish to contact a HUD-approved Housing Counseling Agency for unbiased counseling on your particular situation.  HUD–approved Housing Counseling Agencies may be located by calling HUD’s interactive voice system at 1-800-569-4287 or online at: https://apps.hud.gov/offices/hsg/sfh/hcc/hcs.cfm
 
Additional information and resources for Borrowers impacted by COVID-19 are available on the Consumer Financial Protection Bureau (CFPB) website at: https://www.consumerfinance.gov/about-us/blog/guide-coronavirus-mortgage-relief-options/

Benefits.gov is an online resource to help you find federal benefits for which you may be eligible.  Visit https://www.benefits.gov/ for more information and a link to the Benefit Finder, to find information on government benefits you may be eligible to receive.
 
Additional FHA Policy Information is available at: 
 

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-05572