October 31, 2013
Borrowers who get into financial trouble may have difficulty paying their monthly FHA mortgages. In all cases, the FHA encourages borrowers to get in touch with the lender as soon as possible to make arrangements to avoid going into delinquency and default on an FHA loan. Borrowers who do this have the most options, and find many more doors open to them. Borrowers who wait until it’s too late to prevent going into default may have few choices.
What is the lender’s responsibility when a borrower starts missing payments and is in danger of foreclosure? The FHA and HUD have issued updated guidance telling lenders what must be done and what the acceptable course of action is for the financial institution in such cases.
These updates were published in FHA mortgagee letter 2013-39. It says in part:
“Prompt and effective contact with all delinquent borrowers is essential in ensuring that delinquencies are properly addressed. This includes ensuring that notices and communications are provided in a manner that is effective for persons with hearing, visual, and other communications-related disabilities. Servicers must also ensure that their contact attempts are adequately documented in their servicing files.”
An FHA lender is expected to be polite and professional in such cases, but there’s also a set of rules governing what to do when the borrower cannot or will not communicate with the bank. According to ML 2013-39, on the 20th day of delinquency, the FHA lender must begin or continue, “telephone contact with borrowers who are delinquent on their mortgages. Servicers should call a minimum of two times per week at varying times and days of the week, until contact is established or until the servicer determines that the property is vacant or abandoned.”
By the 32nd day of delinquency, the lender is advised, “Beginning on the 32nd day, but no later than the 45th day from the date payment was due, send a:
–Notification to borrower(s) of the availability of housing counseling; and
–Service members’ Civil Relief Act (SCRA) Notice (see Mortgagee Letter 2006-28).”
Additionally, this very important step on the 45th day of FHA loan delinquency, where the lender is required to take further action:
“Beginning on the 45th day after the date payment was due, if the servicer has received the borrower’s financial information, the servicer should commence its analysis of those financials to identify appropriate loss mitigation options. If unable to reach the borrower, the servicer must perform a visual inspection of the mortgaged property to determine if it is vacant or abandoned. This action should be completed no later than 60 days after the date payment was due.”
For more information on your FHA loan options to prevent losing your home if you become delinquent on the loan, call the lender and the FHA as soon as possible.
Do you have questions about FHA home loans? Ask us in the comments section.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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