April 17, 2013
The FHA has issued a new mortgagee letter amending its guidance and policies for Hurricane Sandy disaster relief as well as general guidelines for disaster assistance related to FHA home loans, loan forbearance and related measures.
Mortgagee Letter 13-11 states, “As indicated in Mortgagee Letter 2012-23, HUD requires a moratorium on foreclosures of properties in Presidentially-Declared Major Disaster Areas (PDMDAs) for a ninety (90) day period beginning on the date of each Disaster Area Declaration. The moratorium applies to the initiation of foreclosures AND foreclosures already in process. As necessary, HUD may communicate further specific guidance for extension of moratorium periods for individual disasters.”
Additionally, “During foreclosure moratorium periods, HUD expects servicers to make every effort to communicate with and assist affected borrowers in rebuilding or repairing damaged properties, minimizing delinquencies and retaining homeownership.”
FHA guidance for Hurricane Sandy relief as well as other federally-declared disaster areas now includes the following, as per the FHA:
“Before considering impacted borrowers for a permanent solution utilizing one of FHA’s Loss Mitigation Home Retention Options, the servicer must first evaluate the borrower for a Forbearance, which allows for one or more periods of reduced or suspended payments without specific terms of repayment.”
Relief measures in this area include forbearance relief “consistent with” the following options which may apply depending on the circumstances:
- Informal Forbearances. FHA loan rules as stated in the new mortgagee letter “do not need to be in writing” and may be effective for a three-month period. “If the moratorium is extended,” FHA loan rules state, “a new informal forbearance period may be granted in applicable areas”.
- Formal Forbearances must be in writing. According to FHA mortgagee leetter 13-11, “Formal Forbearances pertaining to PDMDAs that do meet the requirements” as stated in FHA Mortgagee Letter 2012-22:
(i) cannot exceed the estimated time to repair the property as supported by a contract or repair estimate;
(ii) can be granted for periods of up to twelve (12) months while borrowers are pursuing home repairs and resolving verifiable financial difficulties related to the disaster; and
(iii) the total accumulated arrearages on the loan may not exceed the equivalent of twelve (12) months of principal, interest, taxes and insurance (PITI) during the forbearance period.
For more information on these rules, contact the FHA directly at 1-800 CALL FHA.
Do you have questions about FHA mortgages or refinance 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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