There have been many changes to FHA/HUD foreclosure policy. The latest of those changes comes via FHA Mortgagee Letter 2016-04, which adjusts the foreclosure timeline to comply with federal regulations known as Regulation X. According to the mortgagee letter, a previous mortgagee letter (2015-21) has been superseded in its entirety by this new set of guidelines.
The new mortgagee letter “…provides updated guidance relating to HUDs regulatory requirement for mortgagees to utilize a loss mitigation option or initiate foreclosure within six months of the date of default. Specifically, this Mortgagee Letter:
–reiterates the existing eight automatic extensions available to mortgagees when they are unable to initiate foreclosure within the allotted timeframe; and
–introduces two new automatic extensions to align with the Consumer Financial Protection Bureaus Regulation X.”
Specifically, “The Consumer Finance Protection Bureau (CFPB), under the Real Estate Settlement Procedures Act (Regulation X)…requires an appeals process for loan modification denials when a complete loss mitigation application has been received under the requirements of the regulation.”
That is a very important thing for home owners to know–the appeals process could further help the borrower stay in the home depending on circumstances. Furthermore, as mentioned above, lenders are required to use either loss mitigation or foreclosure within six months of the loan going into default.
That is also important for borrowers to know as it gives a very specific time frame when foreclosure action must occur. That said, “HUD provides automatic 90-day extensions to these deadlines under certain circumstances. These extensions are available to mortgagees without the requirement for mortgagees to obtain HUD approval”.
Borrowers should never allow a single FHA loan mortgage payment to lapse without getting in touch with the lender to make arrangements, explain circumstances, and discuss options for avoiding FHA loan default. The more payments missed on a home loan, the fewer options the borrower has for loss mitigation. Working closely with the lender is the key to being fully informed as to your options and responsibilities.
If you do need loss mitigation or foreclosure avoidance help, your best bet is to discuss the situation with your loan officer to see what options are available. You may be able to refinance the loan depending on circumstances or take other steps to remain in the home.
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