December 15, 2017

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Foreclosure Avoidance on FHA Mortgages: The Trial Payment Plan

160-whitehouseThe FHA recently announced changes to its policies designed to help those who purchased homes with FHA mortgages and have since fallen into financial trouble to avoid foreclosure.

There are many government programs to help borrowers keep their homes in hard times including the Obama mortgage, and the FHA Home Affordable Modification Program or HAMP. If you have fallen behind on your mortgage payments on an FHA mortgage, the information here will be of special interest to you.

Those who are under consideration for HAMP may learn they have to complete a trial payment plan before the HAMP modification can be finalized and approved. But what does this trial payment plan (also referred to as TPP) entail?

The FHA announced modifications to the HAMP program this summer, and in FHA Mortgagee Letter 2016-14, it explains how the trial payment period works, starting with a definition of that period:

“A Trial Payment Plan (TPP) is a payment plan for a minimum period (depending on the situation, three or four months), during which the Borrower must make the agreed-upon consecutive monthly payments prior to final execution of the FHA-HAMP agreement.”

The basic standard for this plan is described as follows: “The Mortgagee must ensure that the Borrower successfully completes a TPP, before executing permanent FHA-HAMP agreements, of a minimum of:

-three months, for Borrowers in Default;

and

-four months, for Borrowers facing Imminent Default”

HAMP loan modifications have certain restrictions, including how long the borrower must have owned the home before the program can be considered as a loss mitigation option. “Where a Borrower is eligible for an FHA-HAMP option, the Mortgagee must ensure that the Borrowers TPP begins only after 12 months have elapsed since the Closing Date of the FHA-insured Mortgage.”

Once it has been established that this minimum time is met, “The Mortgagee must send the proposed TPP Agreement to the Borrower at least 15 Days before the date the first trial payment is due with notification of an established deadline date for Borrower acceptance or rejection of the Trial Payment Plan Terms. The acceptance/rejection deadline date must be on or before the first trial payment due date.”

What about for borrowers who are in imminent danger of foreclosure before the loan modification begins? The FHA mortgagee letter makes provisions for such conditions.

“The Mortgagee must suspend and/or terminate foreclosure action, depending on state law requirement, during the TPP. In the event the Borrower fails to make a payment required under a TPP, the Mortgagee must review the Borrower for other appropriate Loss Mitigation Options before commencing or continuing a foreclosure. HUD provides an automatic 90-Day extension for the Mortgagee to commence or recommence foreclosure or initiate another Loss Mitigation Option, should a TPP fail.”

Joe Wallace - Staff Writer

By Joe Wallace

September 2, 2016

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 for over (3) years.

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