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FHA Refinance Loans, Disaster Assistance, and Loan Forbearance

April 17, 2013


The FHA has updated its disaster relief policies to help those recovering from the effects of Hurricane Sandy, but also natural disasters in a federally declared disaster area in general. One area that hasn’t gotten much attention until now is the FHA policy on refinance loans in such cases. What assistance is there for someone with an FHA insured refinance loan who is struggling in a federal disaster area?

According to the new FHA mortgagee letter, 13-11, “In accordance with HUD Handbook 4155.1, Mortgage Credit Analysis for Mortgage Insurance One- to Four-Unit Mortgage Loans, for the purpose of determining the acceptability of the borrower’s payment history for any FHA refinance, when a borrower has withheld mortgage payments pursuant to either a Formal or Informal Forbearance drafted under this Mortgagee Letter, FHA will not consider those payments to be “late” because the payments were not “due” during the disaster relief period.”

The letter adds, “Mortgagees must continue to analyze the borrower’s payment history for the period prior to, and, where applicable, following, the Forbearance period to determine if the borrower’s payment history meets FHA refinancing program requirements.”

The new mortgagee letter specifically addresses FHA Streamline Refinance loans, stating “the maximum insurable balance of the refinancing mortgage may include the unpaid principal balance, plus up to sixty (60) days of interest and two (2) months annual Mortgage Interest Premium (MIP), less Up-Front MIP refund, if any, plus the new Up-Front MIP (UFMIP). If the borrower’s forbearance plan results in greater than sixty (60) days of interest due on the current loan, the borrower will need to pay the excess by the closing date of the refinance.”

The FHA has also instructed participating lenders to, in certain cases, refrain from sending negative credit information on affected loans to credit reporting agencies.

“Servicers should suspend reporting of delinquencies to credit repositories for borrowers who are granted disaster related mortgage payment relief and are otherwise performing as agreed, unless such reporting is required for a loan modification.”

For more information on the new FHA policies for loans affected by Hurricane Sandy or situations in other federal disaster areas, contact the FHA directly at 1-800 CALL FHA.

Do you have questions about FHA loans or refinance loans? Ask us in the comments section.

Joe Wallace - Staff Writer

By Joe Wallace

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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