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Posted February 22nd, 2018

     Revised Loss Mitigation Policies for Affected Borrowers in Certain Presidentially-Declared Major Disaster Areas

The Federal Housing Administration (FHA) published Mortgagee Letter (ML) 2018-01 entitled, “Loss Mitigation Policy Changes for Hurricanes Harvey, Irma, and Maria and certain California Wildfires that occurred in October 2017 (FEMA-DR-4344), or certain California Wildfires, Flooding, Mudflows, and Debris Flows that occurred in December 2017 (FEMA-DR-4353).”

This ML, which is designed to provide immediate loss mitigation and other relief options to FHA borrowers in certain designated Presidentially-Declared Major Disaster Areas (PDMDAs) allows for the use of streamlined income documentation and other requirements to expedite loss mitigation relief for affected borrowers. It also introduces a new “Disaster Standalone Partial Claim” option to help eligible borrowers on forbearance plans to resume their pre-disaster mortgage payments — helping to avoid payment shock — as well as keeping their interest rate and payment terms the same.   

This new and revised guidance applies to all FHA Title II forward mortgages for those disaster-affected borrowers whose property or employment is in the following PDMDAs:

  • Louisiana – Hurricane Harvey (DR-4345);
  • Texas – Hurricane Harvey (DR-4332);
  • Florida – Hurricane Irma (DR-4337);
  • Georgia –  Hurricane Irma (DR-4338);
  • Puerto Rico – Hurricane Irma (DR-4336) and Hurricane Maria (DR-4339);
  • South Carolina – Hurricane Irma (DR-4346);
  • U.S. Virgin Islands – Hurricane Irma (DR-4335) and Hurricane Maria (DR-4340); and the
  • California Wildfires (FEMA-DR-4344) or California Wildfires, Flooding, Mudflows, and Debris Flows (FEMA-DR-4353).  

To facilitate the implementation of the Disaster Standalone Partial Claim option, changes will be necessary to certain FHA systems and claims processing procedures. These changes will be communicated in the coming weeks.

FHA-approved mortgagees must begin implementing these policies no later than May 1, 2018; however, they can begin using them immediately. These amended policies will expire on May 1, 2019.

Mortgagees are strongly encouraged to read ML 2018-01 in its entirety to ensure they understand — and are ready to implement — the revised policies and new loss mitigation option no later than May 1, 2018.