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COVID-19 LOSS MITIGATION OPTIONS FOR FHA HOMEOWNERS

As of January 30, 2023, there are essential changes to FHA's loss mitigation programs that impact this web page. Borrowers should contact their mortgage servicer to discuss available options.

Mortgage servicers should refer to Mortgagee Letter 2023-02, published on Monday, January 30, 2023, to learn about these changes. This page will be updated following the must-be-implemented-by date of April 30, 2023.

FHA has COVID-19 Loss Mitigation options to assist borrowers who are unable to make their mortgage or property charge payments due to the Presidentially Declared COVID-19 National Emergency. If you are experiencing a financial hardship due to COVID-19 impacting your ability to make on-time mortgage payments, contact your mortgage servicer as soon as possible to discuss your options.
 
If you have an FHA-insured mortgage, the following options may be available to you.

Forbearance for Borrowers Affected by the COVID-19 National Emergency

COVID-19 Forbearance: If you can't pay your mortgage because you're struggling financially due to COVID-19, you can ask for mortgage payment relief (forbearance) through the end of the Presidentially Declared COVID-19 National Emergency. 

 
Mortgage forbearance is when you have worked with your mortgage servicer to temporarily pause or reduce your monthly mortgage payments. After the completion or expiration of the forbearance period your servicer will review the COVID-19 Recovery  Options available to you to resolve the outstanding amounts of the reduced or suspended payments. No COVID-19 Forbearance period may extend beyond six months after the end of the COVID-19 National Emergency or September 30, 2022, whichever is later. 

 

COVID-19 Recovery Options

FHA offers COVID-19 Recovery Options to borrowers who are on a COVID-19 Forbearance, or borrowers who did not participate in a COVID-19 Forbearance who were 90 days or more delinquent through the end of the Presidentially Declared COVID-19 National Emergency. 

 
COVID-19 Advance Loan Modification (ALM): Available to owner-occupant and non-occupant borrowers, the COVID-19 ALM is a permanent change in one or more terms of a borrower's mortgage that achieves a minimum 25 percent reduction to the borrower's monthly principal & interest (P&I) payment and does not require borrower contact. Servicers will proactively mail the modified mortgage documents to borrowers who can achieve the required payment reduction. If the borrower chooses to accept the COVID-19 ALM they will only need to sign and return the mortgage modification documents sent to them by their mortgage servicer.
 

COVID-19 Recovery Home Retention Options (Owner-Occupant Borrower):

 
  • COVID-19 Recovery Standalone Partial Claim: For borrowers who can resume making their current mortgage payments, the COVID-19 Recovery Standalone Partial Claim allows mortgage payment arrearages to be placed in a zero interest subordinate lien against the property. The Partial Claim amount does not require payment until the last mortgage payment is made, the loan is refinanced, or the property is sold, whichever occurs first.
  • COVID-19 Recovery Modification: For borrowers who cannot resume making their current monthly mortgage payments, the COVID-19 Recovery Modification resolves the outstanding mortgage payment arrearages by adding it to the principal loan balance of the first mortgage, extending the term to 30 or 40 years at the current fixed market interest rate, and targets reducing the borrower's monthly principal and interest portion of their monthly mortgage payment. The 30-year COVID-19 Recovery Modification must include a Partial Claim if the borrower has Partial Claim funds available. A 40-year COVID-19 Recovery Modification must include a Partial Claim.
COVID-19 Recovery Home Retention Options (Non-Occupant Borrower):
 
  • COVID-19 Recovery Non-Occupant Loan Modification: For properties that are not occupied by the owner, mortgage servicers must offer eligible borrowers FHA's COVID-19 Recovery Non-Occupant Loan Modification, which resolves the outstanding mortgage payment arrearages by adding it to the principal loan balance of the first mortgage, extends the term of the mortgage to 360 months, or less if requested by the borrower, at the current fixed market interest rate.
COVID-19 Home Disposition Options:
 
Owner-Occupant and Non-Occupant borrowers that do not qualify for a COVID-19 Recovery Home Retention Option or indicate they are unable to resume making the monthly or modified monthly mortgage payment must be reviewed for the COVID-19 Home Disposition Options.
 
  • COVID-19 Pre-Foreclosure Sale (PFS): If the borrower does not qualify for any of the COVID-19 Home Retention Options and the property sales value is not enough to pay the loan in full, the servicer may be able to accept less than the full amount owed by approving eligible borrowers for a Pre-Foreclosure Sale, also known as a short sale.
  • COVID-19 Deed-in-Lieu (DIL) of Foreclosure: If the borrower is unable to complete a COVID-19 PFS transaction at the expiration of the PFS marketing period, they may be able to voluntarily offer to deed ("give back") the property to HUD in exchange for a release from all obligations under the Mortgage.
COVID-19 HECM Property Charge Repayment Plan:
 
The COVID-19 HECM Property Charge Repayment Plan allows servicers to offer eligible homeowners up to five years (60 months) to repay property charges advanced by the servicer. This additional time to repay delinquent property charges will increase the likelihood that affected borrowers can cure property charge delinquencies and avoid foreclosure.
 
  • This option is available to borrowers who have applied for Homeowner Assistance Fund (HAF) assistance if the HAF funds combined with the borrower's ability to repay will satisfy the servicer's advances for the delinquent property charges;
  • Allows the COVID-19 HECM Repayment Plan regardless of whether the borrower has been unsuccessful on a prior repayment plan and whether the borrower owes more than $5,000 in property charge advances; and
  • Only requires a verbal attestation from the borrower that they have been impacted by COVID-19.

Homeowner Assistance Funds

The American Rescue Plan Act of 2021 established the Homeowner Assistance Fund (HAF) in the U.S. Department of the Treasury in order to provide financial assistance to eligible homeowners who have suffered financial hardships during the COVID-19 National Emergency.  Qualified expenses may include mortgage payment assistance, mortgage reinstatement, utilities, insurance, and other housing-related costs.

More information about HAF can be found at:  https://home.treasury.gov/policy-issues/coronavirus/assistance-for-state-local-and-tribal-governments/homeowner-assistance-fund.
HAF information by state can be found at: https://www.ncsha.org/homeowner-assistance-fund/.

Borrowers may use HAF funds in conjunction with FHA's loss mitigation.  HUD's FAQs on HAF in connection with FHA Loss Mitigation can be found at: https://www.hud.gov/answers by selecting the HUD NSC Servicing link on the left side, and then selecting Treasury Homeowner Assistance Fund (HAF) Program.

CONTACT FHA

FHA staff are available to help answer your questions and assist you to better understand your options as an FHA borrower under these loss mitigation programs. There are several ways you can contact FHA for more information, including: