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Loss Mitigation for FHA Homeowners

COVID-19 Loss Mitigation

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. 

For details on COVID-19 Loss Mitigation visit COVID-19 Loss Mitigation Options For FHA Homeowners.

HUD’s Standard Loss Mitigation Options

The Federal Housing Administration (FHA), which is a part of the U.S. Department of Housing and Urban Development (HUD), works to halt and reverse the losses represented by foreclosure. Through its National Servicing Center (NSC), FHA offers a number of loss mitigation programs and informational resources to assist FHA-insured homeowners facing financial hardship, and whose mortgage is either in default or at risk of default. Those homeowners should contact their mortgage servicer who will evaluate them for FHA’s loss mitigation options.

If you have an FHA-insured mortgage, these options may be available to you.

Informal or Formal Forbearance Plan: A Forbearance plan allows a borrower to work with their mortgage servicer to temporarily pause or reduce their monthly mortgage payments and may provide specific terms for repayment.

Special Forbearance (SFB)-Unemployment: SFB is available when one or more of the borrowers have become unemployed and this loss of employment has negatively affected the borrower’s ability to continue to make their monthly mortgage payment. The servicer will re-evaluate the borrower for a permanent Loss Mitigation Option to cure a Default once the borrower is gainfully employed and/or the SFB-Unemployment Agreement expires.

FHA Home Affordable Modification Program (HAMP): FHA-HAMP is designed to help a borrower who meets HAMP eligibility requirements to avoid foreclosure by establishing an affordable monthly mortgage payment to a level sustainable by the borrower’s current income through the use of one of the following:

  • Standalone Loan Modification: Resolves the outstanding mortgage payment arrearages by adding it to the principal loan balance of the first mortgage and extends the term of the mortgage to 360 months at a fixed interest rate. 
  • 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.
  • FHA-HAMP Combination Loan Modification and Partial Claim: The FHA-HAMP Combination Loan Modification and Partial Claim establishes an affordable monthly payment, resolves the outstanding mortgage payment arrearages, and permanently modifies the first mortgage monthly payment. The Partial Claim is a zero-interest subordinate lien that will include a portion of the amount to be resolved and if you meet the requirements, a principal deferment. The remainder is added to the principal loan balance of your first mortgage and extends the term for 30 years (360 months) at a fixed interest rate.

Pre-Foreclosure Sale (PFS): If the borrower does not qualify for any of the FHA 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.

Deed-in-Lieu (DIL) of Foreclosure: If the borrower is unable to complete a 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.

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: