On the heels of new action taken by the administration only a day before related to homeowner loss mitigation options, the Federal Housing Administration (FHA) on Friday announced an extension to the foreclosure and eviction moratorium for borrowers with FHA- insured single family mortgages for an additional period through July 31, 2021, as well as a further extension of the start dates of the initial COVID-19 Forbearance and Home Equity Conversion Mortgage (HECM) Extension to provide additional COVID-19 Forbearance and HECM Extension for certain borrowers.
This is according to guidance handed down in Mortgagee Letter (ML) 2021-15, as well as press releases and public statements made by U.S. Department of Housing and Urban Development (HUD) officials accompanying the publication of the document.
Reverse mortgage-specific guidance
Provisions specific to the HECM program are less numerous than more general provisions. For HECM borrowers who remain negatively impacted by the effects of the pandemic, FHA is further extending the timetable for such homeowners to request an extension on the status of a loan before a servicer can call it due and payable.
“For extension requests received between July 1, 2021, and September 30, 2021, servicers must grant homeowners an extension of up to six months,” FHA explains.
For HECM borrowers with loans that have already been called due and payable by the servicer, homeowner requests for an extension must be approved by that servicer for any deadline related to foreclosure, “and claim submission of up to six months when the request is received between July 1, 2021, and September 30, 2021,” FHA explains.
For HECMs that have already received an extension at any time between July 1 and September 30, 2020, FHA is will provide an additional, single three-month extension period if needed, and specifically if a borrower requests such an extension from the servicer.
This relief was originally granted to reverse mortgage borrowers with the publication of ML 2020-06 in early April 2020, and was extended two additional times. In ML 2020-34 published that October, the Trump administration extended the relief to the end of that year. It was extended again in ML 2021-05 by the Biden administration to June 30, and will now last through September according to the new ML.
Moratorium extension, forbearance request timeframes
While the White House publicly announced its intent to extend relevant foreclosure and eviction moratoriums one day prior to the publication of the new ML, the new Letter codifies the initial guidance making it official for HUD and FHA policy. The letter goes one step further, however, in aiming to provide necessary relief to mortgage servicers who are making efforts to assist distressed homeowners.
“This automatic extension is a one-month additional safeguard for those who are struggling to remain in their homes as the nation transitions from relief to recovery,” reads a HUD statement. “Further, FHA is continuing its extension of the deadline for first legal action and reasonable diligence timeframes for 180 days after July 31, 2021, to provide servicers with the additional time needed to focus their work on assisting distressed homeowners. This extension excludes vacant or abandoned properties.”
The new guidance also extends the time period for homeowners to start new forbearance plans to September 30, 2021 in order to account for continued housing and financial hardship instigated by the pandemic.
“Homeowners who have not previously been in COVID-19 forbearance can request this pause or reduction in mortgage payments,” HUD said in its statement. “The COVID-19 Forbearance for homeowners who newly request forbearance assistance between July 1, 2021, and September 30, 2021, is for six months.”
For homeowners who have already received forbearance from their mortgage servicer between July 1 and September 30, 2020, FHA will provide an additional three-month forbearance extension for anyone who requests additional time to financially recover before resuming their regular mortgage payments.
New form of COVID-19 relief
The ML also establishes a new form of home retention relief specific to the aftermath of the COVID-19 pandemic, which FHA calls the “COVID-19 Advance Loan Modification (COVID-19 ALM).” Designed to provide what FHA describes as “significant payment relief to eligible homeowners,” the COVID-19 ALM will be offered to borrowers currently at least 90 days delinquent or at the end of their COVID-19 forbearance.
It is designed for homeowners that can be brought current by a 30-year rate and term mortgage modification and which will reduce the principal and interest portion of their monthly mortgage payment by at least 25%.
“Mortgage servicers must review their FHA servicing portfolio and offer the new COVID-19 ALM to distressed homeowners with FHA-insured mortgages who have faced a COVID-19 related hardship,” FHA says in its announcement. “To accept the modification, borrowers need to only sign and return the mortgage modification documents to their mortgage servicer.”
All other loss mitigation options previously outlined by HUD and FHA will remain available to eligible borrowers that do not accept a COVID-19 ALM “for any reason,” FHA explains.
HUD and FHA response
RMD reached out to officials with HUD and FHA, but was referred to statements that were issued when the ML was initially announced on Friday.
“Since President Biden took office, COVID-19 cases and deaths are down by nearly 90%, and the economy is rebounding strongly,” said HUD Secretary Marcia Fudge. “Importantly, we must continue to take action to ensure that those who may have experienced hardships brought on by COVID-19 have the support they need to remain in their homes. I am pleased that FHA is implementing additional measures to meet this unprecedented challenge and ensure a fair and equitable recovery.”
On the FHA side, the currently-most senior official says that the housing situations of Americans will continue to be assessed to see if additional relief beyond this week’s measures will be needed in the future.
“These measures are important steps we need to take to ensure that the individuals and families that continue to struggle financially due to COVID-19 have access to effective and meaningful recovery options,” said Principal Deputy Assistant Secretary for FHA Lopa Kolluri. “We will continue to assess additional solutions to help homeowners in distress keep their homes and avoid future foreclosure where possible.”
Earlier on Friday, the White House also announced key appointments at FHA and HUD including for FHA Commissioner, and the appointment of the current Acting Director of the Consumer Financial Protection Bureau (CFPB) to a position at HUD. In addition to HUD and FHA, the Centers for Disease Control and Prevention (CDC) also extended its own eviction moratorium to July 31.
Read ML 2021-15 at HUD.