New Loss Mitigation Option Launched for FHA Lenders
Written by: Heather Papows, Senior Loan Servicing & Secondary Market Consultant
The Federal Housing Administration announced on Wednesday that a new option for FHA-insured past-due borrowers has been launched, adding a new tool for temporarily relieving monthly mortgage payments by up to 25% for up to 3 years without modifying the interest rate.
This new tool, named Payment Supplement, essentially uses a loan’s partial claim allowance (established as a junior lien with funds of up to 30 percent of the outstanding mortgage balance) to bring current all past due amounts, and then supplements partial payments made by the borrower to keep the loan current.
Servicers are permitted to begin use of this Payment Supplement option beginning May 1, 2024, with mandatory rollout to begin January 1, 2025.
In addition to rolling out this additional home retention option, FHA also announced an extension to its current full suite of options through April 30, 2025. [1]
Whether you’re servicing for FHA, VA, State Housing agencies, GSE’s, or simply your own portfolio of borrowers, it’s always helpful to have a second set of eyes on your loss mitigation options. If you haven’t recently reviewed the suite of workout options you’re making available to borrowers in default, reach out to our Director, Bill Dolan, at WDolan@scapartnering.com or by phone at (617) 694-2617 and schedule a time to speak with us today!
[1] Federal Housing Administration Launches New Option to Help Struggling Borrowers Keep Their Homes | HUD.gov / U.S. Department of Housing and Urban Development (HUD)
