Monday, September 24, 2018

FHA extends ‘final’ Puerto Rico, USVI foreclosure moratorium deadline

By on August 16, 2018

SAN JUAN – The Federal Housing Administration (FHA) announced Thursday it is updating its “menu of foreclosure prevention options” to allow borrowers with delinquent FHA-insured mortgages “easier access to bring their mortgages current” without increasing their interest rates or monthly payments.

The U.S. Department of Housing and Urban Development’s (HUD) move helps borrowers who were affected by hurricanes Irma and Maria in Puerto Rico and the U.S. Virgin Islands by instructing FHA-approved mortgage servicers to continue suspending all foreclosure actions against eligible FHA borrowers in the “Presidentially Declared Major Disaster Areas” until Sept. 16 to allow distressed homeowners “an opportunity to find a permanent mortgage resolution.” Read FHA’s letter to mortgage servicers.

In February, FHA introduced the Disaster Standalone Partial Claim option to help borrowers impacted by 2017 natural disasters to resume their pre-disaster mortgage payments.

“Effectively immediately, FHA’s ‘Disaster Standalone Partial Claim’ will now be the first mortgage relief option available for hurricane victims with FHA-insured homes located in Puerto Rico and the U.S. Virgin Islands,” the agency’s release reads.

The FHA said borrowers who have not received “payment relief in the form of a permanent loss mitigation” and seek a “permanent resolution” or “are on a temporary forbearance” should contact their loan servicer for help because it does not intend to further extend the foreclosure moratoriums after Sept. 16

The updated Disaster Standalone Partial Claim provides borrowers with “an opportunity to be immediately evaluated for a permanent loss mitigation solution that is affordable and sustainable,” the FHA said. “This option is the best solution for many borrowers seeking to cure arrearages and resume making payments without modifying their loan and re-amortizing the loan term.”

The option covers missed mortgage payments up to 30% of unpaid principal balance through an interest-free second loan on the mortgage, payable when the financed property is sold or the mortgage is refinanced.

The option does not require a “trial period or balloon payment and allows borrowers to keep their existing interest rate and existing amortization schedule,” and “streamlines income documentation and other requirements to expedite” the relief.

“We need borrowers to contact their servicers right away and begin the process of finding a permanent solution to their mortgage situation,” said FHA Commissioner Brian Montgomery. “We have a lot of options available to help FHA-insured families keep their homes but every day we wait, those options become more limited. Meanwhile, we intend to monitor our servicers very closely to make sure eligible families get the mortgage relief they qualify for.”

FHA borrowers may qualify for the updated Disaster Standalone Partial Claim if they meet the following conditions:

  • They live within the geographic boundaries of the applicable Presidentially declared disaster area in Puerto Rico and the U.S. Virgin Islands;
  • Their ability to make mortgage payments is directly or substantially affected by the disaster;
  • Their mortgage was no more than 60-days past due prior to the date of the Presidentially declared major disaster; and
  • They have not already been approved for a forbearance or other loss mitigation option(s).

The FHA’s release also included the following other options “to help disaster victims recover”:

    • Forbearance and loan modification options – HUD offers different forbearance and loan modification options for FHA borrowers affected by disasters. Borrowers having trouble making regular payments should contact their loan servicer as soon as possible for more information;
    • FHA-insured Mortgage for Disaster Victims – HUD’s Section 203(h) program provides an FHA insured mortgage loan to disaster victims who have lost their homes and are facing the daunting task of rebuilding or buying another home. Borrowers must work with a participating FHA-approved lender in order to be considered for 100 percent financing, including closing costs; and
  • FHA-insured Mortgage for home rehabilitation – HUD’s Section 203(k) loan program enables those who have lost their homes to refinance a home or finance the purchase of a home along with its repair costs by using a single mortgage.

The FHA added that there may be available units provided by “HUD funded or subsidized Public Housing Agencies or Multi-Family owners.”

U.S. Housing Department approves a $1.5 billion Puerto Rico disaster recovery plan

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