A wider set of tailored relief options are to be offered to people with Federal Housing Administration-insured mortgages who’re unable to make their payments due to the COVID-19 pandemic, the Department of Housing and Urban Development said last week.
Under the new measures, mortgage servicers can extend deferred or reduced payment options to FHA borrowers who’re facing financial hardship for up to six months. They can also extend options beyond that date to an additional six months of forbearance, if borrowers request this.
The new guidelines for the FHA were included in President Donald Trump’s stimulus package that was signed into law on March 27, the Coronavirus Aid, Relief and Economic Security Act. Under that law, banks are now required to provide borrowers with federally backed mortgages with up to 12 months of forbearance if facing a coronavirus-related financial hardship.
“The last thing any of us wants is for Americans to lose their homes unnecessarily while we continue to fight this invisible enemy,” HUD Secretary Ben Carson said in a statement. “If you’re struggling, immediate help is now available. The FHA will continue to work with stakeholders to ensure that the loss mitigation options that are offered for both forward and reverse borrowers are appropriately tailored for the present situation.”
In addition, the FHA said it’s offering a new program for borrowers that do take part in forbearance to hold off on paying the full amount from that period until their mortgage is completely paid off. The COVID-19 National Emergency Partial Claim option will take effect following the end of the forbearance period, and will assist homeowners who have been granted forbearance to reinstate their loans by authorizing servicers to advance funds on behalf of homeowners. Borrowers who are given an interest-free subordinate mortgage will not have to pay it off until their first mortgage is paid off.
The FHA’s reverse mortgage rules are also changing, with borrowers now allowed to delay home equity payments for up to six months initially, and another six months if facing coronavirus-related hardship.