FHA Borrowers Eligible for Help Before Delinquency

Struggling homeowners with FHA mortgages are now eligible for loss mitigation assistance before falling behind on payments, according to the U.S. Department of Housing and Urban Development.

In the past, homeowners couldn’t receive assistance until they had missed payments, a rule that has since been updated thanks to the Helping Families Save Their Home Act of 2009.

Effective immediately, loss mitigation options such as forbearance and the FHA’s own Home Affordable Modification Program (FHA-HAMP) may be used to assist borrowers facing “imminent default.”

By imminent default, they mean FHA borrowers current or less than 30 days past due on their mortgage obligations who are “experiencing a significant reduction in income or some other hardship that will prevent” them from making their next mortgage payment.

The borrower must be able to document the cause of imminent default, whether it’s unemployment, loss of income, or a change in household financial circumstances, such as illness or disability.

Those able to prove such circumstances will be eligible for things like forbearance, where payments are postponed or suspended for a limited period of time, or a HAMP loan modification, where payments are slashed to more affordable levels via a partial claim.

“The partial claim defers the repayment of a portion of the mortgage principal through an interest-free subordinate mortgage that is not due until the first mortgage is paid off. The remaining balance is then modified through re-amortization and in some cases, an interest rate reduction,” HUD said.

The move is intended to help keep borrowers in their homes and protect the FHA insurance fund from unnecessary losses.


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