Changes are being made to the procedures on government-insured mortgages that will reduce the number of steps needed to resolve delinquency and modify the loans.
An announcement Thursday from the Federal Housing Administration revealed new procedures intended to strengthen the process servicers use to avoid foreclosure.
FHA said that it is
streamlining its loss mitigation protocols that residential loan servicers need to utilize when they are evaluating and deploying home-retention options.
Details about the changes are outlined in Mortgagee Letter 2016-14.
The revised procedures
streamline the process that servicers use to engage borrowers when evaluating them for the FHA Home Affordable Modification Program.
“These changes will reduce the number of steps that a servicer and borrower must take to resolve a delinquency and enter into a loss mitigation home retention product,” the statement said. “In addition, FHA is removing certain obstacles that will allow servicers greater flexibility for evaluating an unemployed borrower’s financial condition and special forbearance agreements.”
As a result of the changes, FHA will now require that the time to convert successful three-month trial modifications into permanent modifications be reduced to 60 days from as many as six months.
The number of missed mortgage payments needed to qualify for a partial claim to bring arrearages current is being reduced to three from four.
FHA is also ending the
traditional stand-alone loan modification option so that borrowers can access the FHA-HAMP option, which offers greater payment relief more quickly.
In addition, the minimum 12-month delinquency term needed to qualify for FHA’s special forbearance option is being eliminated. This will allow
servicers to extend this option to unemployed borrowers sooner in their delinquency.
