New rules for FHA Loss Mitigation Options

Recently, FHA announced some changes to their Loss Mitigation procedures when mortgagors participate in loan modifications and partial claims.  These new rules will take effect October 1st and require a servicer to comply with their new guidelines.

The most important detail of this change revolves around the trial payments.  FHA is going to require borrowers to participate in a trial payment plan, lasting at least 3 months, before they will modify the loan permanently.  This is typical of most modifications being offered to buyers, but setting guidelines for the servicers means the borrowers will know what to expect ahead of agreeing to the trial modification and in turn the permanent modification.  The permanent modification rate must be determined when a servicer approves the trial modification payments for the homeowners.

Another rule helpful for homeowners is that the servicers for FHA can not charge more on the final modification payment than that of the trial period payment.  The trial period is set to ensure a borrower is successful in making consistent, timely payments at a reduced rate.  Regulating the trial payment will help homeowners that can make their mortgage payments timely, in that there won't be a big surprise on what the permanent payment will be once the trial period is over.  Often, the modifications offered to mortgagors today end up having two different payments for a homeowner.  The homeowners rarely are given the amount of the permanent modification payment until the trial period is over.  For FHA's partial claim process, the trial modification payment must be the same as the future monthly payment.  To referesh your memory on FHA's partial claim process, see my previous blog on June 20th of this year.  

With FHA's new guidelines on their modifications, a homeowner knows upfront what the payments will look like and can decide with better knowledge on whether the modification will help them keep their home because they will be able to successfully make their payments on time.  Click here to learn more details about FHA's guidelines that will take effect October 1 and let me know if you have additional questions on this topic or any other real estate concern you might have.