FHA Explains How to Handle Homeowner Assistance Fund Applicants
On Thursday, a Federal Housing Administration official confirmed that the government intends to assist servicers in pausing foreclosure proceedings when aid is sought through the Homeowner Assistance Fund and went over some of the details.
“The mortgagee may and is strongly encouraged to place a foreclosure action on hold for any of the circumstances described,” Matt Martin, director of the Housing and Urban Development Department’s national servicing center said in a call with stakeholders on Thursday. “Mortgagees may suspend or terminate the foreclosure proceedings depending on the state law or state HAF program requirements,” Martin said.
However, mortgage companies must seek an extension of time to foreclose through HUD’s Extensions and Variances Automated Requests System, because they will be fined if they fail to fulfill specific FHA-imposed foreclosure timetables, according to Martin.
The FHA also has certain reporting requirements for borrowers receiving HAF funds.
“Once a borrower is approved for HAF funds the mortgagee must report delinquency status code 78,” Martin said. “FHA permits the application of additional funds such as HAF to be used as a part of the borrower’s loan mod, or to reduce a partial claim amount if needed, or to pay the partial claim off, depending on the situation, including for the COVID 19 loss mitigation options,”
HAF funds might potentially be utilized to pay off a partial claim if a state allows it, with the money going to HUD contractor ISN. Borrowers who are late can use the funds to bring their mortgage current without completing a loss mitigation option if the amount is sufficient.
“If the borrower states they cannot resume their current monthly mortgage payment, then you must evaluate the borrower for available loss mitigation options in conjunction with the permitted use of those HAF funds,” Martin said.
If a servicer receives notice that a borrower has applied for HAF funding to address a monetary concern relating to FHA-insured reverse mortgages, such as a property tax payment, the servicer may be able to stop or stop a foreclosure. In this scenario, servicers must use the Home Equity Reverse Mortgage Information Technology system and the Hardest Hit Fund timeframes to request extensions.
“All agencies are now aligned on how servicers should process their loans when they are notified by the state HAF program that the borrower has applied for HAF,” said Marissa Yaker, managing attorney of regulatory affairs at the Padgett Law Group. “Servicers are strongly encouraged to place the foreclosure on hold, and now have the guidance on how to do the same.”
The Federal Housing Finance Agency, which regulates government-sponsored firms, has also issued instructions on foreclosures and the use of Homeowner Assistance Fund (HAF) money. Fannie Mae and Freddie Mac servicers have been asked to hold foreclosures for 60 days after receiving information on a HAF application.