Monday, February 4, 2013

FHA Loan Mortgage Relief - Many More Borrowers Now Eligible

Changes in FHA Mortgage Relief / Loss Mitigation Policies Should Allow Many More Borrowers to Save Their Homes

FHA Update

My law firm represents borrowers who are in need of assistance with their mortgage loans, and we do so in multiple states (FL, GA, NC, OH, SC, TN). Some of those homeowners have Federal Housing Administration (FHA) loans. We are very pleased to report that the FHA has now made significant changes to its mortgage loan relief / loss mitigation policies which should allow many more borrowers to save their homes.  In fact, McGrath & Spielberger has already made mortgage loan lenders/servicers aware of this change, as these new policies may very well make several of the Firm's mortgage relief clients eligible for mortgage loan modifications under the Home Affordable Modification Program.

The changes are reflected in the United States Department of Housing and Urban Development (HUD) - of which FHA is part - Mortgagee Letter 2012 - 22. It states that "mortgagees [lenders] must begin to assess mortgagors in default under FHA's loss mitigation priority order and policies referenced herein" within 90 days of the letter, which is dated November 16, 2012. Here it is: Mortgagee Letter 2012-22 (Revisions to FHA MR Options).

Here are the key changes, with comments from attorney Jason McGrath in italics.

  1. Eliminating the FHA-HAMP eligibility requirement that the FHA-insured mortgage be no more than 12 full payments past due.  Previously, a borrower in Raleigh, NC (for example)  with an FHA insured mortgage was not eligible for mortgage loan modifications under the Home Affordable Modification Program (which is part of the Making Home Affordable program) if (s)he was more than 12 months behind on the mortgage. In other words, those most desperate for help were not eligible.

  2. Eliminating the FHA-HAMP maximum Back End Debt-to-Income Ratio requirement of 55 percent. In the past, a distressed homeowner who lived in West Palm Beach, FL would not even be considered for a mortgage loan modification if his/her monthly housing cost made up more than 55% of the monthly gross income. (Monthly housing cost includes principal, interest, property taxes, home insurance and HOA fees, if any.) For example, that south Florida borrower who has a monthly gross income of $4,000.00 a month and a monthly housing cost of $2,250.00 would not have been eligible for mortgage relief allowing the home to be saved, but may be now.

  3. Permitting those mortgagors who were initially unsuccessful in completing Trial Payment Plans to re-apply for standard loan modifications or FHA-HAMP if their
    financial circumstances have changed since their initial application for assistance. We have resubmitted loss mitigation applications on behalf of many of our clients, including those in Charlotte, NC, often due to mistakes by the banks, who frequently wrongfully deny borrowers' request for mortgage relief. Sometimes these applications are submitted due to a change in financial circumstances, and our success rate upon re-application is quite high.

As always, one of the challenges is educating the banks and loan services as to the new rules, as these mammoth entities don't often do a good job of that themselves. For example, just this week in a case in Union County, North Carolina, we had to send a Bank of America Single Point of Contact representative these new FHA / HAMP rules, as she was not aware of them and was insisting our client does not qualify for mortgage relief because our client is more than 12 months behind on the loan.

The bottom line, whether you're in Atlanta, Nashville, Columbus (OH), Charleston (SC), or anywhere else, if you have an FHA mortgage and you're in trouble with it, you need to make sure your mortgage loan servicer and lender are applying these new rules on your behalf and as part of your loss mitigation efforts.