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On Thursday June 4, 2020, the Federal Housing Administration (FHA) released Mortgagee Letter 2020-16, requiring lenders to provide 20 percent indemnification for up to two years on borrowers who go into forbearance due to COVID 19.
Specifically, FHA will only insure borrowers who go into forbearance after closing but prior to FHA insuring the loan if the lender agrees to indemnify 20 percent of the original mortgage amount. Lenders would be required to pay if the mortgage goes into foreclosure. FHA will not require upfront payments by lenders or a change to FHA mortgage insurance premiums for these mortgages.
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