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On February 22, 2018, the Department of Housing and Urban Development (HUD) released Mortgagee Letter 2018-01, which provides for revised loss mitigation options for Federal Housing Administration (FHA) borrowers affected by Hurricanes Harvey, Irma, and Maria and the 2017 California wildfires. NAR previously urged HUD to provide mortgage relief for borrowers in these Presidentially-Declared Major Disaster Areas and supports this Mortgagee Letter.
The new policies will provide immediate relief to FHA borrowers in the disaster areas by helping them stay in their homes while reducing losses to the FHA Mutual Mortgage Insurance Fund. Specific provisions are:
- Borrower income can be confirmed through a recent paystub, bank statement, or other documentation rather than requiring a Verification of Employment
- A Trial Prepayment Plan is not required prior to all mitigation options
- A loan modification in the 24 months preceding the disaster date will not preclude a mitigation option
- Borrowers who do not qualify for a Disaster Rate and Term Loan Modification may qualify for a new mitigation option, the Disaster Standalone Partial Claim. The Disaster Standalone Partial Claim has several requirements including:
- The mortgage was no more than 30 days past due on the disaster date
- The borrower's income is at least equal to their pre-disaster date income
- Borrower can demonstrate an ability to resume monthly mortgage payments
- Interest rates on the FHA-insured mortgage is lower than the market rate
- The lender waives the borrower's late fees
This Mortgagee Letter applies to Borrowers whose property or employment is in the following Presidentially-Declared Major Disaster Areas:
- Louisiana – Hurricane Harvey
- Texas – Hurricane Harvey
- Florida – Hurricane Irma
- Georgia – Hurricane Irma
- Puerto Rico – Hurricane Irma and Hurricane Maria
- South Carolina – Hurricane Irma
- U.S. Virgin Islands – Hurricane Irma and Hurricane Maria
- California – Wildfires of October 2017 and Wildfires, Flooding, Mudflows, and Debris Flows of December 2017
Borrowers who do not meet the criteria for mitigation options in this Mortgagee Letter may be considered for an FHA-HAMP option. The Mortgagee Letter will expire on May 1, 2019.