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Loss Mitigation Home Retention Options Revised

November 26, 2012 09:46pm  
Loss Mitigation Home Retention Options Revised


Last Tuesday, the Federal Housing Administration announced changes to the loss mitigation program that gives mortgage borrowers more options to help them keep their homes.  Through the changes to the Loss Mitigation Home Retention Options, a larger number of current distressed mortgage borrowers can quality for loss mitigation interventions under FHA.


The changes are intended to help distressed borrowers and reduce the number of full claims against the Mutual Mortgage Insurance Fund under the FHA.  


Some of the changes to the Loss Mitigation options are provided below:


Firstly, the Loss Mitigation Home Retention Option will now operate under a 3-tier system.  Theses tiers include special forbearance, loan modification, and FHA-HAMP.  


•    special forbearance occurs when a written agreement is made between the lender and borrower to reduce or temporarily suspend payments
•    loan modification occurs when one or more terms is changed in the mortgage agreement
•    FHA-HAMP usually combines a loan modification and a partial claim


Secondly, the changes have redefined special forbearance.  The situation only applies when mortgagors are unemployed


Thirdly, some requirements have been eliminated that now allow a limited lender to provide assistance to the borrower.  


Lastly, the FHA-HAMP has been expanded so more borrowers can receive assistance.  Usually, the assistance occurs when a lender advances funds to help the borrower pay the amount needed to reinstate the delinquent loan.  


Carol Galante, the Acting FHA Commissioner, stated: “Not only are we taking steps to make sure more borrowers can benefit from FHA loss mitigation assistance, but we are also targeting our assistance to provide more sustainable payments for borrowers so that they are successful in retaining their homes over the long term.  At the same time, these efforts will reduce losses to FHA from foreclosures, benefiting our insurance fund.”


Source: Department of Housing and Urban Development

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