HUD Extends Foreclosure and Eviction Moratoriums and Announces COVID-19 Advance Loan Modification
In Mortgagee Letter 2021-15 dated June 25, 2021, the U.S. Department of Housing and Urban Development (HUD) extended the foreclosure and eviction moratoriums for FHA insured single-family loans from June 30, 2021 to July 31, 2021. The FHA moratoriums apply to all FHA Title II single-family forward and Home Equity Conversion (reverse) mortgage loans, except for FHA loans secured by vacant or abandoned properties. Deadlines for the first legal action and reasonable diligence timelines are extended up to 180 days from the date of expiration of the foreclosure moratorium.
HUD also extended the deadline for the approval of an initial COVID-19 forbearance, as well as the deadline for COVID-19 Home Equity Conversion Mortgage (HECM) extensions, from June 30, 2021 to September 30, 2021. The Mortgagee Letter addresses the maximum forbearance period that is permitted based on the initial forbearance date and the latest date on which the forbearance period must end, as well as the maximum HECM extension period that is permitted based on the initial extension start date and the latest date on which the extension period must end.
HUD also announced the establishment of the COVID-19 Advance Loan Modification (COVID-19 ALM), which is a permanent change in the mortgage loan that achieves a minimum 25% reduction in the monthly principal and interest payment. The Mortgagee Letter sets forth the eligibility criteria for the COVID-19 ALM, and provides that servicers must review eligible borrowers for a COVID-19 ALM without the need for any initial borrower contact. For borrowers in a COVID-19 forbearance, the review must occur within 30 days of the expiration of the forbearance period. Among the eligibility requirements, the borrower must be 90 or more days delinquent. The property may be owner-occupied or non-owner occupied.
The COVID-19 ALM capitalizes only amounts needed to bring the borrower current, and includes (1) unpaid accrued interest, (2) any servicer advances for escrow items, (3) any projected escrow shortage amount, and (4) any related legal fees and foreclosure and bankruptcy costs not to exceed the foreclosure-related fees and costs that HUD has identified as customary and reasonable. The servicer also may include an additional month in the total outstanding debt to be resolved in order to allow time for the borrower to return the executed mortgage modification documents before the modified mortgage payment begins.
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