18.104.22.168 Mortgage Forbearance
In a letter to Texas residents in the wake of Hurricane Harvey, the HUD Secretary stated: “HUD has already granted a 90-day moratorium on foreclosures for FHA-insured properties in disaster-affected areas. In addition, we offer loan forbearance and loan modifications for borrowers struggling to make payments in disaster-affected areas.”169 The Disaster Relief Options for FHA Homeowners page on HUD’s website states: “Your lender may enter into a forbearance plan, or execute a loan modification or a partial claim, if these actions will help retain and pay for your home.”170
The HUD Handbook states: “Should Presidentially-Declared Major Disasters adversely impact a Borrower’s ability to make on-time Mortgage Payments, the Mortgagee must provide the Borrower with forbearance and HUD loss mitigation assistance, where appropriate, as provided in applicable FHA policy guidance.”171
The handbook states further that before considering an affected borrower for a permanent solution utilizing one of FHA’s loss mitigation home retention options, the mortgagee must first evaluate the borrower for a forbearance, allowing for one or more periods of reduced or suspended payments without specific terms of repayment. The mortgagee may offer forbearance relief to a borrower with a mortgaged property or place of employment located within a PDMDA.172
The HUD Handbook references both informal and formal forbearance. A mortgagee “may consider Borrowers in PDMDAs for an Informal Forbearance and may offer additional Informal Forbearance periods if the foreclosure moratorium is extended.”173 A mortgagee “may consider Formal Forbearance for Borrowers in PDMD while homeowners are pursuing home repairs and/or resolving verifiable difficulties related to the disaster” as long as: (1) the forbearance period does not exceed the estimated time needed to complete home repairs as supported by a contract or repair estimate; and (2) the total accumulated mortgage arrearages during the forbearance period does not exceed the equivalent of twelve months of (payment for principal, interest, taxes and insurance) PITI.”174
Servicers may waive late fees for borrowers whose delinquency results from a disaster, but apparently are not required to do so. HUD states on its website: “HUD is confident that your mortgage lender will make every attempt possible to assist you. If you are not satisfied after discussing possible relief actions with your lender, please call a HUD-approved counseling agency toll free at (800) 569-4287 or contact HUD's National Servicing Center.”175
169 U.S. Dep’t of Hous. & Urban Dev., Letter From HUD Secretary Ben Carson to the People of Texas on Harvey Relief, available at https://www.hud.gov.
170 U.S. Dep’t of Hous. & Urban Dev., Disaster Relief Options for FHA Homeowners, available at https://www.hud.gov.
171 U.S. Dep’t of Hous. & Urban Dev., FHA Single Family Housing Policy Handbook 4000.1, § III.A.3.c.iv.
172 U.S. Dep’t of Hous. & Urban Dev., FHA Single Family Housing Policy Handbook 4000.1, § III.A.3.c.iv.B.
173 U.S. Dep’t of Hous. & Urban Dev., FHA Single Family Housing Policy Handbook 4000.1, § III.A.3.c.iv.B(1).
174 U.S. Dep’t of Hous. & Urban Dev., FHA Single Family Housing Policy Handbook 4000.1, § III.A.3.c.iv(B).
175 U.S. Dep’t of Hous. & Urban Dev., Disaster Relief Options for FHA Homeowners, available at https://www.hud.gov.