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12.3.6.4.5 COVID-19 FHA-HAMP Combination Loan Modification and Partial Claim with Reduced Documentation

Significant Law Change

Finally, if the borrower cannot afford the payment provided by the COVID-19 Combination Partial Claim and Loan Modification, the servicer should evaluate the borrower for the COVID-19 FHA-HAMP Combination Loan Modification and Partial Claim with Reduced Documentation. This option follows the same process as the standard FHA-HAMP evaluation, including the calculation of a target payment. However, in order to streamline the process, HUD limited the documents borrowers need to provide for this option—the evaluation for FHA-HAMP must involve servicer review of income documentation and cannot be based on a phone conversation alone. Unlike the standard FHA-HAMP, no trial plan is required.

For non-occupant borrowers facing COVID-19 hardships, FHA provided the COVID-19 Non-Occupant Loan Modification. Prior to Mortgage Letter 2020-22, there were no modification options for FHA borrowers who were renting out their mortgaged homes. Under this option, the borrower’s arrearages are capitalized, the term is extended to 360 months (unless a shorter term is requested), and the interest rate is set to HUD’s current market rate. For rental units, the borrower must provide a copy of the lease. In addition, the borrower must provide a statement indicating either “that they are the landlord of the Property and their renter is impacted, directly or indirectly, by the COVID-19 pandemic and is either unable to make rent payments or has vacated the Property” or “that the Property is used as a Secondary Residence or a Vacation Home for the Borrower.”104

Finally, FHA provided specific rules for pre-foreclosure sales and deeds in lieu of foreclosure for borrowers who no longer wish to occupy their homes.105

Footnotes

  • 104 HUD, Mortgagee Letter 2021-05 at 155.

  • 105 HUD, Mortgagee Letter 2021-05 at 16–17. See also § 8.2.4, supra.