Yes, FHA-HUD allows the borrowers who are having financial problems, and also those which are due to the COVID-19 pandemic forbearance. The guidelines are very similar to Fannie Mae and Freddie Mac.
Here is some of what we know concerning FHA Forbearance loans:
- FHA permits borrowers to apply for forbearance, which means a reduction in their monthly payments for up to six months. If the borrower is still not in a good financial position at the end of six months, they may apply for an additional six months.
- There is no requirement for a lump sum re-payment.
- FHA has also developed what they name as a COVID-19 Standalone Partial Claim to assist with the repayment. This option may be available if the borrowers were current or less than 30 days delinquent on March 1, 2020.
- The partial claim is with interest rate at zero, there are no fees, and the junior lien on the borrower’s property will become payable when the borrowers sell their home, pays off their mortgage, or the mortgage otherwise ends. There are qualifying parameters for this partial claim. All borrowers for this may not qualify, however FHA states they have other tools to present for those that need help with missed payments.
Some Guidelines for the CARES Act Forbearance
There are no documentation requirements to prove the hardship. The borrower(s) can declare they are experiencing financial hardship and need assistance.
The forbearance does not eliminate the repayment of the missed payments. There may be a temporary solution where payments are delayed, or a reduction so that the payment is a lower amount.
Consumer Finance Guidelines For All Federally or GSE- Backed Mortgages
The guidelines that Consumer Finance is in the favor of the borrowers.
- The Lender for any federally related loans, whether the GSE (FNMA/FHLMC), FHA, the VA, or the USDA cannot foreclose on you until at least December 31, 2020.
- If the mortgage borrowers have a financial hardship due to the coronavirus pandemic, this is when you have the right to request and receive a forbearance. The initial period is 180 days (as stated above) and possibly another 180 days.
You must of course check with your lender so they can inform you of the necessary steps required.
Home Loan Delinquency Advice
Mortgage delinquency is not a fun situation to be in. However, there are ways to stay abreast with your servicing lender so that you can save your home if at all possible.
Here are some tips:
- If you cannot make your full payment call your lender. There may be options on the table and should be especially if you have not had any delinquency prior to the current situation.
- Tell them your financial problem, when and if you think it will be resolved, and how. They will be willing to work with you and give you their options. They do not want your home loan to go to foreclosure.
- When your lender sends you information about your late home loan payments, call them and respond and let them know how you are progressing with your financial problems.
- Learn about your options as a consumer. You do have rights, but the lender also has rights after a certain period of time. It is important to be totally honest and fully involved in the process.
- Do not panic and feel there is no hope. Take a look at your assets and see if you have a method that you have not thought about to help with your financial recovery.
- What to look for in your financial closet…do you have a whole life insurance policy that you have had for a while? (I only recommend the latter if you are going to pay back the amount you withdraw). Why? Because you will more than likely pay interest on interest if you do not pay back the policy loan. I have seen it happen, you will lose your cash value in the end if you do not.
- Is it possible that you could cut some of your spending, at least until you are in a better financial standing? Can you stop paying for a cable for TV? Do you need 3 phones? Are you taking care to eliminate extra costs? Are you shopping wisely?
- If you are without employment and are drawing unemployment, the options are probably limited. However, keep trying and look for a job anywhere and do not limit your ability to just what you were doing prior to your job loss. You might be surprised at what you can do if you try.
- Explore online opportunities. There are many and you can learn as you go on some things. Be confident and explore.
Questions To Ask Your Lender
- Is it possible to refinance my mortgage now?
- Is it possible to get a mortgage modification?
- Is it possible to get a 2nd mortgage?
- Do you allow partial payments?
- Will you allow me to make 1/2 of my payment and each 1/2 twice monthly?
- Exactly how can you work with me so that I do not wind up in foreclosure?
Not all lenders have the same internal guidelines. They must abide by rules and regulations set forth by Consumer Finance and GSEs, re the forbearance. However, even when they originate a mortgage loan to sell to FNMA/FHLMC, FHA, or VA- those institutions may be more lenient in some areas than the originating lender.
Example: FHA minimum credit score goes down to 580 under certain circumstances. However, most or should I say many lenders protect their financial strength by not allowing credit scores lower than 620 or higher.
If you are having financial difficulty, please keep the faith and see what your options are and do not give up until you get answers. You will not know unless you ask.
