Additional COVID recovery options for homeowners

The Federal Housing Authority on Friday announced additional streamlined COVID-19 recovery options to help homeowners with FHA-insured mortgages who have been financially impacted by the COVID-19 pandemic bring their mortgage current and remain in their homes. The simplified COVID-19 Recovery waterfall allows mortgage servicers to offer eligible homeowners who cannot resume making their mortgage payments a reduction in the principal and interest portion of their monthly payments. The simple two-step waterfall options intended for properties that are occupied as the homeowner’s primary residence are:

• COVID-19 Recovery Standalone Partial Claim: for homeowners who can resume making their current mortgage payments, the COVID-19 Recovery Standalone Partial Claim allows mortgage payment arrearages to be placed in a zero-interest subordinate lien against the property that is repaid when the mortgage terminates, usually when the homeowner refinances or sells the home.
• COVID-19 Recovery Modification: for homeowners who cannot resume making their current monthly mortgage payments, the COVID-19 Recovery Modification extends the term of the mortgage to 360 months at a fixed rate and targets reducing the borrower’s monthly principal and interest portion of their monthly mortgage payment. The COVID-19 Recovery Modification must include a Partial Claim if the homeowner has Partial Claim funds available.

The changes announced on Friday work in tandem with the pre-waterfall FHA COVID-19 Advance Loan Modification (COVID-19 ALM) announced on June 25, 2021. The COVID-19 ALM requires mortgage servicers to review their FHA mortgage servicing portfolio and offer the COVID-19 ALM to eligible homeowners. Homeowners who choose to accept the COVID-19 ALM need to only review and sign and return the mortgage modification documents sent to them by their mortgage servicer.