FHA Extends and Expands COVID-19 Recovery Options
FHA recently issued Mortgagee Letter 2023-02 (the ML) to extend and expand the COVID-19 Recovery Loss Mitigation Options (COVID-19 Recovery Options) for FHA Title II Single Family forward mortgage programs. Note that the COVID-19 Recovery Options may be offered through October 30, 2024, and must be completed by February 27, 2025.
Changes made by the ML include the following:
- Extends the COVID-19 Recovery Options to all borrowers who are in default or facing imminent default, regardless of the reason for their hardship, including non-occupant borrowers;
- Provides financial incentives to mortgagees for the successful completion of a COVID-19 Recovery Option. The incentive claim payments will range from $250 to $1,000 depending on the specific COVID-19 Recovery Option utilized by the mortgagee;
- Updates the COVID-19 Recovery Standalone Partial Claim and the COVID-19 Recovery Modification guidance by increasing the maximum partial claim amount to 30% of the unpaid principal balance as of the date of default at the time of payment of the initial partial claim less any previous partial claims paid;
- Temporarily suspends the Home Affordable Modification Program (HAMP) options, along with the non-COVID Standard Pre-Foreclosure Sale (PFS) and Standard Deed-in-Lieu (DIL) of Foreclosure options, through October 30, 2024. Pursuant to the ML, all eligible borrowers must be evaluated for the COVID-19 Recovery Options; and
- Establishes a new Single Family Default Monitoring System (SFDMS) reporting code for all COVID-19 Recovery Options.
Mortgagees may implement the provisions of the ML immediately, but must implement such provisions no later than April 30, 2023, where the mortgagee has not sent documents to the borrower to complete any home retention option.
These policy changes will be incorporated into an upcoming update of the FHA Single Family Housing Policy Handbook 4000.1.
