FHA Provides Additional COVID-19 Forbearance and HECM Extensions, Proposes New COVID-Related Modification Policy

On September 27, 2021, the Federal Housing Administration (FHA) announced additional COVID-19 relief for borrowers.  In Mortgagee Letter (ML) 2021-24, FHA issued new forbearance relief, granting borrowers up to six months of forbearance for those requesting their first such COVID-19 forbearance between October 1, 2021, through the end of the COVID-19 National Emergency.  Borrowers can receive an additional six months if the forbearance is exhausted or expires before the end of the COVID-19 National Emergency.  This provision is meant to assist those borrowers newly affected financially by the COVID-19 pandemic, in particular the Delta variant.

The new extension also grants an additional six months of forbearance for borrowers who have already requested their initial COVID-19 forbearance between July 1, 2021, and September 30, 2021.

FHA also provides the opportunity for additional periods of COVID-19 Home Equity Conversion Mortgage Extensions (HECM) when the initial request is made on October 1, 2021, through the end of the COVID-19 National Emergency and when the initial COVID-19 HECM Extension request was made between July 1, 2021, and September 30, 2021.

FHA, in a separate announcement, also proposed a future addition of a 40-year loan modification policy for COVID-19 recovery options.  The proposed addition is being considered for inclusion in FHA’s COVID-19 Recovery Loss Mitigation Options.  The 40-year loan modification is intended to help certain borrowers reach the targeted reduction of 25 percent of the monthly principal and interest portion of their mortgage payments.  FHA encourages interested stakeholders to thoroughly review and provide feedback on the proposed addition between September 27, 2021, through October 27, 2021.