FHA Establishes Disaster Standalone Partial Claim Option for Borrowers Adversely Affected by Hurricanes Harvey, Irma, Maria, and California Wildfires, Flooding, Mudflows and Debris Flows

FHA established a Disaster Standalone Partial Claim option for borrowers whose property and/or place of employment was adversely affected by Hurricanes Harvey, Irma and Maria, and California wildfires, flooding, mudflows, and debris flows. The goal of the Disaster Standalone Partial Claim option is to help eligible borrowers currently subject to a forbearance plan resume their pre-disaster mortgage payments and avoid payment shock. Lenders and servicers must evaluate the borrower for a Disaster Standalone Partial Claim at the end of the forbearance period if the borrower does not qualify for a Disaster Rate and Term Loan Modification. In addition, FHA amended existing loss mitigation policies for borrowers whose property and/or place of employment was adversely affected by Hurricanes Harvey, Irma and Maria, and California wildfires, flooding, mudflows, and debris flows. Pursuant to the amended loss mitigation policies: a Verification of Employment is no longer required for Disaster Loan Modifications or Disaster Standalone Partial Claims (rather employment and income may be verified using pay stubs, bank statements, Social Security benefit statements, Pension statements, and/or other documentation reflecting the borrower’s income); and a Trial Payment Plan is no longer required prior to completion of a Disaster Rate and Term Loan Modification or a Disaster Standalone Partial Claim if the borrower was current, or less than 30 days past due, as of the date of the disaster. Lenders and servicers must implement the Disaster Standalone Partial Claim option and the amended loss mitigation policies no later than May 1, 2018 (but may begin using the policies immediately). The Disaster Standalone Partial Claim option and the amended loss mitigation policies sunset on May 1, 2019, and lenders and servicers may not offer the policies on or after that date. Note that the Disaster Standalone Partial Claim option and the amended loss mitigation policies will not be incorporated into Single Family Housing Policy Handbook 4000.1.

Click here to view the FHA Mortgagee Letter 2018-01