FHA Revises Order of Loss Mitigation Waterfall for Borrowers Affected by Hurricane Maria

FHA issued Mortgagee Letter 2018-05, revising the order of the Loss Mitigation waterfall for borrowers affected Hurricane Maria. Per the Mortgagee Letter, FHA moved the Disaster Standalone Partial Claim to the beginning of the waterfall (above the Disaster Loan Modification option) so that borrowers may be considered earlier for Disaster Standalone Partial Claims. FHA also issued a final 30-day foreclosure moratorium for eligible mortgages affected by Hurricane Maria. To be eligible for the foreclosure moratorium, the borrower: must either be an owner-occupant of the property, or be developing and implementing a viable plan to repair or rebuild and occupy the damaged property; must not currently be in a permanent loss mitigation option; and must not have defaulted on a previous forbearance or other loss mitigation option offered in connection with Hurricane Maria. Mortgagees must implement the amended disaster Loss Mitigation Waterfall no later than September 15, 2018 (Mortgagees may, however, implement the amended disaster Loss Mitigation Waterfall immediately). The amended disaster Loss Mitigation Waterfall (and other loss mitigation options) set forth in the Mortgagee Letter sunset on May 1, 2019 and mortgagees may not offer the disaster Loss Mitigation Waterfall (and other loss mitigation options) set forth in the Mortgagee Letter on or after that date. The 30-day foreclosure moratorium is effective immediately and applies to the initiation of foreclosures and foreclosures already in process.

Click Here to View the FHA Mortgagee Letter 2018-05