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FHA Announces "Streamlined" Loss Mitigation Process for Mortgage Servicers

The Federal Housing Administration (FHA) released a Mortgagee Letter containing new procedures to strengthen the process mortgage servicers use to help struggling families avoid foreclosure and remain in their homes, according to an announcement from The Federal Housing Administration (FHA). The release says FHA is streamlining its loss mitigation protocols that servicers must use when evaluating and deploying ‘home retention options,’ foreclosure alternatives that allow delinquent borrowers to retain their home. The release also says that mortgagees must implement the policies set forth in the Mortgagee Letter no later than December 1, 2016.

Specifically, FHA reports that they will:

  • Require servicers to convert successful 3-month trial modifications into permanent modifications within 60 days instead of the average four-to-six months.
  • Allow borrowers with three missed mortgage payments to qualify for a partial claim to bring their arrearages current versus the previous four-month minimum.
  • End the traditional stand-alone Loan Modification option so borrowers can access the FHA-HAMP option, with its greater payment relief, sooner.
  • Eliminate the minimum 12-month delinquency term to qualify for FHA’s special forbearance option. This will allow servicers extend this option to unemployed households sooner in their delinquency.

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