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FHA revises appraisal validity period
On July 12, FHA released FHA INFO 2022-71, announcing the publication of Mortgagee Letter (ML) 2022-11, Revised Appraisal Validity Periods, which applies to Single Family Title II Forward and HECM programs. The ML increases the FHA initial appraisal validity period from 120 days to 180 days and extends the appraisal update validity period to one year. As a result of the ML, FHA will implement modifications to the appraisal-related functionality in FHA Connection (FHAC). For all case numbers assigned on or after September 6, the Appraisal Effective Date field on the FHAC Appraisal Logging screen will no longer be editable. Appraisal Logging for this field is automatically pre-filled with the information submitted from the electronic appraisal report. The updates outlined in ML 2022- 11 will be incorporated under the Single-Family Housing Policy Handbook 4000.1.
FHA expands mortgage eligibility for Covid-affected borrowers
On July 7, FHA announced expanded mortgage eligibility for qualifying borrowers who previously experienced employment gaps or loss of income due to the Covid-19 pandemic. Under Mortgagee Letter (ML) 2022-09, salaried and hourly wage-earners, as well as self-employed individuals impacted by a Covid-19 related economic event (defined “as a temporary loss of employment, temporary reduction of income, or temporary reduction of hours worked during the Presidentially Declared COVID-19 National Emergency”), who now have stable income will have a greater opportunity to purchase a home using affordable FHA-insured mortgage financing. Specifically, ML 2022-09 updates calculation guidelines for a borrower’s effective income under certain sections in the Single-Family Housing Policy Handbook 4000.1. While ML 2022-09’s provisions are effective for all case numbers assigned on or after September 5, 2022, lenders may begin using the policies immediately. According to FHA Commissioner Julia Gordon, the changes further agency efforts “to facilitate recovery from COVID-19 and support access to homeownership, particularly for populations most deeply impacted by the pandemic.” Gordon noted that the pandemic impacted “the livelihoods of tens of millions of workers in this country, particularly workers of color and those at the lower end of the wage scale.”
DOJ: $4.5 million judgment in case targeting Hispanic homeowners
On June 10, the DOJ announced that the U.S. District Court for the Middle District of Florida entered a consent order against several defendants accused of violating the Fair Housing Act by targeting Hispanic homeowners for predatory mortgage loan modification services. After several Hispanic homeowners filed discrimination complaints with HUD, the agency conducted an investigation, issued charges of discrimination, and referred the matter to the DOJ for litigation. According to the DOJ’s complaint, the defendants targeted Hispanic homeowners with deceptive Spanish-language advertising “that falsely promised to cut their mortgage payments in half” and guaranteed “lower payments in a specific timeframe in exchange for thousands of dollars of upfront fees and continuing monthly fees of as much as $550, which defendants claimed were ‘non-refundable.’” The DOJ further contended that many of the targeted Hispanic homeowners (who had limited English proficiency) were told not to communicate with their lenders and were instructed to stop making monthly mortgage payments; however, the defendants allegedly “did little or nothing to obtain the promised loan modifications,” leading to defaults and foreclosures.
The consent order, reached in partnership with the Civil Rights Division’s Housing Section, enters a nearly $4.6 million judgment (which is mostly suspended) against the defendants to compensate harmed homeowners. Of this amount, $95,000 in total will go to three individuals who intervened as plaintiffs in the DOJ’s lawsuit. Defendants must also pay a $5,000 civil penalty. In addition to monetary relief, the consent order permanently enjoins defendants “from providing any mortgage relief assistance services, including, but not limited to, mortgage loan modification, foreclosure rescue, or foreclosure defense services.” The consent order also imposes training and reporting/recordkeeping requirements for defendants’ other real-estate activities.
HUD announces $65,000 payment for FHA violations
On June 2, HUD announced a conciliation agreement with a mortgage lender to resolve allegations that it engaged in discriminatory lending practices based on race and national origin, in violation of the Fair Housing Act (FHA). The agreement arises from a complaint filed with HUD by the National Community Reinvestment Coalition (NCRC), which alleged that testing in the Seattle-Tacoma area revealed that Black and Hispanic testers were treated differently than White testers who sought housing loans. While the respondent denied that it provided less favorable treatment to testers based on race or national origin, it has agreed to pay $65,000 to NCRC and will “contribute an additional $10,000 to a Seattle-area non-profit organization specializing in providing financial literacy and housing education and counseling for persons in majority-minority census tracts in the Seattle-Tacoma-Bellevue metropolitan area.” The respondent will also conduct an event in the Seattle metro area to improve homeownership rates of Black homebuyers and will provide additional fair lending training to employees. The conciliation agreement does not constitute an admission by respondent or evidence of a finding by HUD of a violation of the FHA.
HUD announces Kansas disaster relief
On May 26, HUD announced disaster assistance for certain areas in Kansas impacted by severe winter storms and straight-line winds from March 17 to March 22. The disaster assistance follows President Biden’s major disaster declarations on May 25. According to the announcement, HUD is providing immediate foreclosure relief, making various FHA mortgage insurance available to disaster victims, and providing information on housing providers as well as HUD-approved housing counseling agencies, among other measures. Specifically, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties effective May 25. It is also making various FHA insurance options available to victims whose homes require repairs or were destroyed or severely damaged. HUD’s Section 203(h) program allows borrowers from participating FHA-approved lenders to obtain 100 percent financing, including closing costs, for homes in which “reconstruction or replacement is necessary.” HUD’s Section 203(k) loan program enables individuals to finance the repair of their existing homes or to include repair costs in the finance of a home purchase or a refinance of a home. HUD is also allowing administrative flexibilities to community planning and development grantees, as well as to public housing agencies and Tribes.
FDIC, HUD announce New Mexico wildfire disaster relief
On May 9, the FDIC issued FIL-19-2022 to provide regulatory relief to financial institutions and help facilitate recovery in areas of New Mexico affected by wildfires and straight-line winds that began on April 5. In the guidance, the FDIC writes that, in supervising institutions affected by the wildfires, it will consider the unusual circumstances those institutions face. The guidance suggests that institutions work with impacted borrowers to, among other things, (i) extend repayment terms; (ii) restructure existing loans; or (iii) ease terms for new loans to those affected by the severe weather, provided the measures are done “in a manner consistent with sound banking practices.” Additionally, the FDIC notes that institutions may receive favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery. The FDIC will also consider relief from certain reporting and publishing requirements.
Separately, on May 6, HUD announced disaster assistance available to certain counties impacted by the New Mexico wildfires and straight-line winds, providing foreclosure relief and other assistance to affected homeowners. Specifically, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties and is making FHA insurance available to those victims whose homes were destroyed or severely damaged. Additionally, HUD’s Section 203(k) loan program will allow individuals who have lost homes to finance the purchase of a house, or refinance an existing house and the costs of repair, through a single mortgage. The program also allows homeowners with damaged property to finance the repair of their existing single-family homes. Furthermore, HUD is allowing administrative flexibilities to community planning and development grantees, as well as to public housing agencies and Tribes.
Agencies instruct servicers to pause foreclosures while HAF assistance is available
On May 6, the Secretaries of HUD, Department of Veterans Affairs, Department of Agriculture, and Treasury announced that servicers of federally-backed mortgages should pause pending foreclosure proceedings while assistance is available under the Homeowner Assistance Fund (HAF). President Biden’s American Rescue Plan established HAF to provide approximately $10 billion in financial support for families affected by the Covid-19 pandemic. According to the announcement, pausing pending proceedings is considered “a vital step towards keeping families in their homes as they receive assistance through the HAF program and is consistent with Congress’s intent in putting in place the HAF program to protect vulnerable homeowners.” The Secretaries encourage homeowners and servicers to continue collaborating on loss mitigation options so that homeowners eligible for assistance can choose “the best path to staying in their homes and fully utilize available resources.” They also “strongly encourage servicers to offer these loss mitigation options to borrowers who are struggling to make their mortgage payments, including those who are eligible for HAF funding.” The announcement further noted that, among other things, Treasury is urging HAF program administrators to ensure that their programs expedite handling of applications from homeowners with pending foreclosure proceedings, and to develop expedited procedures for handling homeowners with immediate threats to housing stability, in addition to supporting homeowners who may benefit from the agencies’ loss mitigation options.
HUD announces Massachusetts disaster relief
On April 20, HUD announced disaster assistance for certain areas in Massachusetts impacted by a severe winter storm from January 28 to January 29. The disaster assistance follows President Biden’s major disaster declarations on April 18. According to the announcement, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties effective April 18 and is making FHA insurance available to victims whose homes were destroyed or severely damaged, such that “reconstruction or replacement is necessary.” HUD’s Section 203(k) loan program enables individuals who have lost homes to finance a home purchase or to refinance a home to include repair costs through a single mortgage. The program also allows homeowners with damaged property to finance the repair of their existing single-family homes. Furthermore, HUD is allowing administrative flexibilities to community planning and development grantees, as well as to public housing agencies and Tribes.
HUD announces $15,000 payment for FHA violations
On April 19, HUD announced a conciliation agreement with a national bank and one if its loan officers to resolve allegations that respondents violated the Fair Housing Act (FHA) by denying a mortgage loan to a couple until after one of the applicants returned to work from maternity leave. Under the FHA, it is unlawful to discriminate in the terms, conditions, or privileges associated with the sale of a dwelling on the basis of race, color, national origin, religion, sex, disability, or familial status, including denying a mortgage loan because an applicant is on maternity leave. In addition to requiring a $15,000 payment be made to the couple, the bank must “adhere to a policy wherein applicants on temporary leave, including parental leave, can be approved for a mortgage prior to returning to active work status,” and provide fair lending training to employees. The conciliation agreement does not constitute an admission by respondents or evidence of a finding by HUD of a violation of the FHA.
HUD offers 40-year mortgage modification
On April 18, HUD issued Mortgagee Letter 2022-07, which establishes a 40-year loan modification as part of the Covid-19 Recovery Loss Mitigation Options. According to HUD, the new option is “designed to help those borrowers who cannot achieve a minimum targeted 25 percent reduction in the Principal and Interest portion of their mortgage payment through FHA’s existing 30-year mortgage modification with a partial claim.” Mortgage servicers may start implementing the new 40-year modification with partial claim option immediately; however, servicers must offer this solution to eligible borrowers with FHA-insured Title II forward mortgages, except those funded through Mortgage Revenue Bonds under certain circumstances, within 90 calendar days. As previously covered by InfoBytes, HUD published a proposed rule to increase the maximum term limit allowable on loan modifications for FHA-insured mortgages from 360 to 480 months. Comments are due by May 31.