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HUD will allow mortgages to be endorsed despite forbearance
On June 4, HUD announced new, temporary guidance (see FHA Info #20-36 and HUD Mortgagee Letter 2020-16), which, among other things, grants mortgagees the ability to submit a mortgage for insurance endorsement involving a borrower who is experiencing financial hardships due to the Covid-19 pandemic, provided the mortgagee “executes a two-year partial indemnification agreement.” The temporary guidance sets the initial amount of partial indemnification at 20 percent of the original loan amount, which will only become payable if the mortgage goes into foreclosure and results in a claim to the FHA Mutual Mortgage Insurance Fund. Mortgagees may access the new agreement and instructions for endorsing these loans here. The guidance also provides for a temporary certification amendment to HUD 92900-A, which allows mortgagees to submit a separate addendum to a mortgagee’s certification addressing a mortgagee’s knowledge of changes in a borrower’s employment status and ability to make payments as a result of Covid-19 after the closing of a mortgage. HUD will also “continue to monitor the impacts to the market as well as implications to the Mutual Mortgage Insurance Fund and may adjust the level of partial indemnification for future indemnification contracts accordingly.”
HUD issues mortgagee letter extending interim procedures relating to FHA Section 232 approved mortgages
On May 28, the U.S. Department of Housing and Urban Development issued Mortgagee Letter 2020-15 to all FHA Section 232 Approved Mortgagees regarding the extension of interim procedures issued in Mortgagee Letter 20-10 to address site access issues during the Covid-19 pandemic. The guidance provides temporary modifications pertaining to third-party site inspections for Section 232 FHA-insured healthcare facilities with effective dates within 60 days of the issuance of the mortgagee letter. The letter also provides guidance on other aspects relating to Section 232 properties, including regarding Property Capital Needs Assessments, appraisals, Section 232 Phase 1 Environmental Site Assessments, asbestos surveys, and radon testing, among other things.
Federal agencies launch joint housing assistance website
On May 12, the CFPB, the Federal Housing Finance Agency (FHFA), and the Department of Housing and Urban Development (HUD) announced a new mortgage and housing assistance website, which consolidates the CARES Act mortgage and rent relief protections, tips to avoid Covid-19 related scams, and tools for homeowners and renters to determine if their property is federally backed. The release details the steps the CFPB has taken in response to the Covid-19 pandemic, including informing consumers of their protections under newly created programs and releasing a policy statement concerning the responsibilities of credit reporting companies and furnishers. The release also outlines efforts that FHFA’s regulated entities and HUD have taken to address the national emergency, including forbearance options for homeowners and eviction protections for renters who live in multifamily properties that are backed by Fannie Mae or Freddie Mac.
HUD OIG issues Covid-19 guidance to homeowners
On April 28, the Department of Housing and Urban Development’s Office of Inspector General issued a bulletin outlining Federal Housing Administration guidance to servicers and borrowers regarding implementing the forbearance requirements of the CARES Act. The office issued the bulletin based on a review of information that the top 30 FHA mortgage servicers provide on their websites, which the office found to be incomplete, outdated, inconsistent, or unclear.
HUD issues guidance on HECM assignment claims during Covid-19
On April 14, HUD issued Mortgagee Letter 2020-12 to inform mortgagees of alternative documentation options and delayed documentation delivery deadlines for submitting Home Equity Conversion Mortgage (HECM) claims for during the Covid-19 related closures. In particular, alternative documentation is permitted to document that taxes are current, HOA and condominium dues are not delinquent, and the borrower will occupy the property as a principal residence. The guidance addresses delayed delivery of original notes, mortgages, and assignments to the Secretary. It also reminds mortgagees of the required repurchase of the HECM if the HECM did not meet all criteria at the time of assignment claim payment.
FTC provides advice to mortgage borrowers impacted by Covid-19
On April 14, the FTC released guidance entitled “Coronavirus and your mortgage” to provide financial information to consumers affected by the Covid-19 pandemic. The guidance points out that many mortgage borrowers facing Covid-19-related financial hardships may benefit from CARES Act protections. Starting on March 18, borrowers with federally-backed mortgages cannot have foreclosure proceedings instituted against them for 60 days. The CARES Act also provides borrowers the right to request forbearance for up to 180 days in order to temporarily freeze or lower mortgage payments. After the forbearance period ends, borrowers may request an additional forbearance for up to 180 days if they are still having trouble making mortgage payments as a result Covid-19. The FTC’s guidance provides contact information for the GSEs so borrowers can determine if their mortgages are federally backed. In addition, the guidance encourages all borrowers to contact their servicers for available payment options and assistance. The FTC suggests that approved housing counselors may also help, and can be found on the Department of Housing and Urban Development’s website here, while the Homeownership Preservation Foundation may be able to assist borrowers in making payment arrangements with their mortgage servicers. (See website here.) The FTC advises borrowers to check state government websites for state-specific information, though the agency warns borrowers to be wary of mortgage relief scams. Finally, the guidance reminds borrowers never to pay up-front for help with their mortgage payments and provides additional links for more detailed information.
HUD announces multifamily mortgage payment relief
On April 13, HUD announced new measures for FHA-approved multifamily mortgagees regarding the implementation of CARES Act forbearance. The guidance stipulates that servicers must grant multifamily borrowers who experience financial hardships due to Covid-19 and request assistance up to 90 days of forbearance, and may grant this forbearance without receiving direct approval from HUD provided they follow guidance outlined in Mortgagee Letter 2020-09 (covered by InfoBytes here). As required by the CARES Act, all owners and agents of FHA-insured multifamily properties and properties participating in HUD multifamily assisted housing programs must also cease all evictions of tenants for non-payment of rent for 120 days. The guidance also outlines the standard multifamily forbearance protocol, which is intended to streamline processing for borrowers, servicers, and lenders. The protocol stipulates that HUD is (i) “allowing servicers to grant, without HUD approval, up to 30 days of forbearance for borrowers experiencing a financial hardship due to COVID-19 if the borrower was current on their mortgage payments as of February 1, 2020”; (ii) “allowing automatic forbearance extensions from servicers to borrowers for up to two additional 30-day periods, without HUD approval”; and (iii) “encouraging borrowers to enter into repayment plans with renters (residential and commercial) that experience an income reduction or temporary loss of household income but are able to make up the difference over time, without HUD approval.”
HUD issues mortgagee letter regarding Section 223(f) underwriting mitigants for multifamily housing projects
On April 10, HUD released Mortgagee Letter 2020-11 to Multifamily Regional Directors, Production Directors, Operations Officers, and FHA MAP Lenders regarding Section 223(f) underwriting mitigants for multifamily housing projects due to the economic impact of Covid-19. Specifically, HUD takes the position that the Covid-19 emergency constitutes a “material change” that requires underwriting mitigants to reduce this additional risk. As such, the letter provides instructions to HUD staff about mitigants that may be included in the Firm Commitment for Section 223(f) loans that are in process, as well as for projects where a Firm Commitment has been issued. Among other things, HUD imposes certain debt service reserve requirements for both market rate transactions and affordable transactions. HUD also requires that, at endorsement, cash out proceeds in excess of 250% of the non-critical repair escrow be used to fund the debt service reserve account. The letter is effective immediately and lasts until HUD determines that additional mitigants for Section 223(f) transactions are no longer required.
HUD issues mortgagee letter on implementation of CARES Act forbearance
On April 10, HUD issued Mortgagee Letter 2020-09 to FHA Approved Multifamily Mortgagees regarding implementation of CARES Act forbearance. The letter includes guidelines on CARES Act forbearance for FHA insured mortgages, 542(b) and (c) risk share mortgages, and HUD-held loans. Among other things, the guidance notes that HUD will not participate in the negotiation of forbearance repayment between multifamily borrowers and lenders. However, if the forbearance agreement contains actions requiring HUD approval, a copy of the forbearance agreement must be provided to HUD.
The letter also provides guidance on continuing program obligations and the post-forbearance period. Mortgagees are reminded that during the forbearance period, all other material terms and conditions of the HUD Loan Documents and the FHA Regulatory Agreement remain in effect. The letter notes that Lenders should use Multifamily Delinquency and Default Reporting System to record post-forbearance delinquencies and defaults. Finally, the letter notes that HUD has reviewed the MBA’s sample forbearance agreement drafted in April 2020, and stated that forbearance agreements that follow this format would not be submitted to HUD prior to execution and implementation by the lender and borrower. HUD is also developing its own form for lenders and borrowers to use.
HUD announces system to securely deliver case binders electronically for endorsement
On April 6, HUD issued Mortgagee Letter-2020-07 announcing that the FHA is accelerating the deployment of “FHA Catalyst”—a system to securely deliver case binders electronically for endorsement—which is now available. This initiative is in response to issues mortgagees have faced in complying with FHA requirements for the delivery of Single Family Forward and HECM paper case binders as well as issues the FHA has faced in processing such paper case binders in light of the Covid-19 outbreak. The letter provides an overview of FHA Catalyst and instructions on access and use of the platform.