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FHA INFO #18-03: Disaster Related Policy Waivers Related to Early Payment Default Loan Level File Review Requirements, and Limited 203k in Puerto Rico; Reminder Regarding FHA Forbearance Agreement for FHA Borrowers Affected by Disasters

Investor Update
January 24, 2018

FHA Issues Disaster-Related Policy Waiver for Early Payment Default Loan-Level File Review Requirements

Today, the Federal Housing Administration (FHA) issued a waiver of its policy regarding early payment default (EPD) review requirements found in the Single Family Housing Policy Handbook 4000.1 (SF Handbook), Sections V.A.3.a.i.(C) and V.A.3.a.iv.(B)(2). This waiver applies to FHA-insured mortgages located in Presidentially-Declared Major Disaster Areas (PDMDAs) affected by Hurricane Harvey in Louisiana and Texas; Hurricane Irma in Florida, Georgia, Puerto Rico, South Carolina, and the Virgin Islands; Hurricane Maria in Puerto Rico and the Virgin Islands; and the wildfires in California.

  • As a result of the disasters associated with the wildfires and Hurricanes Harvey, Irma, and Maria, FHA anticipates an increase in EPDs—FHA-insured mortgages that become 60 days delinquent within the first six payments—in the listed PDMDAs. FHA believes EPDs on loans closed prior to the disaster are most likely a result of unforeseen circumstances associated with these disasters, such as loss of employment and/or income, property damage and repairs, forced relocation, and other contributing factors.
  • Current policy requires that mortgagees select all EPDs for review on a monthly basis and perform a loan file compliance review to ensure compliance with FHA Single Family origination and underwriting requirements. Given the likelihood of an increase in EPDs in these disaster areas, solely as a result of these disasters, FHA is waiving the requirement that all of these EPDs be selected and reviewed.
  • The current policy is being waived for FHA-insured mortgages in the listed PDMDAs that:
    — have a mortgage Closing Date before the start date for the respective Incident Period as determined by
         the Federal Emergency Management Agency (FEMA);
    — meet the definition of an early payment default (SF Handbook, Section V.A.3.a.iv.(B)(1)); and
    — became early payment defaults between September 1, 2017, and February 28, 2018.
  • If in compliance with the waiver requirements above, mortgagees do not need to include EPDs in the origination and underwriting loan file compliance review activities found in Section V.A.3.c of the SF Handbook for FHA insured mortgages in the listed PDMDAs.
  • Mortgagees must continue to meet the loan file selection requirements in Section V.A.3.a.i.(A) Pre-Closing Reviews; (B) Post-Closing Reviews; and (D) Servicing Reviews, of the SF Handbook.

FHA Issues Temporary Disaster-Related Policy Waiver for Limited 203(k) for Properties in Puerto Rico

Today, the Federal Housing Administration (FHA) issued a temporary waiver of its Limited 203(k) program policy regarding the time period in which borrowers may be prevented from occupying the property as a result of repairs in determining whether a repair is considered “major.” The temporary waiver applies to Limited 203(k) mortgages closed on or before June 30, 2018, secured by properties in the Commonwealth of Puerto Rico.

  • FHA’s Limited 203(k) program may be used to finance minor remodeling and non-structural repairs up to $35,000. Included in the Single Family Housing Policy Handbook 4000.1 (SF Handbook) is a list of eligible improvements (Section II.A.8.a.vii.(A)(1)) and a list of ineligible improvements (Section II.A.8.a.vii.(B)).
  • Under ineligible improvements, policy states that “major” rehabilitation or remodeling is not allowed. FHA defines “major” rehabilitation or remodeling, in part, as a repair that prevents the borrower from occupying the property for more than 15 days.
  • Due to the large number of properties damaged by Hurricane Maria in the Commonwealth of Puerto Rico, FHA is temporarily waiving its 15-day rehabilitation period as it relates to its definition of a “major” repair.
  • The temporary waiver will allow for the use of FHA’s Limited 203(k) program for financing of minor repairs in which the borrower is prevented from occupying the property for more than 15 days. However, FHA is not waiving the requirement that a borrower occupy the property within 60 days.

FHA Borrowers Affected by Disasters and FHA’s Forbearance Agreement

The Federal Housing Administration (FHA) supports homeowners with FHA-insured mortgage loans whose properties are impacted by a natural disaster. Specifically, upon the declaration of a Presidentially-Declared Major Disaster Area (PDMDA), an automatic 90-day foreclosure moratorium becomes effective to provide relief for FHA borrowers. FHA would like to remind mortgagees that at the end of the moratorium, mortgagees may evaluate affected borrowers for forbearance relief.

As stated in the Single Family Policy Handbook 4000.1 (SF Handbook), mortgagees may offer forbearance relief to borrowers who:

  • have a mortgaged property located within a PDMDA; and/or
  • have a place of employment located in a PDMDA.

Subject to the restrictions in Section III.A.3.c.iv.(C) of the SF Handbook, if a borrower meets one or both of the above referenced requirements, mortgagees may offer the borrower an FHA Forbearance Agreement provided, in part, that the agreement’s cumulative arrearage amount is no more than 12 months of missed monthly mortgage payments (including Principal, Interest, Taxes, and Insurance).

Quick Links

Resources
The FHA Resource Center’s Online Knowledge Base has additional information for disaster victims with FHA-insured loans. Access this Knowledge Base to learn more about FHA’s disaster policies, its 203(h) Mortgage Insurance for Disaster Victims program, and FHA’s 203(k) Rehabilitation Mortgage Insurance program.

Contact the FHA Resource Center:

  • Visit our online knowledge base to obtain answers to frequently asked questions 24/7 at:
    https://www.hud.gov/answers
  • E-mail the FHA Resource Center at: answers@hud.gov. Emails and phone messages will be responded to during normal hours of operation, 8:00 AM to 8:00 PM (Eastern), Monday through Friday on all non-Federal holidays.
  • Call 1-800-CALL-FHA (1-800-225-5342). Persons with hearing or speech impairments may reach this number by calling the Federal Relay Service at 1-800-877-8339.

Source: HUD (FHA INFO #18-03 full version)

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CEO

Alan Jaffa

Alan Jaffa is the Chief Executive Officer for Safeguard Properties, steering the company as the mortgage field services industry leader. He also serves on the board of advisors for SCG Partners, a middle-market private equity fund focused on diversifying and expanding Safeguard Properties’ business model into complimentary markets.

Alan joined Safeguard in 1995, learning the business from the ground up. He was promoted to Chief Operating Officer in 2002, and was named CEO in May 2010. His hands-on experience has given him unique insights as a leader to innovate, improve and strengthen Safeguard’s processes to assure that the company adheres to the highest standards of quality and customer service.

Under Alan’s leadership, Safeguard has grown significantly with strategies that have included new and expanded services, technology investments that deliver higher quality and greater efficiency to clients, and strategic acquisitions. He takes a team approach to process improvement, involving staff at all levels of the organization to address issues, brainstorm solutions, and identify new and better ways to serve clients.

In 2008, Alan was recognized by Crain’s Cleveland Business in its annual “40-Under-40” profile of young leaders. He also was named a NEO Ernst & Young Entrepreneur Of The Year® Award finalist in 2013.

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Esq., General Counsel and EVP

Linda Erkkila

Linda Erkkila is the General Counsel and Executive Vice President for Safeguard Properties, with oversight of legal, human resources, training, and compliance. Linda’s broad scope of oversight covers regulatory issues that impact Safeguard’s operations, risk mitigation, strategic planning, human resources and training initiatives, compliance, insurance, litigation and claims management, and counsel related to mergers, acquisition and joint ventures.

Linda assures that Safeguard’s strategic initiatives align with its resources, leverage opportunities across the company, and contemplate compliance mandates. She has practiced law for 25 years and her experience, both as outside and in-house counsel, covers a wide range of corporate matters, including regulatory disclosure, corporate governance compliance, risk assessment, compensation and benefits, litigation management, and mergers and acquisitions.

Linda earned her JD at Cleveland-Marshall College of Law. She holds a degree in economics from Miami University and an MBA. Linda was previously named as both a “Woman of Influence” by HousingWire and as a “Leading Lady” by MReport.

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COO

Michael Greenbaum

Michael Greenbaum is the Chief Operating Officer of Safeguard Properties, where he has played a pivotal role since joining the company in July 2010. Initially brought on as Vice President of REO, Mike’s exceptional leadership and strategic vision quickly propelled him to Vice President of Operations in 2013, and ultimately to COO in 2015. Over his 14-year tenure at Safeguard, Mike has been instrumental in driving change and fostering innovation within the Property Preservation sector, consistently delivering excellence and becoming a trusted partner to clients and investors.

A distinguished graduate of the United States Military Academy at West Point, Mike earned a degree in Quantitative Economics. Following his graduation, he served in the U.S. Army’s Ordnance Branch, where he specialized in supply chain management. Before his tenure at Safeguard, Mike honed his expertise by managing global supply chains for 13 years, leveraging his military and civilian experience to lead with precision and efficacy.

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CFO

Joe Iafigliola

Joe Iafigliola is the Chief Financial Officer for Safeguard Properties. Joe is responsible for the Control, Quality Assurance, Business Development, Marketing, Accounting, and Information Security departments. At the core of his responsibilities is the drive to ensure that Safeguard’s focus remains rooted in Customer Service = Resolution. Through his executive leadership role, he actively supports SGPNOW.com, an on-demand service geared towards real estate and property management professionals as well as individual home owners in need of inspection and property preservation services. Joe is also an integral force behind Compliance Connections, a branch of Safeguard Properties that allows code enforcement professionals to report violations at properties that can then be addressed by the Safeguard vendor network. Compliance Connections also researches and shares vacant property ordinance information with Safeguard clients.

Joe has an MBA from The Weatherhead School of Management at Case Western Reserve University, is a Certified Management Accountant (CMA), and holds a bachelor’s degree from The Ohio State University’s Honors Accounting program.

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Business Development

Carrie Tackett

Business Development Safeguard Properties