HUD: FHA INFO #20-64: Guidance Regarding Presidentially-Declared Major Disaster Areas During the COVID-19 Pandemic
September 2, 2020
Today, the Federal Housing Administration (FHA) is issuing this clarification to mortgagees about its guidance for originating and/or servicing FHA-insured forward mortgages in locations in the U.S. and its territories when the President declares a major disaster area during the COVID-19 pandemic. This declaration is made when natural disasters or other events are of such severity that it is beyond the combined capabilities of state and local governments to respond. FHA recognizes the difficulty facing many borrowers across the country in light of recent hurricanes, wildfires, and other extreme weather events in the midst of a pandemic. This guidance is intended to provide clarity to borrowers and industry partners.
To date, the President has declared a major disaster in every state and most territories in connection with COVID-19. The following guidance applies to all areas covered by an additional Presidentially-Declared Major Disaster Area (PDMDA) during the COVID-19 pandemic.
• This guidance does not pertain to the loss mitigation options for PDMDAs declared as a result of COVID-19 National Emergency, which are addressed in Mortgagee Letters 2020-06 and 2020-22.
• For FHA-insured forward mortgages secured by properties in a PDMDA:
• FHA-insured forward mortgages secured by properties in a PDMDA are subject to a 90-day foreclosure moratorium following the disaster declaration.
• In PDMDAs, FHA provides mortgagees an automatic 90-day extension from the date of the foreclosure moratorium expiration date to commence or recommence a foreclosure action or evaluate the borrower under HUD’s Loss Mitigation Program.
• For borrowers who are already on a COVID-19 Loss Mitigation Option — including a forbearance — before the date of the PDMDA, mortgagees must continue to follow the loss mitigation guidance in ML 2020-22: FHA’s COVID-19 Loss Mitigation Options.
• For all other borrowers, the mortgagee must evaluate the borrower for all loss mitigation options available to them, including any PDMDA or COVID-19 Loss Mitigation Options, as applicable, based on their reason for hardship.
•For any buildings in a PDMDA that are substantially damaged, mortgagees must follow the guidance in Single Family Housing Policy Handbook1 (SF Handbook) Section III.A.3.c.iii, Monitoring of Repairs to Substantially Damaged Homes. This requirement applies to all properties covered by an additional non-COVID-19 Presidentially-Declared Major Disaster Area during the COVID-19 pandemic, including those already under a COVID-19 Loss Mitigation Option, such as forbearance.
• Mortgagees are reminded that they must report the appropriate default status codes associated with the actions taking place.
• Default Status Code 34 must be reported when the property is in a PDMDA and/or if the borrower has been impacted until another code applies, such as loss mitigation, or until it is determined that the borrower and/or property was not impacted by the disaster. Default Reason Code 019 must be reported to indicate that the borrower’s ability to make on time mortgage payments has been impacted by property damage.
• Default Reason Code 055 must be reported for COVID-19 Loss Mitigation. If the property is also located in a PDMDA, the PDMDA must be noted in the Servicing File.
• FHA-insured Home Equity Conversion Mortgages (HECM) that become due and payable for reasons other than the death of the last surviving borrower and eligible non-borrowing spouse are subject to a 90-day extension of HECM foreclosure timelines, as most recently provided for in FHA INFO 18-40.
• In addition to the provisions found in FHA INFO 18-40, FHA is providing HECM mortgagees an automatic 90-day extension from the date of the PDMDA foreclosure expiration date to commence or recommence a foreclosure action.
Mortgagees are reminded that they should begin reaching out to affected borrowers who may require loss mitigation assistance as soon as possible post-disaster.
In preparation for assisting homeowners with longer-term recovery efforts, mortgagees should also review:
• FHA’s 203(h) Mortgage Insurance for Disaster Victims requirements in Section II.A.8.b of the SF Handbook. The 203(h) program allows FHA to insure mortgages for victims of a major disaster who have lost their homes and are in the process of rebuilding or buying another home.
• FHA’s 203(k) Rehabilitation Mortgage Insurance Program requirements in Section II.A.8.a of the SF Handbook. The 203(k) program provides mortgage financing or refinancing which includes the cost of home repairs – both structural and non-structural – into the loan amount.
Mortgagees can find more information about the policies referenced above and other FHA PDMDA and FHA COVID-19 policies on the FHA Resource Center’s Online Knowledge Base.
• View Mortgagee Letters 2020-06, 2020-22 and all other archived Mortgagee Letters at: https://www.hud.gov/program_offices/administration/hudclips/letters/mortgagee
• Access the SF Handbook in online or portable document format from HUD’s Client Information Policy Systems Housing Handbooks web page at: https://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/handbooks/hsgh
• View the status of Incident Periods on the FEMA Disasters web page at: https://www.fema.gov/disasters
Additional items covered in FHA INFO #20-64: New and updated FHA Catalyst resources; job opportunity
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