HUD: Updated Servicing and Loss Mitigation Section of Handbook 4000.1
Updated 6/24/21: HUD delayed the effective date for policy changes made to Section III (Servicing and Loss Mitigation) Appendix 4.0 (FHA-HAMP Calculations) and Appendix 5.0 (Schedule of Standard Possessory Action and Deed-In-Lieu of Foreclosure Attorney Fees) of Single Family Housing Policy Handbook 4000.1.
Changes must now be implemented no later than March 31, 2022.
April 19, 2021
Updates to Single Family Handbook policies strengthen loss mitigation approaches for struggling borrowers while streamlining key requirements for servicers
WASHINGTON – The Federal Housing Administration (FHA) today announced the publication of its update to the Servicing and Loss Mitigation section of the FHA Single Family Housing Policy Handbook 4000.1. This update streamlines many standard operational requirements for mortgage servicers, including revising FHA’s loss mitigation home retention “waterfall” so that servicers can more quickly offer effective loss mitigation home retention options to borrowers in danger of losing their homes to foreclosure. Additional changes streamline and enhance many servicing requirements to provide more consistency with industry practices and reduce barriers to servicing FHA-insured single family mortgages.
“With these updates, we have strengthened the ability of servicers to reach and help more struggling borrowers with FHA-insured mortgages, more quickly,” said Principal Deputy Assistant Secretary for Housing Lopa Kolluri. “The updates to our policies will ensure quality servicing activities, streamline servicing requirements, more closely align our servicing policies with industry servicing practices, and improve outcomes.”
The changes contained in the updated Section III of the FHA Single Family Housing Policy Handbook 4000.1 published today are based on rigorous internal analysis and extensive public feedback and will improve the effectiveness and efficiency of FHA’s servicing policies. The updates incorporate the actions FHA has already taken to support borrowers who are experiencing financial hardship due to COVID-19. The changes include:
• A revised loss mitigation waterfall that allows servicers to review struggling borrowers for a permanent FHA Home Affordable Modification Program (FHA-HAMP) home retention option without a lengthy forbearance, which has been proven to be highly effective at helping borrowers avoid redefault and foreclosure;
• Streamlined documentation requirements to avoid unnecessary delays and to align more closely with standard industry servicing practices, including removing signature requirements on Trial Payment Plans; and
• A revised structure for certain allowable costs and fees that corresponds with fee structures used by other industry participants.
“The work completed today responds to feedback we’ve received about the complexity and cost of servicing FHA-insured mortgages,” said Acting Associate Deputy Assistant Secretary for Single Family Housing Julie Shaffer. “FHA requirements will continue to reflect our high expectations of servicers and updating our processes and addressing outdated and unnecessary requirements will improve the program for borrowers and servicers.”