18.11 SPECIAL RELIEF MEASURES [7 CFR 3555.307(c)] (07/02/18)

Owned by Kacey Olson
Nov 24, 2018
3 min read

© RHS HB-1-3555 SFH Guaranteed Loan Program Technical Handbook

The servicer must suspend any and all foreclosure actions for affected borrowers in PDD areas effective for 90 days from the date of declaration, unless extended by the Agency. This applies to both the initiation of new foreclosures as well as foreclosures already in process.

To be eligible for a suspension of foreclosure activities, the property or the borrower’s place of employment must be directly affected by the PDD. During the suspension, servicers should consider the following factors in order to determine the appropriate course of action:

  • Evaluate the effects of the disaster;
  • Instruct the borrower to file insurance claims and apply for disaster assistance that may be available through FEMA, state and local governments;
  • Offer appropriate repayment plans as outlined in Section 2 of this Chapter; and
  • Determine if foreclosure is the only option.

The borrower’s income or ability to pay his/her mortgage, any increase in living expenses, the extent of damage, the delinquency status of the mortgage, and the availability of alternative housing are additional factors to consider. The goal should be a formal relief provision that will cure the delinquency as soon as possible without imposing an undue hardship on the borrower. A relief measure that is very appropriate in disasters is forbearance. Under forbearance, the servicer can agree to reduce or suspend the borrower’s monthly payments for up to 12 months. After which, the borrower must agree to resume his or her regular monthly payments and to pay additional money at scheduled intervals toward repayment of the amount reduced or suspended.

Regular follow-up during a suspension and reassessment of the individual borrower’s circumstances, based upon property inspections, borrower financial information at the end of the suspension period should be conducted. If the servicer is not actively engaged in workout options with the borrower(s) and believes suspension beyond the 90 day period is warranted, the servicer must document the reason to extend a hold on any and all foreclosure actions and retain the documentation in their collection systems. Failure to do so may impact any future loss claim payment.

Servicers may use existing loss mitigation workout options to reinstate a borrower ready to resume mortgage responsibilities. Late charges while the borrower is on a forbearance plan, or paying as agreed on a repayment plan, should not be assessed. A borrower for whom a forbearance or repayment plan is extended due to disaster-related circumstances must not be reported to credit repositories.

Special Relief Alternatives

In addition to standard workout options, eligible borrowers may be offered the following special relief measures to assist borrowers without the standard financial evaluation required subject to the following conditions:

  • The loan was current or less than thirty (30) days past due as of the date of the applicable PDD;
  • The servicer receives verification the hardship (employment and/or property) has been resolved;
  • Total modified mortgage principal and interest payment is less than or equal to the payment prior to modification.

Special Relief Measures shall be considered in the following order:

  • Term Extension: If the servicer determines the borrower is capable of maintaining the current contractual payment including any escrow shortage created by advancements during the forbearance period (can be spread over 60 months), the loan term may be extended an equal number of months to the term of the forbearance provided. Any interest accrued during the forbearance period should be waived and the servicer may re-amortize the loan if necessary to meet any investor restrictions.
  • Capitalization of Delinquency and Term Extension: If the servicer determines the borrower is capable of maintaining the current contractual payment, but cannot manage the additional escrow repayment amount, the servicer may offer a Cap and Extend Modification under the following terms:
    • Capitalize the accumulated arrearages and eligible unreimbursed servicer advances, fees and costs into the modified mortgage balance;
    • Extend term up to 360 months:
    • Reduce rate down to no greater than 50 basis points greater than the most recent Freddie Mac Weekly Primary Mortgage Market Survey (PMMS) Rate for 30-year fixed-rate conforming mortgages (US Average), rounded to the nearest one-eighth of one percentage (0.125%), as of the date a plan is offered to the borrower;
    • The borrowers post modified PITIA payment must be equal to or less than their payment prior to the disaster.
  • Mortgage Recovery Advance: If the servicer is unable to offer the borrower either of the first two options the servicer may utilize a mortgage recovery advance to settle the borrower delinquency and return the borrower to a current status. The mortgage recovery advance is limited to an amount no greater than what is necessary to resolve any accumulated interest and unreimbursed servicer advances made during the forbearance and must meet all other requirements as explained in section 5.K of the Loss Mitigation Guide found in Attachment 18A of this Chapter.