Requirements are being loosened for modifications on loans that are insured by the Federal Housing Administration. In addition to higher debt-to-income ratios and expanded FHA claim amounts, borrowers who previously failed a trial-payment plan could be given another chance to try again.
The maximum back-end debt-to-income ratio requirement of 55 percent is being eliminated on FHA-HAMP transactions.
Also being eliminated is the 12-month restriction on the amount of principal, interest, taxes and insurance that can be included in an FHA-HAMP partial claim.
The updates were spelled out by the Department of Housing and Urban Development in Mortgagee Letter 2012-22.
In addition, the FHA-HAMP eligibility requirement that FHA-insured mortgages are no more than 12 full payments past due is being removed.
FHA’s loss mitigation home retention option priority order is being streamlined by replacing its current four-tier incentive structure with a three-tier incentive. Special forbearance is the first option to be considered, followed by a loan modification and an FHA-HAMP.
Mortgagees have 90 days to implement assessment of FHA’s loss mitigation priority order.
The term “special forbearance” is being re-defined to apply only when the borrower is unemployed.
The mortgagee letter indicated that FHA-HAMP is being expanded to consist of a stand-alone modification, stand-alone partial claim or a combination thereof.
Mortgagors who previously failed to successfully complete a trial payment plan will now be permitted to re-apply for standard loan modifications or FHA-HAMP if their financial circumstances have improved.
