FHA Expands COVID-19 Recovery Loss Mitigation Options

Four years after the COVID 19 Pandemic, FHA once again expands their COVID 19 Recovery Options.

FHA just can't stop giving out the "help"!

In hopes of avoiding further foreclosure starts, FHA has again added some programs to buy even more time, and extended current loss mitigation options for another year. Mortgagee Letter 2024-02 details these changes.

FHA introduces the Payment Supplement loss mitigation option.

Rising interest rates have made loan modifications challenging, and the new Payment Supplement option combines a standalone partial claim to bring the mortgage current, and reduce the ongoing payment with a principal reduction. 

hud partial claim

This will temporarily reduce the monthly mortgage payment for a period of three years, without requiring a loan modification. 

Existing COVID-19 Recovery Options are extended through April 30,2025.

The following programs, which were set to expire October 2024 are extended and additional 6 months: 

How are these workouts funded?

Almost all new and current home retention options get funded via the borrowers current and future home equity through the HUD Partial Claim. Partial Claims are essentially a silent second mortgage that does not require repayment until sale or refinance, and simply ties up the equity in the home. Theoretically this is a non issue, unless the seller needs to sell their home and discovers they owe much more than their home could ever sell for, and they must pursue a short sale.

short sale with FHA
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I just wanted to thank you for all of your help in selling my house as a short sale. You were very knowledgable on the subject and took care of everything for me, even when things seemed tough in dealing with the bank. You were upfront and told me what I could expect and you were right. Your professionalism pulled through in helping me out of a tight situation. I sincerely cannot thank you enough for helping me to get to a better place where I can live comfortably. Thank you not only for doing your job so well, but for making it easy for me.

E.H.

Last Updated on March 18, 2024 by Minna Reid

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