FHA’s COVID-19 Loss Mitigation Options
Summary
HUD Mortgagee Letter 2020-22, dated July 8, 2020, with the subject FHA’s COVID-19 Loss Mitigation Options is addressed to FHA-approved mortgagees. It states that its purpose is to inform mortgagees of the full suite of COVID-19 Loss Mitigation Options available to Single Family borrowers affected by the COVID-19 Presidentially-Declared National Emergency, where the mortgage was current or less than 30 days past due as of March 1, 2020. It states that mortgagees must offer the options no later than 90 days from the date of the letter and that the initial COVID-19 Forbearance period may be up to six months. The options include a COVID-19 Owner-Occupant Loan Modification, a COVID-19 Non-Occupant Loan Modification, a COVID-19 Pre-Foreclosure Sale and a COVID-19 Deed-in-Lieu of Foreclosure.
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- Date
- 2020-07-08
Cite this document
“FHA’s COVID-19 Loss Mitigation Options.”
Original at www.hud.gov, dated 2020-07-08. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/2020-07-08-hud-fha-mortgagee-letter-2020-22-covid-19-forbearance-www-h-5fe453dcde/
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U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
WASHINGTON, DC 20410-8000
ASSISTANT SECRETARY FOR HOUSING –
FEDERAL HOUSING COMMISSIONER
Date: July 8, 2020
Mortgagee Letter 2020-22
To: All FHA-Approved Mortgagees
All Direct Endorsement Underwriters
All Eligible Submission Sources for Condominium Project Approvals
All FHA Roster Appraisers
All FHA-Approved 203(k) Consultants
All HUD-Approved Housing Counselors
All HUD-Approved Nonprofit Organizations
All Governmental Entity Participants
All Real Estate Brokers
All Closing Agents
Subject FHA’s COVID-19 Loss Mitigation Options
Purpose The purpose of this Mortgagee Letter (ML) is to inform mortgagees of the full
suite of COVID-19 Loss Mitigation Options available to Single Family
borrowers affected by the COVID-19 Presidentially-Declared National
Emergency, where the mortgage was current or less than 30 days past due as
of March 1, 2020, including additional Loss Mitigation Home Retention
Options and Home Disposition Options.
Effective Date Mortgagees must offer eligible borrowers the COVID-19 Loss Mitigation
Options and procedures set forth in this ML no later than 90 days from the
date of this Mortgagee Letter, but may begin offering the new options
immediately.
The new Single Family Default Monitoring System (SFDMS) Delinquency
and Default Reason (DDR) Code 055 – Related to National Emergency
Declaration must be used to report delinquencies as a result of impacts of the
COVID-19 pandemic effective immediately or no later than the July 2020
reporting cycle. That data is due to HUD no later than August 7, 2020, which
is the fifth business day of August 2020. All mortgagees that are unable to
report DDR Code 055 – Related to National Emergency Declaration prior to
the July 2020 reporting cycle must report DDR Code 010 – Neighborhood
Problem until they can begin reporting DDR Code 055.
www.hud.gov espanol.hud.gov
Mortgagee Letter 2020-22, Continued
The use of the new SFDMS Delinquency/Default Status (DDS) Code 053 –
Combination Partial Claim/Modification Started (Non FHA-HAMP) will be
effective for the July 2020 reporting cycle. That data is due to HUD no later
than August 7, 2020, which is the fifth business day of August 2020.
Public HUD welcomes feedback from interested parties for a period of 30 calendar
Feedback days from the date of issuance. To provide feedback on this policy document,
please send feedback to the FHA Resource Center at answers@hud.gov.
HUD will consider the feedback in determining the need for future updates.
Affected This guidance applies to all FHA Title II Single Family forward mortgage
Programs programs.
Affected Topics This ML provides Loss Mitigation Options for borrowers of FHA-insured
forward mortgages impacted by COVID-19, updating the forward mortgage
guidance in ML 2020-06. This policy will be included in Handbook 4000.1 as
section III.A.3.d Presidentially-Declared COVID-19 National Emergency.
Background HUD is working to provide additional Loss Mitigation Home Retention
Options due to the COVID-19 National Emergency. On March 27, 2020 the
Coronavirus Aid, Relief, and Economic Stimulus (CARES) Act was signed
into law. On April 1, 2020, HUD published ML 2020-06, establishing the
Forbearance for Borrowers Affected by the COVID-19 National Emergency
(COVID-19 Forbearance) and the COVID-19 National Emergency
Standalone Partial Claim (COVID-19 Standalone Partial Claim), as well as an
extension period for Home Equity Conversion Mortgages (HECM) affected
by COVID-19.
Through this ML, HUD is updating FHA’s COVID-19 Loss Mitigation
Options, building on the COVID-19 Forbearance and COVID-19 Standalone
Partial Claim, and establishing the following COVID-19 Home Retention and
Disposition Options:
• COVID-19 Owner-Occupant Loan Modification
• COVID-19 Combination Partial Claim and Loan Modification
• COVID-19 FHA-HAMP Combination Loan Modification and Partial
Claim with Reduced Documentation
• COVID-19 Non-Occupant Loan Modification
• COVID-19 Pre-Foreclosure Sale (PFS)
• COVID-19 Deed-in-Lieu (DIL) of Foreclosure
This suite of COVID-19 Loss Mitigation Options will greatly assist borrowers
impacted, directly or indirectly, by the COVID-19 pandemic and provide
streamlined loss mitigation for borrowers and industry partners.
2
Mortgagee Letter 2020-22, Continued
Summary of These changes to HUD’s Loss Mitigation for Borrowers Affected by COVID-
Changes 19 (III.A.3.d) update existing COVID-19 Forbearance and COVID-19
Standalone Partial Claim options published in ML 2020-06, and introduce the
following COVID-19 Home Retention and Disposition Options:
• COVID-19 Owner-Occupant Loan Modification
• COVID-19 Combination Partial Claim and Loan Modification
• COVID-19 FHA-HAMP Combination Loan Modification and Partial
Claim with Reduced Documentation
• COVID-19 Non-Occupant Loan Modification
• COVID-19 Pre-Foreclosure Sale (PFS)
• COVID-19 Deed-in-Lieu (DIL) of Foreclosure
SFDMS Reporting Requirements are updated for the COVID-19 Loss
Mitigation Options.
The update to section III.A.2.k.(B) states that a COVID-19 Home Retention
Option does not count against a borrower’s limit of one FHA-HAMP
agreement within 24 months.
HUD Single The above-mentioned policy changes will be incorporated into Handbook
Family Housing 4000.1 as appears below.
Policy
Handbook Programs and Products (III.A.3)
4000.1
d. Presidentially-Declared COVID-19 National Emergency
Presidentially-
Declared Loss Mitigation for Borrowers Affected by the COVID-19 National
COVID-19 Emergency
National
Emergency i. Definitions
Servicing and
Loss Mitigation
COVID-19 refers to the COVID-19 National Emergency declared on
Program
March 13, 2020.
The COVID-19 Forbearance provides Borrowers who experience an
adverse impact on their ability to make on-time Mortgage Payments due to
the COVID-19 pandemic with a forbearance period, upon request, which
allows for one or more periods of reduced or suspended payments without
specific terms of repayment.
The COVID-19 Home Retention Options provide options to reinstate the
Mortgage after the expiration of the COVID-19 Forbearance period.
Borrowers who are able to resume the monthly or the modified monthly
Mortgage payments, where the Mortgage was current or less than 30 Days
past due as of March 1, 2020, are eligible to be reviewed for the following
streamlined COVID-19 Home Retention Options:
3
Mortgagee Letter 2020-22, Continued
• Owner-Occupant Borrowers are eligible to be reviewed for the:
o COVID-19 Standalone Partial Claim;
o COVID-19 Owner-Occupant Loan Modification;
o COVID-19 Combination Partial Claim and Loan Modification;
and
o COVID-19 FHA Home Affordable Modification Program
(FHA-HAMP) Combination Loan Modification and Partial
Claim with Reduced Documentation, which may include
principal deferment and requires income documentation.
• Non-Occupant Borrowers are eligible to be reviewed for the
COVID-19 Non-Occupant Loan Modification.
COVID-19 Home Disposition Options provide options for the disposition
of a Property if the Borrower is unable to reinstate the Mortgage. The
following COVID-19 Home Disposition Options are available to Owner-
Occupant and Non-Occupant Borrowers:
• COVID-19 Pre-Foreclosure Sale (PFS); and
• COVID-19 Deed-in-Lieu (DIL) of Foreclosure.
ii. Standard
Upon Borrower request, Mortgagees must offer a COVID-19 Forbearance
to any Borrower that experiences an adverse impact on their ability to make
on-time Mortgage Payments due to the COVID-19 pandemic, regardless of
Default status.
To be eligible for the COVID-19 Loss Mitigation Home Retention and
Disposition Options, the Borrower must have been current or less than 30
Days past due as of March 1, 2020 and satisfy the criteria set forth in this
section.
COVID-19 Loss Mitigation Options are not incentivized for Mortgagees.
iii. Forbearance for Borrowers Affected by the COVID-19 National
Emergency (COVID-19 Forbearance)
If a Borrower is experiencing a financial hardship negatively impacting
their ability to make on-time Mortgage Payments due to COVID-19 and
makes a request for a COVID-19 Forbearance, the Mortgagee must offer
the Borrower a COVID-19 Forbearance.
The COVID-19 Forbearance allows for one or more periods of reduced or
suspended payments without specific terms of repayment.
All FHA-insured Borrowers are eligible for a COVID-19 Forbearance,
regardless of the delinquency status of the Mortgage.
4
Mortgagee Letter 2020-22, Continued
The Mortgagee may utilize any available method for communicating with a
Borrower regarding a COVID-19 Forbearance to meet these requirements.
Acceptable methods of communication regarding a COVID-19
Forbearance include, but are not limited to, emails, text messages, fax,
teleconferencing, websites, web portals, etc. If a Mortgagee sends out a
general communication advising that a COVID-19 Forbearance is
available, the Borrower may reply to that communication requesting a
COVID-19 Forbearance, via email, phone call, or any other method of
communication clearly made available to the Borrower by the Mortgagee.
The initial COVID-19 Forbearance period may be up to six months. If
needed, an additional COVID-19 Forbearance period of up to six months
may be requested by the Borrower and must be approved by the
Mortgagee.
The term of the initial or extended COVID-19 Forbearance may be
shortened at the Borrower’s request.
The Mortgagee must waive all Late Charges, fees, and penalties, if any, as
long as the Borrower is on a COVID-19 Forbearance Plan.
Mortgagees must complete a Loss Mitigation Option for eligible Borrowers
no later than 90 days from the earlier of the date of completion or
expiration of the COVID-19 Forbearance. For Home Disposition Options, a
signed Approval to Participate (ATP) Agreement or a signed DIL
Agreement will meet this requirement.
Owner-Occupant Borrowers who were current or less than 30 Days past
due as of March 1, 2020 must be reviewed for the COVID-19 Standalone
Partial Claim, the COVID-19 Owner-Occupant Loan Modification, the
COVID-19 Combination Partial Claim and Loan Modification, or the
COVID-19 FHA-HAMP Combination Loan Modification and Partial
Claim with Reduced Documentation.
Non-Occupant Borrowers who were current or less than 30 Days past due
as of March 1, 2020 must be reviewed for the COVID-19 Non-Occupant
Loan Modification.
Extension of First Legal Deadline Date
For Borrowers participating in the COVID-19 Forbearance, Mortgagees are
granted an automatic 90-Day extension to the first legal deadline date, from
the earlier of the date of completion or expiration of the COVID-19
Forbearance period, to complete a Loss Mitigation Option, or to commence
or re-commence foreclosure. Mortgagees must report the appropriate loss
mitigation action in SFDMS.
iv. COVID-19 Home Retention Options
5
Mortgagee Letter 2020-22, Continued
A Trial Payment Plan (TPP) is not required for a Borrower to be eligible
for COVID-19 Loss Mitigation Options.
(A) COVID-19 Standalone Partial Claim
For any Owner-Occupant Borrower who receives a COVID-19
Forbearance, the Mortgagee must evaluate the Borrower for the
COVID-19 Standalone Partial Claim no later than the end of the
COVID-19 Forbearance period(s).
(1) Eligibility for the COVID-19 Standalone Partial Claim
The Mortgagee must ensure that:
• the Mortgage was current or less than 30 Days past due as of
March 1, 2020;
• the Borrower indicates they have the ability to resume
making on-time Mortgage Payments; and
• the Property is owner-occupied.
(2) Terms of the COVID-19 Standalone Partial Claim
The Mortgagee must ensure that:
• the Borrower’s accumulated Late Charges, fees, and
penalties are waived;
• the COVID-19 Standalone Partial Claim amount includes
only arrearages, which consists of Principal, Interest, Taxes,
and Insurance (PITI);
• the COVID-19 Standalone Partial Claim does not exceed the
30 percent maximum statutory value of all Partial Claims for
an FHA-insured Mortgage, as listed in Statutory Maximum
for Partial Claims (III.A.2.k.v(D)(2)(a)); and
• the Borrower receives only one permanent COVID-19
Home Retention Option.
(3) Required Documentation for COVID-19 Standalone Partial
Claim
The Mortgagee must submit all required documentation for
COVID-19 Standalone Partial Claims as listed under Delivery of
Partial Claim Documents (III.A.2.k.v(J)(6)).
The Mortgagee is automatically granted a 90-day extension to the
six-month deadline for the recorded Mortgage.
If a Mortgagee experiences additional delays out of their control,
including past the automatic 90-day extension for the recorded
Mortgage, that impact delivery of the Partial Claim documents,
Mortgagees may file requests for an additional extension in
6
Mortgagee Letter 2020-22, Continued
accordance with Requests for Extensions of Time for Delivery of
Partial Claim Documents (III.A.2.k.v(J)(7)).
(B) COVID-19 Owner-Occupant Loan Modification
For Borrowers who do not qualify for the COVID-19 Standalone Partial
Claim, the Mortgagee must review the Borrower for a COVID-19
Owner-Occupant Loan Modification, which modifies the rate and term
of the Mortgage, at the end of the COVID-19 Forbearance period.
The Mortgagee must ensure that the Borrower and the FHA-insured
Mortgage meet the following requirements for a COVID-19 Owner-
Occupant Loan Modification.
(1) Eligibility for the COVID-19 Owner-Occupant Loan
Modification
The Mortgagee must ensure that:
• the Mortgage was current or less than 30 Days past due as of
March 1, 2020;
• the Borrower indicates they have the ability to make the
modified Mortgage Payment; and
• the Property is owner-occupied.
(2) Terms of the COVID-19 Owner-Occupant Loan
Modification
The Mortgagee must modify the Mortgage as follows:
• The Mortgagee must waive all accumulated Late Charges,
fees, and penalties.
• The Mortgagee must only capitalize into a COVID-19
Owner-Occupant Loan Modification:
o arrearages for unpaid accrued interest, and
o Mortgagee advances for escrowed items.
• The Mortgagee must ensure that the COVID-19 Owner-
Occupant Loan Modification fully reinstates the Mortgage.
• The Mortgagee must ensure that the modified Mortgage,
including ARM, GPM or GEM, is modified to a fixed rate
Mortgage.
• The Mortgagee must ensure that the interest rate is no
greater than the Market Rate as defined by HUD1.
• The Mortgagee must ensure that the term for the modified
Mortgage is 360 months.
1
Market Rate is a rate that is no more than 25 bps greater than the most recent Freddie Mac Weekly Primary
Mortgage Market Survey (PMMS) Rate for 30-year fixed-rate conforming Mortgages (U.S. average), rounded to the
nearest one-eighth of 1 percent (0.125 percent), as of the date the Loan Modification is approved.
7
Mortgagee Letter 2020-22, Continued
o The term may be less than 360 months if requested by
the Borrower.
• The Borrower’s P&I may not increase under the COVID-19
Owner-Occupant Loan Modification unless:
o The Borrower has exhausted the 30 percent maximum
statutory value of all Partial Claims for an FHA-insured
Mortgage.
• HUD does not provide a model for COVID-19 Loan
Modification documents, but the Mortgagee must ensure the
FHA-insured Mortgage remains in first lien position and is
legally enforceable.
• The Borrower(s) receives only one permanent COVID-19
Home Retention Option.
(C) COVID-19 Combination Partial Claim and Loan Modification
For Owner-Occupant Borrowers where the modified monthly Mortgage
payment will increase utilizing the COVID-19 Owner-Occupant Loan
Modification, and who are unable to bring the Mortgage current
through the COVID-19 Standalone Partial Claim because the total
arrearage exceeds the available portion of the statutory maximum for
Partial Claims and the available portion of the statutory maximum for
the Mortgage has not been fully exhausted, or because the Borrower
cannot resume their existing monthly Mortgage Payments with a
COVID-19 Standalone Partial Claim, the Mortgagee must review the
Borrower for a COVID-19 Combination Partial Claim and Loan
Modification.
(1) Eligibility for the COVID-19 Combination Partial Claim
and Loan Modification
The Mortgagee must ensure that:
• the Mortgage was current or less than 30 Days past due as of
March 1, 2020;
• the Borrower has not exceeded the 30 percent statutory
maximum value of all Partial Claims for an FHA-insured
Mortgage, as listed in Statutory Maximum for Partial Claims
(III.A.2.k.v(D)(2)(a));
• the Borrower indicates they have the ability to make the
modified Mortgage Payment; and
• the Property is owner-occupied.
(2) Terms of the COVID-19 Combination Partial Claim and
Loan Modification
For the COVID-19 Combination Partial Claim and Loan
Modification, the Mortgagee must ensure the following:
8
Mortgagee Letter 2020-22, Continued
• The Mortgagee waives all accumulated Late Charges, fees,
and penalties.
• The Mortgagee must only capitalize into the modified
Mortgage of the COVID-19 Combination Partial Claim and
Loan Modification:
o arrearages for unpaid accrued interest, and
o Mortgagee advances for escrowed items.
• The Mortgagee must determine the maximum Partial Claim
amount available that does not exceed the 30 percent
maximum statutory value of all Partial Claims for an FHA-
insured Mortgage, as listed in Statutory Maximum for
Partial Claims (III.A.2.k.v(D)(2)(a)). The Mortgagee must
apply any remaining available Partial Claim amount toward
the arrearage first, and then capitalize the remaining
arrearage into the modified Mortgage.
• The Mortgagee must ensure that the COVID-19
Combination Partial Claim and Loan Modification fully
reinstates the Mortgage.
• The Mortgagee must ensure that the modified Mortgage,
including ARM, GPM or GEM, is modified to a fixed rate
Mortgage.
• The Mortgagee must ensure that the interest rate is no
greater than the Market Rate as defined by HUD2.
• The Mortgagee must ensure that the term for the modified
Mortgage is 360 months.
o The term may be less than 360 months if requested by
the Borrower.
• The Borrower’s monthly Mortgage Payment may increase.
• HUD does not provide a model for COVID-19 Loan
Modification documents, but the Mortgagee must ensure the
FHA-insured modified Mortgage remains in first lien
position and is legally enforceable.
• The Mortgagee must ensure that the Borrower(s) receives
only one permanent COVID-19 Home Retention Option.
(3) Required Documentation for COVID-19 Combination
Partial Claim and Loan Modification
The Mortgagee must submit all required documentation for
COVID-19 Partial Claims as listed under Delivery of Partial Claim
Documents (III.A.2.k.v(J)(6)).
2
Market Rate is a rate that is no more than 25 bps greater than the most recent Freddie Mac Weekly Primary
Mortgage Market Survey (PMMS) Rate for 30-year fixed-rate conforming Mortgages (U.S. average), rounded to the
nearest one-eighth of 1 percent (0.125 percent), as of the date the Loan Modification is approved.
9
Mortgagee Letter 2020-22, Continued
The Mortgagee is automatically granted a 90-day extension to the
six-month deadline for the recorded Mortgage.
If a Mortgagee experiences additional delays out of their control,
including past the automatic 90-day extension for the recorded
Mortgage, that impact delivery of the Partial Claim documents,
Mortgagees may file requests for an additional extension in
accordance with Requests for Extensions of Time for Delivery of
Partial Claim Documents (III.A.2.k.v(J)(7)).
(D) COVID-19 FHA-HAMP Combination Loan Modification and
Partial Claim with Reduced Documentation
Borrowers may provide income documentation to be reviewed for an
affordable monthly payment under a COVID-19 FHA-HAMP
Combination Loan Modification and Partial Claim with Reduced
Documentation, which may include a principal deferment.
The Mortgagee must ensure that the Borrower and the FHA-insured
Mortgage meet the following requirements for a COVID-19 FHA-
HAMP Combination Loan Modification and Partial Claim with
Reduced Documentation.
(1) Eligibility
The Mortgagee must ensure that:
• the Mortgage was current or less than 30 Days past due as of
March 1, 2020;
• the Property is owner-occupied;
• the Borrower has not exhausted the 30 percent statutory
maximum value of all Partial Claims for an FHA-insured
Mortgage; and
• the Borrower is not eligible for the COVID-19 Home
Retention Options due to the following:
o the Borrower is not eligible for the COVID-19
Standalone Partial Claim because the Borrower indicates
they are unable to resume the existing monthly Mortgage
Payments after the COVID-19 Forbearance; or
o the Borrower is not eligible for the COVID-19
Combination Partial Claim and Loan Modification
because the Borrower indicates they are unable to make
the modified monthly Mortgage Payment under the
COVID-19 Combination Partial Claim and Loan
Modification.
(2) Terms
10
Mortgagee Letter 2020-22, Continued
The Mortgagee must review the Borrower for an affordable
monthly Mortgage Payment using the FHA-HAMP calculations in
Step 5 of the Loss Mitigation Home Retention Waterfall Options
(III.A.2.j.iii).
If required, a principal deferment may be utilized. No portion of the
Partial Claim may be used to bring the modified PITI monthly
payment below the targeted payment.
The following reduced income documentation requirements are
adequate to review the Borrower for a COVID-19 FHA-HAMP
Combination Loan Modification and Partial Claim:
• the Borrower’s most recent pay stub for wage income
reflecting year-to-date earnings; or
• the Borrower’s most recent bank statement reflecting
deposits of income amounts from applicable sources; or
• other documentation (e.g., monthly statement of Social
Security benefits, monthly pension statement) reflecting the
amount of income.
A TPP is not required.
(E) COVID-19 Non-Occupant Loan Modification
At the expiration of the COVID-19 Forbearance period, the Mortgagee
must review Non-Occupant Borrowers for a COVID-19 Non-Occupant
Loan Modification, which modifies the rate and term of the Mortgage.
The Mortgagee must ensure that the Borrower and the FHA-insured
Mortgage meet the following requirements for a COVID-19 Non-
Occupant Loan Modification.
(1) Eligibility for the COVID-19 Non-Occupant Loan
Modification
The Mortgagee must ensure that:
• the Mortgage was current or less than 30 Days past due as of
March 1, 2020;
• the Borrower indicates they have the ability to make the
modified Mortgage Payments; and
• the Property is not owner-occupied. The Property can be
used as a Rental Property, Secondary Residence, or
Vacation Home for the Borrower.
(2) Terms of the COVID-19 Non-Occupant Loan Modification
The Mortgagee must modify the Mortgage as follows:
11
Mortgagee Letter 2020-22, Continued
• The Mortgagee must waive all Late Charges, fees, and
penalties accumulated during the COVID-19 Forbearance.
• The Mortgagee must only capitalize into a COVID-19 Non-
Occupant Loan Modification:
o arrearages for unpaid accrued interest, and
o Mortgagee advances for escrowed items.
• The Mortgagee must ensure that the COVID-19 Non-
Occupant Loan Modification fully reinstates the Mortgage.
• The Mortgagee must ensure that the modified Mortgage,
including ARM, GPM or GEM, is modified to a fixed rate
Mortgage.
• The Mortgagee ensures that the interest rate is no greater
than the Market Rate as defined by HUD.3
• The Mortgagee must ensure that the term for the modified
Mortgage is 360 months.
o The term may be less than 360 months if requested by
the Borrower.
• The Borrower’s total monthly Mortgage Payment may
increase.
• HUD does not provide a model for COVID-19 Loan
Modification documents, but the Mortgagee must ensure the
FHA-insured Mortgage remains in first lien position and is
legally enforceable.
• The Borrower(s) receives only one permanent COVID-19
Home Retention Option.
(3) Required Documentation for the COVID-19 Non-Occupant
Loan Modification
The Mortgagee must document the following in the Claim Review
File for any Non-Occupant Borrowers for the COVID-19 Non-
Occupant Loan Modification:
• a copy of the rental agreement for each rental unit, if
applicable; and
• a written statement from the Borrower stating:
o that they are the landlord of the Property and their renter
is impacted, directly or indirectly, by the COVID-19
pandemic and is either unable to make rent payments or
has vacated the Property; or
3
Market Rate is a rate that is no more than 25 bps greater than the most recent Freddie Mac Weekly Primary
Mortgage Market Survey (PMMS) Rate for 30-year fixed-rate conforming Mortgages (U.S. average), rounded to the
nearest one-eighth of 1 percent (0.125 percent), as of the date of the Loan Modification is approved.
12
Mortgagee Letter 2020-22, Continued
o that the Property is used as a Secondary Residence or a
Vacation Home for the Borrower.
v. COVID-19 Home Disposition Options
Mortgagees must review Borrowers that are impacted, directly or
indirectly, by COVID-19, that do not qualify for a COVID-19 Home
Retention Option or indicate that they cannot resume making the monthly
or the modified monthly Mortgage Payment, for the COVID-19 Home
Disposition Options. The COVID-19 Home Disposition Options are
available to Owner-Occupant and Non-Occupant Borrowers.
(A) COVID-19 Pre-Foreclosure Sale
A COVID-19 Pre-Foreclosure Sale (COVID-19 PFS) option is
available for Borrowers who are experiencing a hardship affecting their
ability to sustain the Mortgage due to COVID-19.
To evaluate Borrowers for the COVID-19 PFS option, Mortgagees
must follow the Streamlined PFS requirements (III.A.2.l.ii), except as
noted below.
(1) COVID-19 PFS Eligibility
The Mortgagee must ensure that the Borrower and the FHA-insured
Mortgage meet the following requirements for a COVID-19 PFS.
For a Borrower to qualify for a COVID-19 PFS, the Mortgagee
must ensure that:
• the Mortgage was current or less than 30 Days past due as of
March 1, 2020;
• the Borrower indicates a financial hardship affecting their
ability to sustain the Mortgage due, directly or indirectly, to
the COVID-19 pandemic;
• the Borrower does not qualify for any COVID-19 Home
Retention Options; and
• the Borrower and Mortgage must meet all PFS eligibility
requirements except the Mortgagee is not required to review
the Borrower for Borrower Eligibility (III.A.2.l.ii(B)(3).
(2) COVID-19 PFS Program Requirements
The Mortgagee must ensure the COVID-19 PFS meets all other
Streamlined PFS program requirements outlined in Pre-Foreclosure
Sales (III.A.2.l.ii), with the following exceptions:
• Under PFS Outreach Requirements (III.A.2.l.ii(C)),
Mortgagees may utilize any available means of
13
Mortgagee Letter 2020-22, Continued
communication to provide the Borrower with form HUD-
90035.
• Mortgagee PFS Incentive (III.A.2.l.ii(P)) does not apply to
COVID-19 PFS.
(B) COVID-19 Deed-in-Lieu of Foreclosure
A COVID-19 Deed-in-Lieu (DIL) of Foreclosure (COVID-19 DIL) is a
COVID-19 Home Disposition Option in which a Borrower voluntarily
offers the deed as collateral Property to HUD in exchange for a release
from all obligations under the Mortgage.
A COVID-19 DIL option is available for Borrowers who are
experiencing a hardship affecting their ability to sustain the Mortgage
due to the COVID-19 pandemic, and who were unable to complete a
COVID-19 PFS transaction at the expiration of the PFS marketing
period.
The Mortgagee must ensure that the Borrower and the FHA-insured
Mortgage meet the following eligibility and program requirements. To
evaluate Borrowers for the COVID-19 DIL, Mortgagees must follow
the Streamlined DIL requirements outlined in Deed in Lieu of
Foreclosure (III.A.2.l.iii), except as noted below.
(1) COVID-19 DIL Eligibility
The Mortgagee must ensure that the Borrower and the FHA-insured
Mortgage:
• meet the requirements for COVID-19 PFS transactions;
• was unable to complete a COVID-19 PFS transaction by the
expiration of the PFS marketing period; and
• must meet all Streamlined DIL eligibility requirements
except:
o the Borrower Eligibility Streamlined DIL Standards
(III.A.2.l.iii(B)(2)(a)(ii)), which are not required for the
COVID-19 DIL; and
o for COVID-19 DIL, Mortgagees are not required to
submit a request for National Servicing Center (NSC)
approval via Extensions and Variances Automated
Requests System (EVARS) for approval to offer a
COVID-19 DIL Option to a Borrower who owns more
than one FHA-insured Property as outlined in DIL
Exceptions for Borrowers with More than One FHA-
Insured Mortgage (III.A.2.l.iii.(B)(2)(d)).
(2) COVID-19 DIL Program Requirements
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Mortgagee Letter 2020-22, Continued
The Mortgagee must ensure the COVID-19 DIL meets all other
Streamlined DIL program requirements outlined in Deed-in-Lieu of
Foreclosure (III.A.2.l.iii), with the following exceptions:
• Mortgagee DIL Compensation (III.A.2.l.iii(H)) does not
apply to COVID-19 DIL.
• Extensions for Foreclosure Time Frames (III.A.2.l.iii(I)): if
the DIL follows a failed COVID-19 PFS, it must be
completed or foreclosure must be initiated within 90 Days of
the end of the COVID-19 Forbearance period.
vi. Single Family Default Monitoring System (SFDMS) Reporting
Requirements for Borrowers Affected by the COVID-19 National
Emergency in Loss Mitigation
Servicers must report the Delinquency/Default Reason (DDR) codes that
apply to the Borrower at the end of each reporting cycle and must update
the code as the Borrower’s circumstances change.
(A) Default Reason Code Reporting
To assist in identifying delinquencies and loss mitigation utilization that
are a result of a National Emergency Declaration FHA has implemented
a DDR code that is available for use by Mortgagees. DDR Code 055 –
Related to National Emergency Declaration must be used to report that
the delinquency is a result of impacts of the COVID-19 pandemic.
(B) Default Status Code Reporting
Mortgagees must report the Default Status Codes detailed below for all
FHA-insured Mortgages utilizing the COVID-19 Loss Mitigation
Options.
If the Mortgage is newly defaulted (no open default episode in
SFDMS), Mortgagees must report Status Code 42 – Delinquent prior to
reporting any other Status Codes.
FHA has implemented a Delinquency/Default Status (DDS) Code that
is available for use by Mortgagees. The DDS Code 053 – Combination
Partial Claim/Modification Started (Non-FHA-HAMP) must be used to
report that the Mortgagee has approved the Borrower for this loss
mitigation option.
Mortgagees should report the correct Status Code in SFDMS as
follows:
• Status Code 06 – Formal Forbearance Plan for the COVID-19
Forbearance.
• Status Code 10 – Partial Claim Started for the COVID-19
Standalone Partial Claim.
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Mortgagee Letter 2020-22, Continued
• Status Code 28 – Modification Started with an occupancy Status
Code 1 (Occupied by Borrower) for the COVID-19 Owner-
Occupant Loan Modification.
• Status Code 53 - Combination Partial Claim/Modification
Started (Non-FHA-HAMP) for the COVID-19 Combination
Partial Claim and Loan Modification.
• Status Code 28 – Modification Started with the applicable
occupancy Status Code that indicates the type of non-borrower
occupancy for the COVID-19 Non-Occupant Loan
Modification.
• Status Code 41 – FHA-HAMP Modification/Partial Claim
Started for the COVID-19 FHA-HAMP Combination Loan
Modification and Partial Claim Reduced Documentation
Option.
• Status Code 15 – Pre-foreclosure Acceptance Plan Available for
the COVID-19 PFS.
• Status Code 44 – Deed-in-Lieu Started for the COVID-19 DIL.
• Status Code AH – Streamlined Financials Received and In
Review should be reported prior to Status Codes 41, 15, and 44
as appropriate.
No TPP is required for the COVID-19 loss mitigation options.
Therefore, Mortgagees are not required to report Status Code 08 – Trial
Payment Plan prior to reporting Status Codes 10, 28, or 53.
Status Code 39 – FHA-HAMP Trial Payment Plan is also not required
to be reported prior to Status Code 41 – FHA-HAMP
Modification/Partial Claim Started.
vii. Required Financial Evaluation for other Loss Mitigation Options
The Mortgagee must evaluate any Borrower who is not eligible for a
COVID-19 Home Retention or Disposition Option, because the Mortgage
was not current or less than 30 Days past due as of March 1, 2020, for
HUD’s standard Loss Mitigation Home Retention Options (III.A.2.k) and
Home Disposition Options (III.A.2.l).
viii. Terms of the Mortgage are Unaffected
Nothing in this section confers any right to a Borrower to any loss
mitigation or any other action by HUD or the Mortgagee. Further, nothing
in this section interferes with any right of the Mortgagee to enforce its
private contractual rights under the terms of the Mortgage. All private
contractual rights and obligations remain unaffected by anything in this
section. Where a Mortgagee chooses to enforce its contractual rights after
expiration of the COVID-19 Forbearance, the standard time frames to
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Mortgagee Letter 2020-22, Continued
initiate foreclosure and reasonable diligence in prosecuting foreclosure
following expiration of a foreclosure moratorium will apply.
ix. Reporting to Consumer Reporting Agencies of Borrowers Impacted
by COVID-19 National Emergency
Any Borrower who is granted a COVID-19 Forbearance and is otherwise
performing as agreed is not considered to be delinquent for purposes of
credit reporting.
FHA requires Servicers to comply with the credit reporting requirements of
the Fair Credit Reporting Act (FCRA); however, FHA encourages
Servicers to consider the impacts of the COVID-19 National Emergency on
Borrowers’ financial situations and any flexibilities a Servicer may have
under the FCRA when taking any negative credit reporting actions.
x. Exclusion of COVID-19 from FHA’s Presidentially-Declared Major
Disaster Areas (PDMDA)
For Borrowers impacted by the COVID-19 National Emergency and whose
mortgaged Property is located in a COVID-19 PDMDA, the policy in this
section applies in lieu of FHA’s PDMDA guidance listed in Presidentially-
Declared Major Disaster Areas (III.A.3.c), for the purposes of this National
Emergency only.
For Mortgagees that have begun using FHA’s PDMDA Loss Mitigation
Options (III.A.3.c), they must convert to the COVID-19 Loss Mitigation
Options listed in this section.
HUD Single FHA-HAMP (III.A.2.k.v.)
Family Housing
Policy (B) Eligibility
Handbook
4000.1 (2) Borrower Qualifications
FHA-HAMP The Mortgagee must ensure that the Borrower meets the following eligibility
Borrower criteria for the FHA-HAMP Option:
Eligibility
• The Borrower has recently experienced a verified loss of income or
increase in living expenses and all Borrowers on the Note have signed
and submitted hardship affidavits attesting to and describing the
hardship.
• One or more Borrowers receives Continuous Income.
• The Mortgagee’s calculations show that the resulting monthly
Mortgage Payment not exceeding 40 percent of the Borrower’s gross
monthly income can be offered, provided that either:
o the Borrower(s) front-end ratio is greater than 31 percent; or
o 85 percent of the Borrower’s surplus income is insufficient to cure
arrears within six months.
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Mortgagee Letter 2020-22, Continued
• The Borrower has successfully completed a TPP based on the FHA-
HAMP monthly Mortgage Payment amount.
• The Borrower has not executed an FHA-HAMP agreement in the past
24 months. Presidentially-Declared Major Disaster Area (PDMDA)
Disaster Loss Mitigation Options and COVID-19 Home Retention
Options do not count against this requirement.
The Mortgagee must ensure that the Borrower is an Owner-Occupant
Borrower who is occupying the Property as a Principal Residence. FHA-
HAMP may not be used as a means to reinstate a Mortgage prior to sale or
assumption.
Paperwork The information collection requirements contained in this document have
Reduction Act been approved by the Office of Management and Budget (OMB) under the
Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned OMB
Control Numbers 2502-0059, 2502-0524, 2502-0611, 2502-0589, 2502-0429,
2502-0584, and 2502-0189. In accordance with the Paperwork Reduction Act,
HUD may not conduct or sponsor, and a person is not required to respond to,
a collection of information unless the collection displays a currently valid
OMB Control Number.
Questions Any questions regarding this ML may be directed to the FHA Resource
Center at 1-800-CALL-FHA. Persons with hearing or speech impairments
may reach this number by calling the Federal Relay Service at 1-800-877-
8339. For additional information on this ML, please visit
www.hud.gov/answers.
Signature
Len Wolfson
Acting Assistant Secretary for Housing –
Federal Housing Commissioner
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