The Federal Housing Administration (FHA) loss mitigation options are outlined for homeowners with an FHA loan who are delinquent on their mortgage or struggling to make mortgage payments. The FHA also outlines these loss mitigation options for lenders issuing FHA-backed mortgages.
Lenders are expected to follow the loss mitigation guidelines and offer these options to people with FHA-insured loans. FHA loans are intended to make homeownership more feasible, including available loss mitigation options.
If your lender isn’t following the FHA loss mitigation guidelines it may be a violation of your mortgage. You may have a case to defend your home from foreclosure.
Joshua Denbeaux is a New Jersey loan modification and foreclosure attorney. If you’re struggling to make your mortgage payments, an attorney may be able to help you negotiate with your lender to find a loss mitigation option that works for you. Contact us today to learn more about how we may be able to help you through the loss mitigation process.
What Is an FHA Loan?
An FHA loan is a mortgage backed by the Federal Housing Administration that traditional lenders offer. FHA loans typically offer a low down payment, low closing costs, and less stringent credit requirements than conventional mortgages.
Lenders view FHA loans as less risky because the FHA insures them. This backing means that the lender would face less risk if the mortgage were to default.
What Is Loss Mitigation?
Loss mitigation is any option available to help homeowners who are behind or struggling to make mortgage payments. During loss mitigation, you work with your loan servicer to explore options to avoid foreclosure.
The FHA loss mitigation guidelines list specific loss mitigation options for homeowners with FHA-insured loans. The guidelines also include options to help homeowners adjust their mortgages to make payments more affordable and options to avoid foreclosure if keeping the home isn’t an option, such as a pre-foreclosure sale or a deed-in-lieu of foreclosure.
Special Forbearance
A special forbearance is one loss mitigation option specifically available for homeowners with FHA loans. In a special forbearance, a lender can provide a temporary reduction or suspension of your mortgage payments to give you time to overcome or navigate through the life event that has temporarily reduced your income.
When granted a special forbearance, you may be offered a payment plan to pay back the missed mortgage payments until you’re up to date on your mortgage. Without a payment plan, you are typically expected to pay back the total forbearance amount at the end of the forbearance period.
Extended forbearance periods may be provided to borrowers who are unemployed and actively seeking employment.
Mortgage Modification
A loan modification is a permanent change to loan terms. The interest rate or length of your loan may be changed to make your mortgage payments more affordable with lower monthly payments.
With a loan modification, overdue payments may be added to your loan balance. This means that your overdue payments are turned over, so you still owe them as part of your total loan, but they’re no longer overdue.
Partial Claim
A partial claim is a loss mitigation option only offered with FHA loans. With a partial claim, a borrower receives a second loan in the amount necessary to bring their delinquent loan current.
The second loan in a partial claim is interest-free and doesn’t need to be repaid until you pay off your first mortgage or sell your home.
FHA Home Affordable Modification Program (FHA-HAMP)
An FHA-HAMP combines a partial claim with a loan modification. The partial claim includes the second loan amount needed to bring your mortgage current but can also include a larger amount to reduce your existing loan balance by up to 30%.
After getting the second loan, your reduced mortgage amount will be modified. The mortgage modification in an FHA-HAMP is the same as a traditional modification. The mortgage will be altered to lower your monthly payment amount.
Contact a Foreclosure Attorney
Struggling to pay your mortgage and worrying about keeping your home can be stressful. The FHA offers loss mitigation options to help homeowners with FHA-backed mortgages.
Working through your loss mitigation options with your lender can be difficult, especially if they’re not following FHA guidelines. A foreclosure attorney can help you work with your lender to negotiate, explore your loss mitigation options, and fight your foreclosure if necessary.
Contact Denbeaux Law today to learn more about how we may be able to help you through the FHA loan loss mitigation process.
