Loan Modification

FHA Loss Mitigation: Get Help if You Need It

By Gina Pogol

In Trouble? FHA Loss Mitigation May Be Able to Help

HUD requires lenders to take whatever measures are practicable to prevent mortgage foreclosures on FHA mortgages. If you are behind on your FHA mortgage payments, you may be able to use one or more forms of mortgage assistance.

1. Assumption
2. Partial Claim
3. Special Forbearance
4. Extension of Time
5. Deed in Lieu of Foreclosure
6. FHA HAMP

Your eligibility depends on your income (enough to make a modified payment?), desires (do you want to keep your home?), equity position (could someone assume your loan?), and hardship (Is the problem due to circumstances beyond your control?).

Here is a run-down of each program.

Assumption

Someone could take over your mortgage payment and take possession of your home. Even if your mortgage has been modified, someone else may be allowed to assume it. The new borrower must qualify to assume the loan. This is a workable solution if you aren’t underwater (or no one would want your loan) and you can’t or don’t want to keep the property.

Partial Claim

If your mortgage is at least four months overdue, you may qualify for a partial claim. This means that some of your mortgage insurance policy will be advanced to cover your arrearages and bring your loan current. To qualify, you must have resolved the cause of default (for example, if you lost your job, you must have found a new one), and you must continue to use the home as a primary residence.

Special Forbearance

Its purpose is to reinstate mortgages that are in default and in danger of foreclosure. If you are at least 3 months in arrears on your home loan, you may qualify. Forbearance involves allowing you to skip payments or make partial payments; the skipped payments are then added to your mortgage balance. The maximum missed payments allowed is twelve.

Extension of Time

This is a 90-day extension granted to those in foreclosure proceedings. Borrowers who want to keep their homes get additional time to pursue mortgage modifications or cure the default.

Deed in Lieu of Foreclosure

This is for those who don’t want to keep their property, and who cannot manage the financial commitment of their mortgage. It is not available to those who have the means to make their payments. It allows allows a homeowner in default who does not qualify for any other HUD Loss Mitigation option to sign the house back over to the mortgage company. To qualify, you must occupy the home, document a reduction in income or an increase in living expense, and agree to leave the property in good condition. You may be paid up to $2,000 to voluntarily turn over the property.

FHA HAMP

FHA’s version of the Home Affordable Modification Plan (HAMP) is unlike the standard modification plan in that it combines modification with a partial claim advance and possibly a principal reduction to 30%. Here are the particulars:

* First 3 months, you complete a trial loan modification.
* You get a partial advance from mortgage insurance to bring your loan current.
* You may receive a reduction of up to 30% of the unpaid principal balance.
* You cannot be more than 12 months behind.
* Your interest rate is reduced.
* Your modified loan must be a 30 year fixed rate mortgage.

If you have an FHA mortgage and need help, first contact your lender or loan servicer and ask about FHA loss mitigation. Another option is to call a HUD mortgage counselor. One way or another, you should be able to secure the help you need.

Full post as published by FHA Mortgage Guide on March 16, 2010 (boomark / email).