The Federal Housing Administration today announced it is seeking feedback on a proposal to allow mortgage servicers to use the FHA partial claim to both bring a borrower’s mortgage current and provide temporary reductions for monthly mortgage payments for up to five years. The new option, called the payment supplement partial claim, seeks to help struggling homeowners meet their mortgage obligations.
The rapid interest rate increases of the past year have limited the effectiveness of some of FHA’s existing loss mitigation options in assisting borrowers, the agency said in a statement. FHA’s widely used loan modification option, which has historically reduced borrowers’ monthly payments to levels they can afford, is no longer as effective as it once was because borrowers are forced to modify at market rates that may be higher than their current rates.
The payment supplement partial claim allows homeowners experiencing a hardship who are unable to obtain a significant payment reduction with other loss mitigation options to keep their existing interest rate and temporarily reduce their monthly payment using funds from the FHA partial claim, which is a subordinate zero interest lien, the agency said. Repayment on the lien will not be required until maturity of the mortgage, sale or transfer of the property, payoff of the mortgage, or termination of the FHA insurance. The deadline for submitting feedback on the proposal is June 30.