The American Bankers Association, the Mortgage Bankers Association and the National Mortgage Servicing Association cautioned the Federal Housing Administration that a proposed payment supplemental partial claim option “would significantly increase the operational, compliance, liquidity and reputational risk for mortgage servicers, while introducing potential harm to borrowers.” FHA proposed the PSPC to both bring a borrower’s mortgage current and provide temporary reductions for monthly mortgage payments for up to five years.
While offering support for a loss mitigation solution that would help provide payment relief to seriously delinquent FHA borrowers in a high interest rate environment, the trade groups urged FHA to make two key changes. First, they encouraged FHA to simplify and clarify the PSPC by creating a three-year level payment term, prioritizing permanent relief over temporary relief, reinforcing FHA’s traditional use of a prescribed waterfall and addressing substantial documentation issues with the PSPC proposal.
They also requested that FHA increase the allowable incentive to $3,500 to protect servicers’ liquidity positions in the current market and the value of Ginnie Mae mortgage servicing rights actively being transferred among program participants; and allow servicers a 12-month period for implementation of the new PSPC option.
