The Federal Housing Administration today published the final mortgagee letter for its new loss mitigation home retention option for borrowers with FHA-insured single-family forward mortgages who are behind on their mortgage payments. The offering, called the Payment Supplement, will allow mortgage servicers to temporarily reduce a borrower’s mortgage payment by using funds from a partial claim that enables the borrower to access up to 30% of the outstanding balance of their FHA-insured mortgage, according to the agency.
The partial claim amount is placed in a junior lien and paid back when the homeowner sells or refinances the home or the mortgage otherwise terminates, FHA said. Funds from the partial claim will be used to pay any arrearages and bring the borrower’s mortgage payment current. Any remaining funds are deposited in an FHA custodial account managed by the mortgage servicer and used to temporarily supplement the principal and interest portion of a borrower’s mortgage payment each month, with a target of up to a 25% reduction in monthly principal and interest payments.
Mortgage servicers may begin implementing Payment Supplement on May 1, but must implement the solution for all eligible borrowers by Jan. 1, 2025. FHA also announced that it is extending its full suite of temporary loss mitigation options through April 30, 2025.
