The Federal Housing Administration (FHA) is currently assisting families with FHA-insured mortgages struggling to repair or rebuild their homes in the wake of major disasters like Hurricane Sandy. This has recently been published in Mortgage Letter 2012-23. What this letter has done is reinforced the FHA’s long-standing policy of always offering help out their to people who really need it. These types of movements direct lenders to release insurance proceeds to borrowers rather than to apply those payouts to bring delinquent mortgages current.
Acting FHA Commissioner, Carol Galante, made a statement in Mortgagee Letter 2012-23 that these guidelines provide clarity to the lending community and ultimately help families with FHA-insured mortgages to recover from major disasters.
Mortgagee Letter 2012-23 outlines the current 90 day freeze of foreclosures on properties located in the Presidentially-declared disaster areas. They now ask servicers to consider a full range of benefits for the affected borrowers which includes mortgage modifications, partial claims, use of FHA HAMP or other refinance options; and a waiver of late charges. Lenders must release homeowners’ insurance proceeds to the borrower rather than retaining such proceeds to make up for missed payments; and summarizes HUD’s special Section 203(h) mortgage insurance product to assist disaster victims and references HUD’s Section 203(k) Rehabilitation Mortgage Insurance Product.