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FHA Introduces Simplified COVID-19 Recovery “Waterfall”
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oreclosures are inevitable! Once the moratorium ends, there is a high likelihood that many homeowners will lose their homes, and not just that, with rents on the rise, many renters will also lose their homes. Seeing the worst on the horizon, the U.S. Department of Housing and Urban Development published a fully revised version of the “Waterfall” loss mitigation options for the borrowers who are almost to the end of their forbearance period. WHAT IS WATERFALL LOSS MITIGATION? Basically, these are loss mitigation options to help vulnerable renters and homeowners from being evicted and falling into foreclosure. The loss mitigation measures by FHA apply what is 114
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known as the “waterfall method” which assesses the homeowner’s eligibility if they do not qualify for FHA’s National Emergency Standalone Partial Claim. The Federal Housing Administration compared this version of loss mitigation to that of a filter which means that, when the homeowner fails to meet the qualification of the servicing interventions, they will be streamlined down to a series of waterfall options as the servicer attempts to get the borrower into the sustainable mortgage payment. “Due to the fact that servicers are facing an unprecedented number of loss mitigation actions on the backside of this, we want to make it as easy for them as possible to get borrowers in a feasible situation on the other side forbearance,” said a HUD official. In order to streamline this process, the Federal Housing Administration intends to scrap off their old model and instead of providing servicers with two options for processing the borrowers who are coming out of forbearance that is; •
The recovery standalone partial claim for the borrowers who are able to continue with their mortgage payments.
THE POWER IS NOW MAGAZINE | SEPTEMBER 2021
