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                                              FHA Issues New Guidelines:
                                           Imminent FHA Borrower Default
                                                          and our
                                     Solution to Excessive Defaults and Claims

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Overview

Homeowners with FHA-insured mortgage loans who are experiencing financial hardship are now eligible for loss mitigation assistance before they fall behind on their mortgage payments. Previously, these homeowners were not eligible for such assistance until after they had missed payments.

On January 22, 2010, FHA issued guidance to FHA-approved loan servicers on how to assist these FHA borrowers.

The loss mitigation options of forbearance and FHA's Home Affordable Modification Program (FHA-HAMP) may be used to assist borrowers facing imminent default. FHA defines an "FHA borrower facing imminent default" to be an FHA borrower who is current or less than 30 days past due on the mortgage obligation and is experiencing a significant reduction in income or some other hardship that will prevent him or her from making the next required payment on the mortgage during the month that it is due.
Highlights

The borrower must be able to document the cause of the imminent default which may include, but is not limited to, one or more of the following types of hardship:

1. A reduction in or loss of income that was supporting the mortgage loan (i.e., unemployment, reduced job hours, reduced pay, or a decline in self-employed business earnings). A scheduled temporary shutdown of the employer (such as for a scheduled vacation), would not in and by itself be adequate to support an imminent default.

2. A change in household financial circumstances (i.e., death in family, serious or chronic illness, permanent or short-term disability).

Loan servicers must document the basis for its determination that a payment default is imminent and retain all documentation used to reach its conclusion. The servicer's documentation must also include information on the borrower's financial condition.
Solution to Excessive Defaults and Claims
REDUCE HIGH COMPARE RATIOS


Our Compare Ratio Task Force is designed to reduce high
 Compare Ratios caused by excessive defaults and claims.


Task Force Description
  • Staffed with subject matter experts and skilled auditors
  • Specially designed checklists and automated file screening systems
  • State-of-the-art quality control, compliance, forensics, and modern research facility
  • Scalable up to virtually any size default and claims experience
  • Upload/download large file formats for prompt reviews
  • Located in a secured and safe audit location
Our Remedy
  • Comprehensive review of existing defaults and claims for loss mitigation  and loan modification eligibility
  • HUD-FHA and regulatory compliance guidance for the mortgagee
  • Notification to mortgagee of borrower's loss mitigation eligibility
  • Notification of loss mitigation eligibility to the borrower
  • Referrals to expert, nationwide legal counsel to handle loss mitigation and loan modification strategies
  • Monitoring of loss mitigation applications in process
  • Follow-up with servicers to assure proper and timely resolution and notification to HUD-FHA
  • On-going review and loss mitigation of new defaults and claims

Call Today: 516-442-3456
Ext: 204 -Task Force

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Loss Mitigation for Imminent Default - Mortgagee Letter 2010-04 (1/22/2010)

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