What to Know About the FHA Payment Supplement Program
April 1, 2024
Borrowers with FHA loans should know about an important home retention option now offered to borrowers who get into financial trouble.
In late February 2024, the FHA announced a new “home retention” program for those with FHA single-family home loans who fall behind on their mortgages.
The FHA Payment Supplement Program
The FHA’s new program launched in 2024 is called the FHA Payment Supplement and allows participating lenders more freedom to (temporarily) change the terms of the loan to reduce monthly payments without changing the home loan interest rate.
How the Payment Supplement Program Works
FHA lenders working with a borrower in financial trouble now have the ability to lower the FHA mortgage payment by as much as 25%. This is a temporary reduction designed to help those who can’t keep up with payments and have an FHA loan with an interest rate lower than current rates.
The Department of Housing and Urban Development official site notes that this program should help FHA borrowers “who cannot sufficiently be assisted by existing FHA home retention solutions because the interest rate on their mortgage is lower than current interest rates.
This program is yet another step toward helping FHA borrowers stay in their homes post-pandemic and post housing crisis.
According to HUD, “It is the latest addition to a successful suite of FHA loss mitigation options that has kept more than 1.6 million struggling borrowers in their homes...”
Using an FHA Partial Claim
The program lowers mortgage payment by allowing the lender to use money from an FHA “partial claim” which the FHA and HUD say, “enables the borrower to access up to 30 percent of the outstanding balance of their FHA-insured mortgage.”
The amount of this partial claim is added to the loan as a “junior lien” meant to be repaid “when the homeowner sells or refinances the home” or the mortgage is ended by other means.
“FHA developed this innovative tool because after interest rates rose the FHA Recovery Modification could no longer reliably provide payment reduction to borrowers facing a hardship,” according to Federal Housing Commissioner Julia Gordon, who was quoted in a HUD press release.
She adds, “Payment Supplement will bring borrowers current and temporarily reduce their monthly payments for up to three years, which we hope will enable them to weather their hardship and once again begin making their full mortgage payments.”
This FHA loss mitigation option is offered to those who have not already used up FHA partial claim options in other ways.
According to HUD, participating FHA lenders “may begin implementing Payment Supplement on May 1, 2024” but the program must be available to all eligible FHA borrowers by the first of the new year in 2025.
In late February 2024, the FHA announced a new “home retention” program for those with FHA single-family home loans who fall behind on their mortgages.
The FHA Payment Supplement Program
The FHA’s new program launched in 2024 is called the FHA Payment Supplement and allows participating lenders more freedom to (temporarily) change the terms of the loan to reduce monthly payments without changing the home loan interest rate.
How the Payment Supplement Program Works
FHA lenders working with a borrower in financial trouble now have the ability to lower the FHA mortgage payment by as much as 25%. This is a temporary reduction designed to help those who can’t keep up with payments and have an FHA loan with an interest rate lower than current rates.
The Department of Housing and Urban Development official site notes that this program should help FHA borrowers “who cannot sufficiently be assisted by existing FHA home retention solutions because the interest rate on their mortgage is lower than current interest rates.
This program is yet another step toward helping FHA borrowers stay in their homes post-pandemic and post housing crisis.
According to HUD, “It is the latest addition to a successful suite of FHA loss mitigation options that has kept more than 1.6 million struggling borrowers in their homes...”
Using an FHA Partial Claim
The program lowers mortgage payment by allowing the lender to use money from an FHA “partial claim” which the FHA and HUD say, “enables the borrower to access up to 30 percent of the outstanding balance of their FHA-insured mortgage.”
The amount of this partial claim is added to the loan as a “junior lien” meant to be repaid “when the homeowner sells or refinances the home” or the mortgage is ended by other means.
“FHA developed this innovative tool because after interest rates rose the FHA Recovery Modification could no longer reliably provide payment reduction to borrowers facing a hardship,” according to Federal Housing Commissioner Julia Gordon, who was quoted in a HUD press release.
She adds, “Payment Supplement will bring borrowers current and temporarily reduce their monthly payments for up to three years, which we hope will enable them to weather their hardship and once again begin making their full mortgage payments.”
This FHA loss mitigation option is offered to those who have not already used up FHA partial claim options in other ways.
According to HUD, participating FHA lenders “may begin implementing Payment Supplement on May 1, 2024” but the program must be available to all eligible FHA borrowers by the first of the new year in 2025.
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