FHA and HUD Extend COVID-19 Forbearance Deadlines
The FHA and HUD issued a Mortgagee Letter on HUD.gov stating that FHA is extending the deadline for COVID-19-related FHA loan forbearance and FHA Home Equity Conversion Mortgages. There is a new deadline of May 31, 2023, to get an application approved.
On April 1, 2020, HUD published Mortgagee Letter 2020-06, the Forbearance for Borrowers Affected by the COVID-19 National Emergency (COVID-19 Forbearance) and an Extension Period for HECMs Affected by the COVID-19 National Emergency.
Since then, the agency has extended COVID-19 forbearance deadlines multiple times. As mentioned in the Mortgagee Letter, HUD tied the final extension to the end of the COVID-19 Presidentially Declared National Emergency.
“As the National Emergency may end earlier than originally expected, HUD has determined that a short period beyond the expiration of the COVID-19 Presidentially Declared National Emergency would be beneficial to both FHA Borrowers and Mortgagees.”
The new deadline, May 31, 2023, is “intended to provide affected Borrowers ample time to request a COVID-19 Forbearance or HECM Extension, and for Mortgagees to offer and process these requests.”
The FHA has extended the deadline for applications until May 31, 2023 “to align COVID-19 Forbearance and HECM Extension requests with the monthly billing cycle.”
How does the forbearance program work? HUD.gov says lenders are required to offer COVID-19 FHA loan forbearance, “to any Borrower that experiences an adverse impact on their ability to make on-time Mortgage Payments due to the COVID-19 pandemic, regardless of Default status.”
You read that correctly; any FHA borrower may qualify for a COVID-19 FHA loan forbearance regardless of whether the loan is delinquent or not.
If the borrower enters into such an agreement with the lender, the bank must agree to waive all late charges, penalties, and related fees as long as the borrower is complying with the forbearance.
It is important to note that the May 31, 2023 deadline is for applications and NOT the deadline for the forbearance program to stop. That said, HUD.gov advises that no COVID-19-related loan forbearance period is allowed to extend beyond November 30, 2023.
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