Forbearance
Frequently Asked Questions
General Forbearance:
Your lender may allow you to reduce or suspend payments
for a short period of time after which another option must
be agreed upon to bring your loan current. A forbearance option
is often combined with a Reinstatement when you know you will
have enough money to bring the account current at a specific
time in the future. The money might come from a hiring bonus,
investment, insurance settlement, or a tax refund.
Special Forbearance (for FHA and VA
loans)
A Special Forbearance (SFB) is a written repayment
agreement between a mortgagee and mortgagor, which contains
a plan to reinstate an asset that is minimum three mortgage
payments due and unpaid.
Q: In reviewing a mortgagor for SFB, it
was discovered that there were two homes on the lot. The mortgagor
occupies one home and rents the other. Would the mortgagor
qualify for consideration of a SFB?
A:
In this case, the mortgagee would need to verify that the
deed of trust reflects the current mortgage is on both homes
with one FHA Case Number. If so, the mortgagee should treat
this asset the same as a duplex where the mortgagor lives
in one side and rents out the other side and continue their
review for consideration of a SFB.
Q: What is the definition of SFB Agreement
failure?
A:
- The mortgagor abandons the property;
- The mortgagor advises the mortgagee that he/she will not
follow through and fulfill the terms of the SFB Agreement;
or,
- The mortgagor allows an installment to become due and unpaid
for 60 consecutive days from the payment due date. See CFR
203.355(h)
Q: If the mortgagor has been performing
under the SFB and then stops making payments, when does the
60 consecutive day failure begin?
A:
The 60 consecutive days begin from the oldest unpaid SFB payment.
Q: If a mortgagor has executed their SFB
Agreement, but then the SFB Agreement fails due to nonpayment,
when must the mortgagee initiate foreclosure?
A:
The mortgagee has 90 days from the last day of the 60th consecutive
days of failure to initiate foreclosure.
Q: When a mortgagor is under a SFB Agreement
and they are unable to make one of their scheduled payments,
can a mortgagee give a verbal grace period to submit the payment?
A:
Yes, the mortgagee may provide a verbal grace period for submission
of that one payment, but should also advise the mortgagor
of the written schedule of submission of payments within the
SFB Agreement and that if the mortgagor does not make the
payment on the date that is verbally agreed to, the 60 consecutive
days of failure will begin with the oldest unpaid payment.
The mortgagee then should document their system.
Q: Mortgagor qualified and has been performing
under a SFB Agreement, but then the mortgagor experienced
a demotion at their place of employment and can no longer
continue making the established SFB Agreement payments. Upon
renegotiation, it is determined mortgagor qualifies for a
SFB Type II, with cure of the delinquency resulting by utilizing
a Partial Claim. May the mortgagee file incentive claim for
the Partial Claim?
A:
Yes. Mortgagee Letter 2002-17, Page 6, "Review and Re-negotiation,"
second paragraph states, "Plans may be re-negotiated
if the mortgagor's financial circumstances change. However,
re-negotiated plans may not exceed HUD's requirement that
the loan be no more than 12 months delinquent." Within
the Mortgagee Comment area, the mortgagee should fully document
why a subsequent claim is being submitted for the same default.
Q: When does HUD expect a mortgagee to
report an SFB Agreement via the SFDMS?
A:
A mortgagee is to report an SFB Agreement via the SFDMS when
the mortgagee has determined that the mortgagor has qualified
for the SFB Agreement.
Q: Can the SFB Agreement be utilized while
the mortgagor is waiting for the first monthly disability
payment?
A:
Yes, if the mortgagor has provided documented evidence of
a "start date" for receipt of the monthly disability
payments, the mortgagee may establish a SFB Agreement.
Information provided by hud.gov |
