Presidentially-Declared Disasters FHA Servicing Requirements

Please Note: Mortgagee Letter 05-13 advises that the Federal Emergency Management Agency (FEMA) no longer provides the Mortgage Assistance Payments referred to in Mortgagee Letters 2004-37, 2004-36, and 2004-32. Mortgagees should no longer refer mortgagors to this program.

Requirements for servicing mortgages in Presidentially-Declared Disaster Areas are provided in Chapter 14 of HUD Handbook 4330.1, Rev-5, Administration of Insured Home Mortgages. For the most recent guidance, also see Mortgagee Letter (ML) 05-33 (ML 05-41 for special requirements and MLs 05-45 and 06-05 for Questions & Answers on specific Foreclosure Moratorium extensions). A 90-day moratorium on foreclosure is automatically imposed on properties actually affected by the disaster. After Mortgagee Letter 98-20, HUD stopped issuing separate Mortgagee Letters for each disaster declaration. Instead, when the President declares a disaster, the mortgagee must check with FEMA to determine affected counties and corresponding declaration dates. Check the webpage at http://www.fema.gov/news/disasters.fema or call the local FEMA office.

Sometimes the mortgagor's property is not affected by the disaster, but the mortgagor's financial viability is affected. When this happens and the mortgagor has provided supporting evidence of the financial impact, mortgagees shall also include those mortgages in the moratorium.

Direct questions regarding the 90-day moratorium on foreclosures, or other aspects of servicing properties affected by Presidentially-Declared disasters to HUD's National Servicing Center at 1 (888) 297-8685.

Please note these ratio changes:

• Pre-foreclosure sale (PFS) minimum ratio of as-is appraised value to unpaid balance changed to 65% for properties affected by Presidentially- Declared disasters per Mortgagee Letter 99-11
• PFS minimum ratio reduced to 63 % for any homeowner eligible for loss mitigation by Mortgagee Letter 00-05
• PFS minimum ratio reduced to 58% for properties affected by Presidentially-Declared disasters per Mortgagee Letter 01-07.

Questions & Answers (Top)

Mortgagee Letter 06-05, announcing the FHA Foreclosure Moratorium
Extensions to Assist Victims of Hurricanes Katrina, Rita and Wilma

Who is eligible?
How long will the foreclosure moratoriums remain in effect?
Are eligible borrowers required to do anything to obtain this additional foreclosure forbearance?

Who is eligible? (Top)

Borrowers with FHA-insured home loans in approved areas declared a disaster by the President from Hurricanes Katrina, Rita or Wilma in:

• Alabama
• Florida
• Louisiana
• Mississippi
• Texas

Borrowers are eligible if they are unable to maintain mortgage obligations due to hurricane related property damage, curtailment of income or increased living expenses.

How long will the foreclosure moratoriums remain in effect? (Top)

HUD extended foreclosure moratoriums for eligible FHA-insured loans directly affected by the disasters until June 30, 2006.

Are eligible borrowers required to do anything to obtain additional foreclosure forbearance? (Top)

Yes. The deadline was March 31, 2006, and eligible borrowers had to make a written commitment to work with their mortgage holder/servicer to develop and implement a plan to resolve delinquent loan payments and make required home repairs. The foreclosure moratorium terminated on March 31, 2006 for all loans where the borrower had not made a written commitment by that date.

Do plans to resolve mortgage defaults have to be finalized by March 31st?

No. An eligible borrower only had to make a commitment by March 31, 2006 to develop a specific plan of action and work with the mortgage holder/servicer to implement it. Borrowers and their mortgagees then had until June 30, 2006 to finalize an appropriate plan of action.

How can a borrower make a written commitment?

The written commitment may be an application to use one of the FHA loss mitigation options, including:

• Special forbearance
• Mortgage modification
• Partial claim
• Mortgage assistance initiative
• Deed-in-lieu of foreclosure

It may also be a written communication from the borrower delivered by mail, fax or electronic media requesting additional time to work with the mortgagee/servicer to resolve the debt.

What efforts must a mortgagee/servicer make to contact eligible homeowners?

Mortgagees and their servicers are expected to make proactive attempts to contact affected borrowers using all reasonably available means and information:

• When telephone contact can't be established, a written notice explaining available relief measures and requirements should be mailed to the borrower's last known address with address service requested.
• If the borrower has filed a change of address notice, the US Postal Service will forward the mail and provide a separate notice to the sender of the new address.
• When sending notice letters to borrowers, include a telephone call-back number to reach a loss mitigation specialist and the address where the borrower written commitment responses should be sent to.