The Mortgage Bankers Association supports the FHA’s new payment supplement, a new loss mitigation option meant to help the borrower avoid foreclosure amid high interest rates.
The Mortgage Bankers Association (MBA) yesterday expressed its strong support for the Federal Housing Administration’s move in introducing its newest loss mitigation alternative–the Payment Supplement—to help borrowers facing financial distress. Mortgage servicers will be better equipped under this new approach to help distressed homeowners avoid foreclosure, an important development at a time when interest rates are running at very high levels.
Bob Broeksmit, CMB, MBA president and CEO said, “MBA supports this additional tool that will allow servicers to better help struggling borrowers avoid foreclosure in today’s high-interest rate environment and commends FHA for its transparency and engagement with industry stakeholders throughout the proposal process.”
The Payment Supplement will permit servicers to use FHA’s partial claim both to catch up a borrower’s mortgage and to make temporary reductions in their monthly mortgage payments for up to three years. That will be especially helpful to the borrower whose current mortgage rate is appreciably lower than the prevailing market rate and who therefore would experience meaningful payment relief without needing an outright loan modification.
Based on the suggestions given by the MBA, FHA is providing an extension of the timeline for implementation, allowing servicers to implement the Payment Supplement by May 1, 2024, but with a compliance date of January 1, 2025. This way, services have enough time for the implementation process. The agency also increased the incentive payment given to the servicer from $1,000 to $1,750. This was taken into consideration so that it rewards the effort that goes into developing and maintaining the Payment Supplement.
The focus was on relief of payment and operational simplification. We believe that the improvements, after multiple rounds of feedback, will ensure that mortgage servicers have a new effective and efficient way to help struggling borrowers stay in their homes,” said Broeksmit.
The MBA agreed to collaborate with FHA in the roll-out of the Payment Supplement and other loss mitigation programs, which had the objective of assisting troubled borrowers while protecting the Mutual Mortgage Insurance Fund and the stability of the secondary mortgage market.
