What is loss mitigation
FHA NSC Loan Servicing and Loss Mitigation Frequently Asked Questions
Assumptions - Assumption of an FHA-insured mortgage is a servicing function where the responsibility or paying for a mortgage is taken over by another person through simple assumption or creditworthiness assumption.
Claims - The vehicle utilized for payment of insurance proceeds from HUD to a Lender is the Insurance Benefit Claim form HUD- 27011. This form is utilized for all submissions of Claims for Conveyance of Property and Loss Mitigation Option Incentives.
Deed-in-Lieu - The Deed in Lieu of Foreclosure (DIL) is a disposition option in which a borrower voluntarily deeds their collateral property in exchange for a release from all obligations under the mortgage. A DIL may not be accepted from Borrowers who can financially afford their mortgage payments.
Extension of Time - To comply with required time frames, an Extension of Time is a tool afforded to Lenders to assist in the initiation or completion of HUD's Loss Mitigation Program (except Preforeclosure Sales) and/or foreclosure action. A lender is required to submit to NSC-Oklahoma City, form HUD-50012. Mortgagee's Request for Extensions of Time, prior to the expiration of the respective time frame via EVARS.
FHA Connection - FHA Connection (FHAC) is an online portal used by Lenders to report on and update the status of their respective FHA portfolios. In addition, the FHAC facilitates the following Single Family Servicing functions: Claims Processing, Delinquent Loans, HECM Reports, Monthly Premiums, Mortgage Record Changes, Mortgage Calculator, Mortgage Servicing Data Quality System and Lender Query by Case Number. For additional information about FHA Connection, log onto FHAC FAQs.
FHA-HAMP - FHA-HAMP provides Borrowers who are in default and/or in imminent default a greater opportunity to retain homeownership using a Partial Claim combined with a Loan Modification. See Mortgagee Letters 09-23 and 13-32. Also see ML 2012-22 and 2013-32 Frequently Asked Questions (FAQs ).
Foreclosure - Foreclosure should only be considered as a last resort and should not be initiated until all Loss Mitigation Options have been exhausted. When foreclosure cannot be avoided, it
must be started quickly and prosecuted vigorously to minimize losses to both the Lender and HUD.
General Loss Mitigation - This category includes all Loss Mitigation questions that are not specific to one of the Loss Mitigation Options.
General Servicing - This category includes all General Servicing items stated within HUD Handbook 4330.1 REV-5, Administration of Insured Home Mortgages.
Loan Modification - A Loan Modification is a permanent change in one or more of the terms of a Borrower's loan, allows the loan to be reinstated, and results in a payment the Borrower can afford.
Preforeclosure Sale - The Preforeclosure Sale (PFS) Program allows the defaulted Borrower to sell his/her home and use the Net Sale Proceeds to satisfy the mortgage debt even though the Proceeds are less than the amount owed. NOTE - NSC and the Post Claims Division have developed a listing of PFS Allowable and Disallowable fees. If the fee the Lender wants to verify is not on the list, the Lender will need to submit a Variance via HUD's EVARS System.
Single Family Default Monitoring System - Data reported to the Single Family Default Monitoring System (SFDMS) is used to measure the effectiveness of origination and servicing activities, and the potential risk to HUD's Insurance Fund.
Special Forbearance - Unemployment - A Special Forbearance (SFB) - Unemployment Agreement is a written Agreement between a Lender and a Borrower, which contains a plan to enable the Borrower time needed for them to acquire employment.
Variance - A Lender is required to submit form HUD-90041, Request for Variance Procedure on any Loss Mitigation Option where all HUD requirements have not been met. These Variances are to be submitted via EVARS System. All Variances are considered on a case-by-case basis. When preparing a Variance for Special Forbearance, Trial Payment Plan, Loan Modification, Partial Claim or Deed-in-Lieu, the Lender is to select "other button". When preparing a Variance for the Preforeclosure Sale Program and FHA-HAMP Option, the Lender is to utilize the drop down menu and select the appropriate choice.Source: portal.hud.gov