The Community Home Lenders of America (CHLA) commended FHA Commissioner Julia Gordon for today’s announcement that FHA is proposing a program to create a flexible partial claim loan modification option for defaulted borrowers – which avoids having to take the underlying loan out of a Ginnie Mae loan pool.
CHLA was the first national association to ask FHA to develop such a program option, in a letter to FHA last August.
“CHLA commends FHA Commissioner Gordon for proposing this innovative option to enable more defaulted borrowers to keep their home, by allowing partial claims without the borrower losing the benefit of lower interest rates on their loan,” said Scott Olson, CHLA’s Executive Director.
“The skyrocketing of mortgage rates has undermined FHA’s main loss mitigation tool for helping distressed borrowers – and FHA’s nimbleness in finding a workaround for this will be greatly appreciated by distressed homeowners.”
CHLA’s August 2022 letter – which noted former Ginnie Mae Commissioner Ted Tozer’s work on this subject – explained why rising mortgage rates created a problem for FHA loss mitigation – and why this type of action could benefit consumers.
EXCERPT FROM CHLA LETTER
“Rising mortgage rates are creating problems for Ginnie Mae issuers carrying out loss mitigation for defaulted FHA borrowers. Typically, issuers implement loss mitigation by buying an FHA loan out of a Ginnie Mae pool, modifying the loan, and then selling the loan back into a Ginnie Mae pool.
This was not a problem when mortgage rates were stable or falling. However, Ginnie Mae issuers are now facing two unpalatable options – either an increase in the mortgage rates that could make it difficult to carry out the loss mitigation or the re-sale of loans into Ginnie Mae pools at steep losses to the issuer.”