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  • Donna Schmidt

Announcing the New FHA Unique Circumstance Forbearance Loss Mitigation No Documentation Forbearance

April 6, 2020

In response to the COVID-19 Pandemic and the extraordinary measures our government has taken to protect homeowners, we have added the following options to our system. Please note that we did not change the import criteria for this change.

FHA Unique Circumstance Forbearance Our Waterfall’s Forbearance program was designed exclusively for the unemployment special forbearance, which allows for up to 12 months of reduced payments, or until the loan is no more than 12 months delinquent. The only time the system will default to this option is when all borrowers on a loan are unemployed or if there are two borrowers on a loan, with only one unemployed but they do not qualify for the HAMP option.

The New FHA Unique Circumstances Forbearance can be used for: • Disaster Forbearances • CARES Act Forbearances (COVID-19 Pandemic Responses) • Unique Circumstances Forbearances – when a variance from FHA would be warranted This option allows you to enter the number of months (term – from 1 to 6 months) of the plan and the payment amount the borrower wishes to make. Or if the borrower provided income and expense information, the system will calculate the affordable payment (1/2, 1/3, ¼, 1/5, 1/6 of a payment or $10 for those that do not seem to be able to afford a fractional payment).

Processing a Unique Circumstance Forbearance: a) Without Borrower Documentation – begin entering the data as usual within the FHA module of WaterfallCalc.com (WFC). At the top of the first page: • Leave the “Use Disaster Protocol:” field defaulted to “NO” – this option should only be “YES” when you are ready to do a modification or partial claim to bring the loan current. • Change the “Special Circ. FB” to “YES” • Change the “Recv’d Complete LM Pkg” field to “NO” • The RFD must either be “FEMA Disaster” or “Pandemic” or the system will not allow you to proceed without a full loss mitigation application. At the bottom of the 2nd page: • Enter in the term of the Forbearance Plan – 1 to 6 months • Enter in the payment amount the borrower wishes to pay. You may enter any amount from 0 to $9999.99. b) With Borrower Documentation - begin entering the data as usual within the FHA module of WaterfallCalc.com (WFC). At the top of the first page: • Leave the “Use Disaster Protocol:” field defaulted to “NO” – this option should only be “YES” when you are ready to do a modification or partial claim to bring the loan current. • Change the “Special Circ. FB” to “YES” • Leave the “Recv’d Complete LM Pkg” field to “YES” • You may select any RFD (Reason For Default) – if you select a reason other than FEMA Disaster or Pandemic, the system will warn you that you will need to request a variance to move forward with this forbearance. We designed this with extraordinary circumstances in mind – such as the family that was already beyond 12 months delinquent. Husband was unemployed while caring for terminally ill wife, who was recently placed on palliative care and not expected to survive more than a few weeks. This allows you to create a forbearance agreement under theses unusual circumstances to submit for variance approval to extend a forbearance for a few more months to allow the family time during this transitionary period. At the bottom of the 2nd page: • Enter in the borrower’s income and expense information • Enter in the term of the Forbearance Plan – 1 to 6 months Selecting this option will allow you to move through the system without requiring fields that are not necessary to create the forbearance agreement.

Unique Circumstance Forbearance Report The report was designed to break out the number of payments that will be required under the plan, their due dates and amounts. The report will also display the number of months the loan will remain delinquent at the end of the plan and the total due as of that date. There is a disclaimer that the actual total due may be different due to various factors and that the borrower should contact the servicer for more information.

The report was designed to be an attachment to your standard Forbearance Agreement that would include specific language, created by your legal and compliance advisors.

Loss Mitigation No Documentation Forbearance VA, Rural Housing, Fannie Mae, Freddie Mac and most private insurers will allow a period of reduced or suspended payments for a variety of reasons other then just unemployment. Therefore, our system has already been programmed to allow for forbearance agreements without restriction. However, our previous programming did require that income and expense data be entered so that an affordable payment amount could be calculated.

The new option will allow you to select a No Documentation option that creates the Forbearance agreement based on the user entered term and payment amount.

The New No Documentation Forbearance can be used for: • Disaster Forbearances • CARES Act Forbearances (COVID-19 Pandemic Responses)

Processing a No Documentation Forbearance: Begin entering the data as usual within the Loss Mit module of WaterfallCalc.com (WFC). • Change the “Offer No Doc FB” to “YES” • Leave the “Has Loan been affected by a federally declared disaster & loan was less than 30 days delinquent at the time:” field defaulted to “NO” – this option should only be “YES” when you are ready to do a modification or partial claim to bring the loan current. • Change the “Recv’d Complete LM Pkg” field to “NO” • Enter in the term of the Forbearance Plan – 1 to 6 months • Enter in the payment amount the borrower wishes to pay. You may enter any amount from 0 to $9999.99. Selecting this option will allow you to move through the system without requiring fields that are not needed to create the forbearance agreement.

No Documentation Forbearance Report The report was designed to break out the number of payments that will be required under the plan, their due dates and amounts. The report will also display the number of months the loan will remain delinquent at the end of the plan and the total due as of that date. There is a disclaimer that the actual total due may be different due to various factors and that the borrower should contact the servicer for more information.

The report was designed to be an attachment to your standard Forbearance Agreement that would include specific language, created by your legal and compliance advisors.

You may follow these same procedures if you need to extend the forbearance agreement.

Future Programming COVID-19 Response - Here at WaterfallCalc.com – we are working on the programming changes that will be necessary due to the updated guidance provided by FHA. We will also be on the lookout for other changes that may be required as a direct response to this by any of the other insurers or investors.

USDA-Rural Housing Waterfall Changes – Rural Housing Service had published loss mitigation changes in December of 2019, with an effective date of 4/24/2020. We are currently working on these changes and expect them to be delivered on time.

GSE Payment Deferral Program – we are aware of the changes proposed and due by July 1, 2020 related to this new loss mitigation option and we have scheduled work in response

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