Rural Housing Loss Mitigation Waterfall Changes 4/24/2020
Rural Housing Service (RHS), a division of the United States Department of Agriculture (USDA) issued an update to their Loss Mitigation guidelines that would be effective April 24, 2020.
We have updated our system to include the calculation adjustments required to comply. Your entries will remain the same, however the results will be extremely different. More loans will be approved for assistance under the new guidelines.
The basic options include:
Regular Servicing Modification – allows for interest rate adjustments to market and a variable term.
a) GNMA Loans that will be resold into new GNMA pools – the system will automatically calculate the interest rate at market and extend the term to 360 months from the first payment due under the mod terms
b) Loans that will not be resold into a GNMA pool – they system will set the new rate at the lower of the current Note rate or market rate and extend the term only to the point of achieving the target payment (which is the lower of 31% of front end DTI or a 10% reduction from the current monthly payment).
Special Servicing Modification – this modification option is not available for loans being resold into GNMA pools. For other loans, the system will set the new modified rate at the lower of the current note rate or the market rate and extend the term up to another 480 months from the first payment on the modification.
Mortgage Recovery Advance (MRA) – If the borrower’s payment is above 31% of their gross monthly income, then the system will attempt to include the arrears (past due PITI and any projected escrow shortage), corporate advances and any additional principal necessary to reduce the new payment to no more than 31% of their gross income.
Stand Alone MRA – This option is available when a modification will not work and the borrower is already below the 31% front end DTI.
Regular Servicing Modification – the new rule now allows us to circle back and give the borrower another modification, even if it did not pass the first review, but the MRA or special servicing modification would not pass.
Let us know if you have any questions.