USDA Covid-19 Special Relief Measures & VA Step C Refund Modification
WaterfallCalc.com is excited to announce the release of the USDA Covid-19 Special Relief Measures as well as the VA Step C Refund Modification.
USDA Covid-19 Special Relief Measures:
- Borrower was no greater than 120 days past due on March 1, 2020 or the loan was closed on or after March 1, 2020,
- The borrower occupies, as the borrower’s residence, the property securing the guaranteed loan, and,
- The borrower requested and received an initial forbearance due to COVID-19 related hardship prior to September 30, 2021.
- Borrower states they cannot afford their pre-pandemic payment and requires greater payment relief
Servicer should establish a target payment that includes up to a 20% payment reduction from the borrower’s current principal and interest payment. Once the target payment is established, the servicer should incrementally utilize the following options to get a close to the target payment as possible.
1. Rate Reduction: The servicer should use the most recent PMMS rate as a [minimum/maximum] for 30-year fixed-rate mortgages
2. Term Extension: If the target payment is unable to be achieved with the rate reduction alone, the servicer should extend the term in one-month increments, up to a maximum of 480 months
3. Mortgage Recovery Advance: If the targeted monthly mortgage payment still cannot be achieved, the servicer may consider a Mortgage Recovery Advance (MRA) in addition to the rate reduction and term extension to achieve the monthly target payment.
Unless extended, the COVID-19 Special Relief Measures will expire on December 31, 2022.
VA Step C Refund Modification
Step C, as outlined in Circular 26-21-13 includes a financial evaluation customary for a traditional loan modification and determines the borrower’s gross monthly household income. This calculation determines whether the borrower’s new monthly mortgage payment could correspond to 31 percent of the borrower’s gross monthly household income, without causing VA’s total purchase (of COVID-19 arrearages & principal) to exceed 30 percent of the UPB. If this outcome is achievable, the servicer offers the COVID-19 Refund Modification, regardless of the percentage by which such assistance would reduce the borrower’s payment.