FHA Loss Mitigation Can Help if You Have an FHA Mortgage

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The US Department of Housing and Urban Development mandates that lenders take all possible steps to prevent foreclosures on FHA home loans. If you are g=having trouble with your FHA mortgage, there is a lot of help available and it takes many forms. Check out:

  1. Assumption
  2. Partial Claim
  3. Special Forbearance
  4. Extension of Time
  5. Deed in Lieu of Foreclosure

The kind of assistance you might be eligible for depends on the following:

  1. Income (enough to make a modified payment?)
  2. Desire (want to keep your home?)
  3. Equity (underwater on the home?)
  4. Hardship (beyond your control?)


Assumption means that someone else will take over your mortgage payment and also get your home. Even if your mortgage has been modified, the new owner may be allowed to take it over. This person must qualify to assume the loan. This is a workable option if you aren't underwater (or no one would want your loan) and you can't or don't want to retain the property.

Partial Claim

If your mortgage is four or more months past due, you may qualify for a partial claim. This involves some of your mortgage insurance policy being advanced to cover your late payments. To qualify, you must have solved the problem that caused the default (for example, if you lost your job, you must have found a new one), and you must keep living in your home.

Special Forbearance

Its purpose is to bring mortgages that are in default back to being current and stop foreclosure. If you are at least 3 months behind on your home loan, you may be eligible. Forbearance means that you skip or make partial payments; your loan is brought current and the missing money is added to your mortgage balance. The maximum arrearage allowed is twelve months of payments.

Extension of Time

This is 90-days of extra time for borrowers in foreclosure proceedings. Those who want to keep their homes are granted additional time to arrange mortgage modifications or catch up on their payments.

Deed in Lieu of Foreclosure

This is for homeowners who can't make their payments and don't want to keep their houses. It is not for those who could make their payments but don;t want to. It lets people in default who don't qualify for any other HUD Loss Mitigation option (long-term unemployed, for example) to sign the house back over to the mortgage company. To qualify, you must line in the house, document a reduction in income or an increase in living expense, and agree to leave the property in good condition. You may be paid up to $2,000 to voluntarily leave.


FHA's version of the Home Affordable Modification Plan (HAMP) is better than the standard modification plan. It combines mortgage modification with a partial claim advance. Besides interest rate reductions and making your loan current again, the FHA HAMP may reduce your principal balance up to 30%. Here's the scoop:

  • You complete a 3-month trial loan modification.
  • You may be given a partial advance from mortgage insurance to bring your mortgage current.
  • You could receive a loan reduction of up to 30% of the unpaid principal balance.
  • You cannot be more than 12 months behind on your payments.
  • Your interest rate gets reduced.
  • Your modified loan must be a 30-year fixed-rate mortgage.

If you have an FHA mortgage and are in trouble, immediately contact your lender or loan servicer about FHA loss mitigation. Or call a HUD mortgage counselor. One way or another, you should be able to find the help you need.