crfs shares high level summary of forbearance impact on claims

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The forbearance guidelines for government-backed loans established as part of the CARES Act do not include a provision for claim filing. Upon forbearance expiration the borrower should be evaluated for a loss mitigation option to cure the default. Currently, FHA is the only agency that has provided a claim alternative beyond the standard available options, namely the Standalone Partial claim.

Below is a summary of the latest available information on how the agencies are handling forbearance-related claim filing.

FHA:

  • The COVID-19 Standalone Partial claim is the new option. If the borrower doesn’t qualify for that, the standard loss mitigation options should be pursued.
  • Claims will be filed for the Standalone partial claim, or other standard loss mitigation options that may be approved including disposition options. (HAMP Modification, HAMP Partial Claim, Pre-foreclosure/Short Sale, Deed in Lieu)

FHLMC and FNMA:

  • After the forbearance, review the borrower for loss mitigation options provided in the servicing guides
  • Claims will be filed for the completed loss mitigation options, including modifications and disposition options

VA:

  • After the forbearance, servicers should consider all loss mitigation options described by Chapter 5 of VA Servicer Handbook M26-4
  • Modifications do not require claims, the VA automatically reimburses the incentive based on reporting in VALERI
  • Claims will be filed after disposition loss mitigation options

USDA:

  • Upon completion of the forbearance, determine if the borrower is able to resume making payments. If so, offer a written re-payment plan or extend the loan term for a period that is at least the length of the forbearance.
  • If unable to resume payments, evaluate for available options in the loss mitigation guide
  • Claims will be filed for MRA/Mortgage Recovery Advance (similar to partial claim) and disposition options

 

CRFS will continue to provide updates and information as we learn them.  Please contact us at 585.589.0800 or sales@crfservices.com if you have any questions or would like to learn how CRFS can support your default services operations.