State officials have complained to the Federal Housing Administration that mortgage servicers are not offering FHA loan modification programs to homeowners who are behind in their mortgage payments due to the COVID pandemic.
The FHA introduced these loan modification programs and required mortgage servicers to offer these programs starting October 21, 2021.
State officials have complained to the Department of Housing and Urban Development that FHA-approved mortgage servicers have routinely ignored the FHA’s loan modification program, and even sent notices to homeowners that failed to mention the relief options. Some servicers required paperwork and imposed qualifications that are not necessary under the FHA’s guidelines, and some servicers also told borrowers that the loan modification option did not exist.
FHA’s loan modification plan was created to help low-income households, first-time homeowners, and households of color that have been disproportionately impacted by the pandemic.
Washington, D.C. Attorney General Karl Racine called the mortgage servicers’ misdeeds “illegal, unacceptable, and dangerous.” He added that they discriminate against low-income borrowers and borrowers of color. “The purpose of the federal program is to reduce the displacement of families from their homes, and, as a result, thwart homelessness during the pandemic,” said Racine. “The truth is that too many FHA-approved mortgage loan servicers have not been honest and transparent about the FHA’s protections for borrowers.”