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As US homeowners continue to struggle with long term unemployment and home values below their mortgage amounts, FHA is amending its requirements to allow mortgage lenders to assist homeowners at risk of "imminent default."

FHA Guidelines: Understanding "Imminent Default" and What it Means to You

Unemployment rates are stagnant at around 10%, and home values in most areas of the US aren't improving fast enough. In an effort to keep homeowners in their homes, FHA is changing some qualifications for its foreclosure prevention programs. A key concept in these changes is how FHA defines "imminent default." If you meet these qualifications, you may be eligible for FHA loss mitigation programs through your mortgage lender:

FHA Requirements for Imminent Default

  • Your mortgage loan is insured by FHA
  • Your mortgage payments are current or less than 30 days past due
  • You're experiencing financial or other hardship that prevents making your next mortgage payment, and can document the source of hardship, which may include:
    • Loss of income such as layoff, reduced hours, reduced pay, or loss of income from self-employment. Scheduled temporary work stoppages are not considered a hardship according to FHA guidelines.
    • A change in family circumstances including serious or chronic illness, a debilitating injury, temporary or permanent disability, or death in the family.

Your mortgage lender is required to keep records documenting eligible hardships. You may be asked to provide detailed financial information and to request assistance in writing.

Loss Mitigation Options for FHA Loans Facing Imminent Default

Mortgage lenders are authorized to offer qualified homeowners informal forbearance up to three months, and can also enter into formal forbearance agreements of more than six months as determined by borrower need. During forbearance, homeowners are expected to work toward resolving their difficulties so they can resume mortgage payments.

Home Affordable Modification Program (HAMP)

Eligible borrowers may be offered loan modifications through FHA-HAMP. During the trial period for HAMP modifications, borrowers must submit all required documentation in order for their modified mortgage terms to become permanent.

The success of FHA loss mitigation programs depends on good communication with your loan servicing company and your willingness to cooperate with your mortgage company's requests for documentation and information.

Karen Lawson
Karen Lawson is a freelance writer with extensive experience in mortgage banking and home loan loss mitigation programs. She holds BA and MA degrees in English from the University of Nevada, Reno.