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The payment supplement policy suggests a combination of a partial claim to update the mortgage and a new monthly principal reduction (MoPR), which would temporarily assist in covering the main portion of a borrower’s monthly mortgage payment. It proposes a temporary payment reduction for three years, after which the borrower would resume full payment of the principal and interest amount.
This plan would allow mortgage servicers to both update a borrower’s mortgage status and offer temporary reductions in their monthly payments for up to five years.
The MBA and NMSA have proposed four major amendments to enhance the policy’s effectiveness. These include increasing the incentive payment for participation from $1,000 to $3,500, modifying the model note and payment supplement agreement, ending the supplement in cases of borrower re-default, and allowing 9-12 months for the successful rollout of the policy.
“Sustainable loss mitigation policy is necessary to preserve affordable homeownership,” the industry bodies said in the letter. “FHA guidance must continue to reduce the program’s complexity as the draft ML touches on all aspects of a servicer’s operations and loan lifecycle.”
Read more: Could bond yield trends hint at a more affordable housing market?
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