FHA Proposes Plan to Help Distressed Homeowners Amid Rising Interest Rates

The Wall Street Journal reports that the Federal Housing Administration (FHA) is expected to propose a loss mitigation plan that would reduce monthly mortgage bills for borrowers who are unable to make their current loan payments, and who—due to rising interest rates—would not benefit from a traditional rate and term extension loan modification. Under the proposed plan, the FHA would take a portion of the distressed borrower’s unpaid principal balance and structure it as a second lien and use funds from the FHA insurance fund to make payments on that second lien. This would allow homeowners to maintain their current interest rates on the primary mortgage—which is generally lower than prevailing interest rates today—while still enabling lower monthly payments. When the FHA proposal is released, it is expected to have a 30-day comment window for interested parties to share views. Read More