FHA Guidance on Servicing and Originating Mortgages in Disaster Areas

firefighters, firefighting, fire, dark, night, fire, fire, fire, fire, fire

The devastating fires in Los Angeles County have prompted the Federal Housing Administration (FHA) to release FHA Info #2025-07, reminding mortgagees of its guidance for servicing and originating FHA-insured mortgages in Presidentially Declared Major Disaster Areas (PDMDA).

Key FHA Disaster Guidance Provisions

90-Day Extension for HECM Foreclosures

FHA provides Home Equity Conversion Mortgage (HECM) mortgagees with an automatic 90-day extension from the expiration date of the PDMDA foreclosure moratorium to commence or recommence foreclosure actions. This extension ensures affected homeowners have additional time to recover before facing foreclosure proceedings.

This policy is designed to provide relief for homeowners who may be struggling due to significant property damage, displacement, or financial hardship caused by the disaster. Mortgagees are encouraged to communicate these extensions clearly to borrowers and offer further support where necessary.

The extension also aligns with FHA’s mission to protect homeowners and reduce the risk of displacement following catastrophic events. Mortgagees must stay informed about any state-specific extensions or moratoriums that may apply in conjunction with the federal guidelines.

HECM Due and Payable Extensions

HECMs that become due and payable for reasons other than the death of the last surviving borrower or eligible non-borrowing spouse are also subject to a 90-day foreclosure timeline extension. This safeguard helps ensure vulnerable homeowners can focus on disaster recovery without the immediate threat of foreclosure.

This extension is particularly critical for seniors who rely on HECMs as a financial safety net. Mortgage servicers are encouraged to provide proactive communication to these borrowers and assist them in understanding their rights under the disaster provisions.

Damage Inspection Requirements

To ensure the safety and habitability of homes impacted by disasters, FHA requires the following:

  • Damage Inspection Report: All properties with pending mortgages or endorsements must have a damage inspection report detailing any dwelling damage. This report is critical in determining the safety and integrity of the property post-disaster.
  • Certified Appraiser: The damage inspection report must be completed by an FHA Roster Appraiser, even if no damage is identified. The use of certified professionals helps maintain consistency and accuracy in the damage assessment process.
  • Inspection Timing: The report must be dated after the Federal Emergency Management Agency (FEMA) Incident Period or 14 days from the incident period start date, whichever occurs earlier.
  • Appraisal Alignment: If the effective date of the appraisal aligns with the required inspection date, a separate damage report is unnecessary.

These measures help ensure that any potential property risks are identified and addressed before proceeding with mortgage-related actions.

Damage Repair Requirements

All damages, regardless of the extent, must be repaired by licensed contractors or as per local jurisdictional requirements. The property must be fully restored to its pre-loss condition with appropriate documentation verifying the repairs. This documentation is crucial for compliance and protecting both the homeowner and mortgagee’s interests.

Failure to comply with these damage repair and reporting standards could result in delays in loan endorsements or even denial of claims. Mortgagees should encourage borrowers to maintain open communication regarding repair timelines and progress to avoid complications.

Key Takeaways for Mortgage Professionals

  • Stay updated with FHA Info #2025-07 for the latest disaster recovery guidance.
  • Ensure compliance with all HECM extensions and damage reporting timelines.
  • Maintain thorough documentation to support property condition and repairs.
  • Provide clear communication and support to borrowers affected by disaster events.
  • Work closely with certified FHA Roster Appraisers and licensed contractors to ensure full compliance with damage reporting and repair standards.

By following FHA’s guidelines, mortgage professionals can contribute to a smoother disaster recovery process, providing essential support and compliance during challenging times. Proactive communication and adherence to these policies not only assist borrowers but also protect mortgagees from potential liabilities associated with disaster-affected properties.
Mortgagees are encouraged to review the servicing guidance for HECMs in PDMDAs, detailed in Handbook 4000.1, Section III.B.3.a, starting on page 1,556

Let’s Get in touch

Use the form below to reach out to us. We’ll get back to you as soon as possible.


Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top