Originally published on January 5, 2022, by Georgia Kromrei for HousingWire.com.
Some Federal Housing Administration-approved mortgage servicers have routinely flouted the agency’s loan modification program, according to Washington, D.C. Attorney General Karl Racine and 20 other state attorneys general.
The attorneys general wrote in a Dec. 21 letter that a number of mortgage servicers employed by FHA-approved lenders failed to adequately implement loan modification options the FHA introduced in July. The loan modification options allowed eligible borrowers to reduce their principal and interest payments by 25%. FHA required mortgage servicers to implement the program by Oct. 21, 2021.
But rather than adhering to the program, some mortgage servicers of FHA-insured loans allegedly sent borrowers notices that fail to mention the relief options, requiring paperwork and imposing qualifications that are not necessary under the FHA’s guidelines. Servicers also told borrowers that the loan modification option did not exist, the attorneys general claim.
A spokesperson for the Department of Housing and Urban Development said the agency takes the concerns raised in the letter very seriously.