Joint Comments to FHA on Payment Supplement Partial Claim

The Honorable Julia Gordon
Assistant Secretary for Housing and Federal Housing Commissioner
Federal Housing Administration
U.S. Department of Housing and Urban Development
451 7th Street, SW
Washington, DC 20410

Dear Commissioner Gordon,

The Mortgage Bankers Association (MBA), American Bankers Association (ABA), and the National Mortgage Servicing Association (NMSA) (the Associations) appreciate the opportunity to comment on the Federal Housing Administration’s (FHA) Draft Mortgagee Letter (Draft ML), Payment Supplement Partial Claim (PSPC). The Associations agree with the need for a loss mitigation solution that provides payment relief to seriously delinquent FHA borrowers in a high-rate environment, while protecting Ginnie Mae issuers from losses. However, as drafted, the complex and resource intensive PSPC would significantly increase the operational, compliance, liquidity, and reputational risk for mortgage servicers, while introducing potential harm to borrowers.

To encourage the best execution of the PSPC for borrowers and establish a permanent program, we strongly urge FHA to make the following important adjustments to the proposed policy prior to finalizing the Draft ML:

1. Simplify and clarify the PSPC by creating a 3-year level payment term, prioritizing permanent relief over temporary relief, reinforcing FHA’s traditional use of a prescribed waterfall, and addressing substantial documentation issues with the PSPC proposal;
2. Increase the allowable incentive to $3,500 to protect servicers’ liquidity positions in today’s market and the value of Ginnie Mae MSRs actively being transferred among program participants; and

Establish the mandatory compliance date for servicers at 12 months after the publication date of the Draft ML.

Please also accept the attached Feedback Response Worksheet that provides additional recommendations and expands on the comprehensive feedback the Associations collected from our members in response to the Draft ML.

Download the joint comment letter to read the full text.