FHA loans: the lender must look at ways to avoid foreclosure
24 C.F.R. § 203.605(a)
In plain words
If you have an FHA-insured mortgage, your lender must review loss-mitigation options every month before four full payments are unpaid, and take the appropriate action. FHA options can include special forbearance, loan modification, a partial claim (an interest-free second loan from HUD to cover arrears), a pre-foreclosure sale, or a deed in lieu.
Who is protected
Borrowers with an FHA-insured mortgage who are behind or about to fall behind.
When it applies
- Only while you are behind but have no foreclosure notice yet, after a notice of default or once a sale date is set.
- Only for FHA loans.
What you can do
Apply for FHA loss mitigation
Ask the servicer for an FHA loss-mitigation review and send a complete application. Ask specifically about a partial claim and FHA modification options.
Open the toolCompare your options
Use the strategy planner to compare staying, catching up, or leaving on your terms.
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Honest limits
- The lender must evaluate options, but you are not guaranteed any particular one; eligibility depends on HUD rules, your income and your history.
- HUD changes FHA loss-mitigation options often through mortgagee letters and the Handbook; ask the servicer which options are current.
- These are rules the government sets for lenders. Whether you can enforce them in court depends on your state: some courts treat them as conditions a lender must meet before foreclosing, others do not.
- This is general legal information, not legal advice, and it does not promise any result. A HUD-approved housing counselor or a lawyer can look at your facts.
The law
- Federal regulationFHA — duty to mitigate
24 C.F.R. § 203.605(a)
Exact part: (a)
What it says: Before four full monthly installments are unpaid, the lender must evaluate all loss-mitigation techniques monthly and take the appropriate action.
Read the official texthttps://www.ecfr.gov/current/title-24/part-203/section-203.605#p-203.605(a) - Federal regulationFHA — loss-mitigation actions
24 C.F.R. § 203.501
What it says: Lenders must consider options such as special forbearance, partial claims, pre-foreclosure sales, deeds in lieu and recasting.
Read the official texthttps://www.ecfr.gov/current/title-24/part-203/section-203.501 - Federal regulationFHA — pre-foreclosure review
24 C.F.R. § 203.606(a)
Exact part: (a)
What it says: Before foreclosing, the lender must ensure all servicing requirements have been met.
Read the official texthttps://www.ecfr.gov/current/title-24/part-203/section-203.606#p-203.606(a) - Agency guidanceHUD Handbook 4000.1 — FHA servicing and loss mitigation
HUD Single Family Housing Policy Handbook 4000.1
What it says: HUD's handbook for FHA lenders sets the detailed default-servicing and loss-mitigation rules and options.
Read the official texthttps://www.hud.gov/hud-partners/single-family-handbook-4000-1
Court cases
- Homeowner lostSame topicMartins v. BAC Home Loans Servicing, L.P.
Martins v. BAC Home Loans Servicing, L.P., 722 F.3d 249 (5th Cir. 2013)
a mortgage servicer acting for a properly assigned mortgagee may foreclose in Texas without possessing the original note, and an oral promise to modify a large loan is not enforceable
- Homeowner lostSame topicLage v. Ocwen Loan Servicing LLC
Lage v. Ocwen Loan Servicing LLC, 839 F.3d 1003 (11th Cir. 2016)
a servicer's duty to evaluate a loss-mitigation application depends on its being submitted more than 37 days before the sale date scheduled at that time
- Homeowner lostSame topicGresham v. Wells Fargo Bank, N.A.
Gresham v. Wells Fargo Bank, N.A., 642 F. App'x 355 (5th Cir. 2016) (per curiam) (unpublished)
the federal dual-tracking bar applies only when the servicer receives a complete loss-mitigation application more than 37 days before the foreclosure sale
- Homeowner lostSame topicBoren v. U.S. National Bank Ass'n
Boren v. U.S. Nat'l Bank Ass'n, 807 F.3d 99 (5th Cir. 2015)
a lender may abandon a prior acceleration by giving notice that it seeks less than the full accelerated balance, which restarts the four-year limitations period
- Homeowner lostSame topicWhittier v. Ocwen Loan Servicing, L.L.C.
Whittier v. Ocwen Loan Servicing, L.L.C., 594 F. App'x 833 (5th Cir. 2014) (per curiam) (unpublished)
a RESPA claim against a servicer fails without evidence of actual damages caused by the violation
- Homeowner lostSame topicMilton v. U.S. Bank National Ass'n
Milton v. U.S. Bank Nat'l Ass'n, 508 F. App'x 326 (5th Cir. 2013) (per curiam) (unpublished)
an agreement to delay a Texas foreclosure falls within the statute of frauds and must be in writing to be enforced
Related rights
FHA loans: a meeting before foreclosure
24 C.F.R. § 203.604(a)(1)
If you have an FHA-insured mortgage, your lender must meet with you — or make a reasonable effort to arrange a meeting — before three full monthly payments are unpaid and at least 30 days before starting foreclosure. A reasonable effort means at least two verifiable attempts to contact you. HUD now decides how the meeting may be held.
Read this rightA fair, on-time review of your application for help
12 C.F.R. § 1024.41(b)(1)
When you apply for help (like a loan modification), your servicer must tell you within 5 business days whether your application is complete and what is missing, if you applied 45 days or more before a sale. If your complete application arrives more than 37 days before a sale, the servicer must review you for every option it has and tell you its decision in writing within 30 days.
Read this rightNo foreclosure while your complete application is being reviewed ("dual tracking")
12 C.F.R. § 1024.41(f)(2)
If you send a complete application for help before the foreclosure is started, the servicer cannot start the foreclosure until it has decided and any appeal is over. If you send it after the foreclosure started but more than 37 days before the sale, the servicer cannot ask for a foreclosure judgment or order of sale, or hold the sale, until it has finished the review — unless you are denied and the appeal is over, you reject the offers, or you do not follow an agreement.
Read this rightUSDA guaranteed loans: servicing options before foreclosure
7 C.F.R. § 3555.301
If you have a USDA Rural Development guaranteed home loan, the lender must contact you promptly after a default, try to learn why you fell behind, and send a certified letter asking for an interview before you are 60 days behind. If you qualify, it must consider options in order: repayment agreement, special forbearance, loan modification, and a mortgage recovery advance. Streamline options may be available later.
Read this rightVA loans: servicing and workout options before foreclosure
38 C.F.R. § 36.4350(f)
If you have a VA-guaranteed home loan, the lender must have a system to work with delinquent borrowers: try to reach you by phone, send letters that explain your options, and make a face-to-face interview or a reasonable effort to arrange one when it has not reached you. VA lists workout options in order of preference: repayment plan, special forbearance, loan modification, short sale, and deed in lieu of foreclosure.
Read this rightNo foreclosure filing until you are more than 120 days behind
12 C.F.R. § 1024.41(f)(1)
Your servicer cannot make the first notice or filing to start a foreclosure until your loan is more than 120 days delinquent. This gives you time to apply for help. There are narrow exceptions, such as a due-on-sale violation.
Read this right