- Borrowers and lenders negotiate special forbearance plans for FHA loans. FHA and HUD do not negotiate these plans directly. Lenders may decide which type of forbearance or modification plans are best suited for their borrowers on a case-by-case basis. If a borrower falls behind on his mortgage payments, HUD and FHA require lenders who service FHA-insured loans to participate in their loss mitigation program. This means that if a borrower becomes delinquent on his FHA-insured mortgage, the lender is required to attempt to help the borrower get current on his mortgage payment through a loss mitigation program before it can initiate foreclosure proceedings.
- To qualify for an FHA forbearance, the borrowers must live in the home and it must be their primary residence. For all FHA special forbearance programs, the borrower cannot be more than one year (12 months) behind on her mortgage payments. These forbearance plans also require borrowers to be at least three months behind on their mortgage payments before they can apply for a special forbearance.
- The FHA Type I special forbearance plan does not permanently modify the loan after the forbearance period ends. Upon exiting the forbearance period, lenders assess the borrower's current financial situation to determine a repayment schedule for past due mortgage amounts. There is no maximum time limit as to how long the borrower has to repay the total amount of past due mortgage payments. Type I forbearance plans must last a minimum of four to six months.
- The FHA Type II special forbearance plan allows for a permanent loan modification once the borrower exits the forbearance period. Once the forbearance period ends, the borrower must enter a three-month trial payment period before the lender will make a permanent loan modification. The borrower cannot be late on any of her mortgage payments during this trial period for the lender to approve the permanent modification.
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