FHA waives some reviews due to Hurricanes Helene, Milton

The Federal Housing Administration is taking steps to adjust policy for a possible jump in early-payment default rates due to two major natural disasters.

The government agency is issuing a limited waiver for some reviews of early defaults in regions Hurricane Helene and Milton hit. The waiver applies to certain EPDs that occurred starting Nov. 1 and will continue to apply to some early defaults through April 30 of next year.

The waiver aims to address early payment defaults in recovering regions that reflect unanticipated loss of employment, income or both, the FHA noted. Such loan performance issues also could stem from unexpected property damage and repairs, or forced relocations.

"EPDs on loans closed prior to the disaster are most likely a result of unforeseen circumstances," the administration said in an information bulletin issued Thursday.

Closings must have occurred prior to the applicable Federal Emergency Management Agency incident period and properties must be within presidentially-declared disaster areas related to the storms.

FHA servicers typically conduct monthly and quality control reviews on early payment defaults.

The limited waiver applies to certain quality control reviews related to early defaults for qualifying loans, and adds to other FHA policy adjustments aimed to provide temporary relief from typical mortgage requirements due to Helene and Milton.

The administration also recently extended its typical 90-day foreclosure pause to provide relief from the storms until April.

Mortgage companies need to maintain the status quo when it comes to many other typical servicing responsibilities, including offering loss mitigation options and delinquency reporting in the single-family default monitoring system, according to the FHA.

The estimated number of first-lien delinquencies stemming from the two hurricanes between August and October topped 40,000, according to ICE Mortgage Technology's recent analysis, which also examined recent prepayment trends.

Of the six states hit by the storms, Florida was hit hardest, accounting for 17,000 of the delinquencies. Georgia, the Carolinas, Tennessee and Virginia also were impacted.

Early estimates of Hurricane Milton's impact on Florida suggested it could result in over $100 billion of damage to single- and multifamily homes based on reconstruction value. There also have been multibillion-dollar projections for total flood and wind losses from Hurricane Helene.