News Logo

Press Release News

Federal Housing Administration To Help Struggling Borrowers Keep Their Homes, Launches New Option

The new option known as a payment supplement will help borrowers to bring their mortgage payments and avoid foreclosure.

February 21, 2024

Washington- A new loss mitigation home retention option was announced by the Federal Housing Administration (FHA) for borrowers with FHA-insured single-family mortgages who are lagging on their mortgage payments. The payment supplement will provide mortgage services with an additional tool to reduce borrower’s monthly mortgage payment by 25% without modifying the interest rate. The payment supplement is meant for borrowers who cannot be sufficiently assisted by home retention solutions because the interest rate on mortgages is lower than the interest rates at present.

HUD’s Secretary Marcia L. Fudge said, “HUD uses every tool in our toolkit to ensure we can help struggling borrowers avoid foreclosure. Today’s new policy will enable the families we serve to get back on their feet while staying in their homes.”

The payment supplement will allow mortgage servicers to use funds from Partial Claim which in turn will enable the borrower to access 30% of the balance of their FHA-insured mortgage. The partial claim amount will be paid back when the homeowner sells the home.

The Payment Supplement’s Partial Claim funds are utilized in a two-step process. Initially, they are applied to clear any arrearages and to update the borrower’s mortgage payments, making them current. Subsequently, any remaining funds are placed into an FHA custodial account, which is managed by the mortgage servicer. These funds are then used each month to temporarily supplement the principal and interest components of the borrower’s mortgage payment, aiming to reduce the monthly principal and interest payments by up to 25 percent.

Federal Housing Commissioner Julia Gordan said, “FHA developed this innovative tool because after interest rates rose the FHA Recovery Modification could no longer reliably provide payment reduction to borrowers facing a hardship. Payment Supplement will bring borrowers current and temporarily reduce their monthly payments for up to three years, which we hope will enable them to weather their hardship and once again begin making their full mortgage payments.”

All borrowers have access to the payment supplement option. The mortgage servicers can start implementing the Payment Supplement option on May 1, 2024.

FHA also announced that it is extending its full suite of temporary loss mitigation options along with the Publication of the payment supplement policy. The existing loss mitigation options are available to mortgage servicers for all borrowers who are lacking their mortgage payments.

Article Sources

Arrow Down Sign

The content provided in this article draws inspiration and includes quotes from various reputable sources, including news articles, government data, and interviews. Affordable Housing 411 strives to ensure accuracy and credibility, but the information presented may be based on some external sources. We encourage readers to refer to the referenced materials for more in-depth insights and verification.

Department of Housing and Urban Development. “Federal Housing Administration Launches New Option to Help Struggling Borrowers Keep Their Homes”. Department of Housing and Urban Development, February 21, 2024,
Federal Housing Administration Launches New Option to Help Struggling Borrowers Keep Their Homes | / U.S. Department of Housing and Urban Development (HUD)

Last Updated: September 20, 2021