Pipeline: Loss Mitigation

American Banker (08/28/08) P. 10; Colter, Allison Bisbey
To provide additional assistance to borrowers trying to climb out of default, the FHA will limit interest rates on modified mortgages to 200 basis points higher than the monthly average Treasury yield. Additionally, the agency will allow borrowers already in the foreclosure process to wrap related expenses--including legal fees--into the principal of modified loans or add the costs of a canceled foreclosure to a partial claim. Moreover, the FHA says late fees on canceled foreclosures should be erased; and borrowers modifying their mortgages can include each past due payment, along with another month, in the reworked financing.