Brief Loss Mitigation Toolkit Improvements for Borrowers Exiting COVID-19 Forbearance
Karan Kaul, Laurie Goodman, Michael Neal
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While the loss mitigation toolkit has improved dramatically since the Great Financial Crisis, there is room for further action. In this brief, the authors identify two potential improvements to the toolkit that have received little focus. First, part of the FHA partial claim could be used to buy down the interest on delinquent loans for a period of time. This would maximize the number of FHA delinquencies that can be cured by offering loan modifications with deeper payment reductions. Second, most borrowers in need of assistance today have positive equity, but the current loss mitigation toolkit was tailored for negative equity situations. To efficiently move forward with property disposition when all home retention options have been exhausted, some changes to the toolkit are needed.

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