September 24, 2013

Senator Warren Applauds FHA Loan Modification Policy Change

New Policy Advocated by Warren Will Help Seniors, Veterans, and Single Mothers Qualify for Modifications

WASHINGTON, DC - United States Senator Elizabeth Warren today applauded a policy change announced by the Federal Housing Administration (FHA) allowing more individuals to qualify for FHA loan modifications. In July, Warren authored an amendment to compel this change, and earlier this month she wrote to FHA with Senate Banking Committee Chairman Tim Johnson (D-SD) urging the Administration to adopt this policy.

"This policy change will reverse the discrimination against seniors, veterans, and single mothers in the FHA's loan modification program and give them a better chance to save their homes," said Senator Warren. "I applaud Commissioner Galante and the FHA for making this change, which is good for families and will help make the FHA's loss mitigation program more effective."

The FHA announced the change on Friday in Mortgagee Letter 2013-32, which includes updated guidance on how "continuous income" other than wages is defined for Loss Mitigation evaluations. Under FHA's previous policy, borrowers were required to be "currently employed" to be eligible for a modification, disqualifying those with other stable and verifiable sources of income. The FHA's new policy will allow income not related to employment to be counted toward loan modification eligibility, including personal retirement accounts, Social Security benefits or survivor benefits, disability benefits or Social Security Disability Insurance, veterans' benefits, and alimony or child support.

Earlier this month, Chairman Johnson and Senator Warren sent a letter to Federal Housing Commissioner and Assistant Secretary for Housing Carol J. Galante urging FHA to adopt the change. The letter is available here. Senator Warren also raised the issue during a July 24 Banking Committee Markup of the FHA Solvency Act. Video of Senator Warren's remarks at the hearing is available here.