The USDA’s Rural Housing Service has updated its mortgage recovery advance program (MRA) with the goal of eliminating or reducing documentation and eligibility challenges for defaulting borrowers.

An MRA assists borrowers by advancing the funds necessary to pay off past due amounts and provide a principal reduction in an amount necessary to achieve a target monthly payment.  This one-time payment made by the Rural Housing Service on the borrower’s behalf does not have to be repaid until the home is sold or refinanced.

Previously borrowers were required to execute a subordinate lien in favor of USDA securing repayment of the funds advanced.  Following the revisions, an MRA will no longer be secured by a subordinate lien on the property, eliminating the need for notes and security instruments as well as the cost of recording fees.  Instead, borrowers will execute an agreement promising to pay off the advance either when the first lien mortgage and note are paid off or when the borrower transfers title to the property, whichever occurs first.

If the borrower’s total monthly mortgage payment is within a reasonable percent of the borrower’s ability to repay, the MRA can be used to cure the borrower’s delinquency without modifying the terms of the promissory note.  Borrowers may be eligible for multiple MRA’s as long as the cumulative amount is less than or equal to 30% of the unpaid principal balance as of the date of the initial default.

The new rule was effective on February 11^th.  To read the rule in its entirety, please visit RHS Changes Related to Special Servicing Options.

The Propel document library includes loss mitigation options for FHA, VA and USDA loans.  For information regarding our loss mitigation offerings, please contact us at info@asurity.com.