Rural Housing Mortgage Payment Assistance Program
Summary
The Rural Housing Service (RHS or the Agency), a Rural Development (RD) agency of the United States Department of Agriculture (USDA), is issuing this document for a demonstration program that will establish a new loss mitigation retention option, referred to as the Payment Supplement Account (PSA). The Agency's intention of this demonstration program is to assist borrowers who have experienced a documented hardship that led to an involuntary inability to pay their mortgage obligation, require payment reduction to resume making a monthly payment, and currently have a below market interest rate. This document briefly discusses a special servicing option for servicers to utilize to continue assisting struggling borrowers who seek loss mitigation alternatives, regardless of the nature of their hardship.
Market Impacts
Creation of new Payment Supplement Account (PSA) demonstration program providing servicers with additional loss mitigation tool to assist struggling borrowers with below-market interest rates who require payment reduction; PSA option is restricted as 'last option in the loss mitigation waterfall' - servicers must determine borrower is not eligible for any other retention solution prior to solicitation; Servicers must establish separate, non-interest-bearing custodial accounts with FDIC or NCUA insured institutions for PSA funds, with specific account requirements and restrictions on fund usage; Enhanced reporting requirements create market opportunity for technology providers specializing in mortgage servicing reporting and data management systems; 30% maximum MRA limit on unpaid principal balance creates financial barrier for severely distressed borrowers with higher loan balances
Validated Company Impacts
Mr. Cooper Group Inc.
Mr. Cooper Group is the largest residential mortgage servicer in the U.S., directly aligning with the rule's focus on mortgage servicing and loss mitigation options. The company's core servicing operations would be directly impacted by the Payment Supplement Account requirements, reporting obligations, and loss mitigation waterfall procedures. The rule's focus on mortgage servicing loss mitigation aligns moderately with the company's 'Servicing Portfolio Growth' operational risk, as it introduces new requirements that could strain operations. However, the rule's specific PSA program and below-market interest rate focus do not directly address the company's primary financial risks like interest rate fluctuations or channel mix shifts.