Mortgage lenders welcomed the rescissions the Department of Housing and Urban Development made to 12 Federal Housing Administration policies, noting they would make the program more attractive for participants.
They could even be a starting point for
These revisions might affect other segments of the housing finance ecosphere including appraisals and possibly even private mortgage insurance,
The general consensus among those National Mortgage News spoke with is that these are at least a step in the right direction for improvements to the FHA insurance program.
Why is HUD making these changes?
"None of these shifts are seismic, but at first blush they are all thoughtful, measured, and positive for the mortgage ecosystem," said Isaac Boltansky, head of public policy at Pennymac, in a comment.
HUD Secretary Scott Turner called the changes "bold, necessary and long overdue," as the Trump administration is slashing bureaucratic red tape which drives up costs.
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"Every hardworking American deserves a fair shot at owning a home — the American Dream should never be buried under a pile of regulations," Turner said in a press release. "These changes open doors for families and lenders, unlocking opportunities nationwide."
While the changes make the FHA program more attractive, the biggest competitive advantage that PMI has remains, which is the life of loan premium. But the amount of overlap in terms of customers has declined in recent years, and this is not likely to cause a large shift between products.
What policies were rescinded in the mortgagee letters?
The 12 retractions were made in a series of five mortgagee letters.
A pair of the letters affected the work of appraisers, and among other things, removed the requirement for underwriters to use an appraiser's opinion of remaining economic life, reduced photograph requirements and a "redundant requirement" involving the use of additional comparable sales in certain markets.
Earlier this year, Turner cancelled
The effect on appraisals from these changes
The Appraisal Institute commended HUD for modernizing the FHA appraisal policy in Mortgagee Letter 2025-18.
"By rescinding outdated and duplicative requirements, FHA has brought its protocols into closer alignment with prevailing appraisal standards and practices," a statement from the organization said. "These reforms enhance clarity for appraisers, reduce unnecessary burdens, and support the delivery of credible valuations — benefiting consumers, lenders, and the broader housing market alike."
But its support for the change did have a caveat, urging regulators to proceed with caution on "overreliance" in the use of internal collateral valuation tools and analytics.
"These systems must be continuously refreshed with reliable, field-verified appraisal data to avoid the spread of 'data cancer' — systemic flaws that compromise the integrity of outputs and the soundness of collateral risk management," the Appraisal Institute said. "Efforts to reduce costs should not come at the expense of prudent risk oversight or the elimination of safeguards that ensure long-term program stability."
How lending in declared natural disaster areas is impacted
A separate letter, 2025-19, removed "mandatory pre-endorsement inspection requirements for properties located in presidentially declared major disaster areas." Those inspections required the use of an FHA-approved appraiser and reportedly led in some instances to a "lengthy waiting period."
This gives mortgage lenders "greater discretion for inspections in those presidentially declared disaster areas," said Darnell Peterson, manager of residential policy and strategic industry engagement at the Mortgage Bankers Association.
"Oftentimes a full county can be cited in the presidential declared disaster area, but the full county wasn't impacted by the disaster," he said, using
The change allows lenders to have a "more responsive approach to disaster recovery" he said.
Those disaster area declarations were not "super specifically tailored," added Jay Wright, a partner at Bradley who advises mortgage lenders and financial institutions on changes in the regulatory environment.
The rule change allows borrowers to avoid the "laborious process" of getting an FHA roster appraiser.
But this specific revision doesn't let the lender off the hook, Wright said, noting the mortgagee letter points to other HUD regulations that shows if the property is damaged, it's going to be surchargable to the lender.
The effect on FHA's safety and soundness
Still for all of these revisions, "I've got every confidence that HUD was looking at this through the lens of what is the net impact to the [Mutual Mortgage Insurance Fund], and if they concluded that it was that it was marginal at best, but it's going to allow people to buy houses more quickly and more easily," Wright said.
The MMIF has
"Overall these give lenders a lot more flexibility to help borrowers by cutting a lot of the red tape and making them more efficient," said Peterson.
No longer will FHA direct endorsement underwriters have to be full-time employees of the lender. That does not remove the employment requirement. "Mortgagees must continue to ensure their DE underwriters are permanent employees of a single mortgagee and underwriting functions are not contracted out," this letter said.
Why was the SCIF form eliminated?
FHA will no longer
Turner also cancelled a November 2024 mortgagee letter implementing flood elevation standards for new construction in special flood hazard areas.
These changes could be a move in the right direction to bring banks back into the FHA program, Peterson said. Several
How the mortgage industry views the new FHA policies
The Community Home Lenders of America has been vocal in embracing reform to FHA (along with Ginnie Mae), including
"CHLA appreciates these very constructive changes the Administration is making to streamline the FHA loan origination process," Scott Olson, executive director, said in a statement. "They will make it easier for lenders to reach qualified borrowers that need an FHA loan to buy their first home."
The rescissions "are technical and administrative tweaks that should reduce regulatory burden without impacting borrowers, credit access, or the FHA's mission," Pennymac's Boltansky said.
Atlantic Bay Mortgage Group also expressed appreciation for Turner "making real, practical updates through the latest Mortgagee Letters," said Chrissy Brown, chief operating officer, in a statement. "Rolling back outdated appraisal rules, removing unnecessary paperwork like the SCIF, and easing flood zone construction standards — these are smart moves that create efficiencies in the home loan process, making it easier for our borrowers to move forward with confidence."
The move is consistent with the Trump administration's directive to eliminate regulatory burdens largely imposed on borrowers, as well as lenders in certain instances, Wright said.
"The idea is to get as many people into the nation's existing housing stock as they can," Wright said. "These are not changes that are fundamentally overhauling creditworthiness of borrowers but they do eliminate some of the paperwork and some of the difficulties that an FHA borrower was going to have to go through in order to obtain the kind of loan that is geared primarily for first-time home buyers."
