The Federal Housing Administration has revised updates planned for rules around contacting and offering options to distressed borrowers.
The FHA has removed required outreach at particular times from
Overall, the new version of the loss mit and borrower contact requirements will be more cost effective for servicers, according to the Department of Housing and Urban Development affiliate, which insures certain affordability loans often utilized by first-time homebuyers.
"These targeted policy updates expand the options available for mortgagees to reasonably engage with borrowers in default and are designed to help them achieve significant savings," FHA said in a bulletin.
Reactions to the FHA's distressed borrower rule revisions
One aspect of loss mitigation some industry experts think the revision improves are certain procedures used to test distressed borrowers' ability to reperform if their loan terms are modified.
"This FHA policy shift is workable and thoughtful. It modernizes some of the requirements on communication to reflect that it's 2025 and provides some operational clarity on trial payment plans," said Isaac Boltansky, head of public policy at Pennymac, in an email.
Industry representatives also indicated changes to the requirements that give servicers more leeway would be helpful to more moderate-sized companies in particular.
"This is a meaningful step toward aligning compliance with practical servicing realities," said Scott Olson, executive director of the
Previous loss mit requirements for interviews during certain hours within a borrower's time zone "would have proven extremely difficult to small servicers with geographically diverse portfolios," said Donna Schmidt, president and CEO at DLS Servicing and WaterfallCalc.
"The revised rule is a significant improvement over the first draft, accomplishing the same basic results without nitpicking requirements that overshadow the spirit of the process. I believe both borrowers and servicers will benefit from the new approach," she said in email.
