The Federal Housing Administration (FHA) on Wednesday published a new proposed Mortgagee Letter (ML) that offers an early look at policies designed to expand contact options with mortgage borrowers who are in default.
Published on FHA’s Single Family Drafting Table — an online portal where proposed U.S. Department of Housing and Urban Development (HUD) single-family policies can be reviewed prior to going into full effect — the new “Modernization of Engagement with Borrowers in Default” document can be reviewed by stakeholders. FHA requests feedback by Sept. 13, 2024.
Earlier this month, FHA published a final rule in the Federal Register to expand communications between mortgage lenders and defaulted borrowers to remote and electronic methods. This would broaden the ways for borrowers to meet with lenders following the success of remote communications on housing issues during the COVID-19 pandemic.
The draft ML specifies that this policy would apply only to FHA’s Title II single-family forward mortgage programs but not its Home Equity Conversion Mortgage (HECM) program for older borrowers.
HUD signaled as early as last summer that it would propose such a policy. The rule as currently enforced, HUD explained, is outdated and does not account for modern methods of communication that would comply with the protection of personal information for those involved in a transaction.
The final rule is scheduled to go into effect on Jan. 1, 2025.
“These updates will allow mortgagees to use a wider variety of communication options to schedule and meet at the borrower’s convenience,” the proposed ML explains. “This increased flexibility will particularly assist delinquent borrowers with disabilities, including borrowers who are immunocompromised, and borrowers whose work or family obligations may otherwise prevent them from participating in an in-person meeting.”
The regulation as published in the Federal Register earlier this month still emphasizes that lenders should make an effort to conduct a face-to-face meeting. But it adds provisions in which an in-person meeting is not required.
A face-to-face meeting is not required if the lender does not reside in the mortgaged property, or if the mortgaged property is not within 200 miles of the lender, servicer or a corresponding branch office. Other circumstances include if a borrower will not cooperate with an in-person meeting request, or if an effort to arrange such a meeting is unsuccessful.