FHA will implement modern borrower default engagement practices

The Federal Housing Administration (FHA) on Wednesday published Mortgagee Letter (ML) 2024-24, which implements guidance first floated this past summer to open up communications between mortgage lenders and defaulted borrowers to remote and electronic methods.

This is designed to broaden the ways for borrowers to meet with lenders following the success of remote communications on housing issues during the COVID-19 pandemic.

The ML “updates the requirements for mortgagees to meet with borrowers in default” while also allowing lenders “to satisfy the meeting requirement by giving them the ability to use alternative communication methods to discuss available loss mitigation options with borrowers and to help them keep them in their homes,” FHA stated.

The guidance is effective immediately and applies to all FHA Title II forward mortgage programs, according to the letter.

“This ML also contains alternative interim procedures for engaging borrowers in default,” FHA explained. “These interim procedures are effective Jan. 1, 2025, through June 30, 2025. These interim procedures give mortgagees the ability to maintain their current operations while working towards implementing the ML’s permanent provisions, which may be implemented immediately but must be implemented no later than July 1, 2025.”

In mid-2023, the U.S. Department of Housing and Urban Development (HUD) signaled that it would explore such a policy. It said that the rule as previously enforced was outdated and did not account for modern methods of communication that would comply with personal information protections for the involved parties.

FHA published a draft ML to its Single Family Drafting Table soon afterward, but the regulation as published in the Federal Register still emphasized that lenders should make an effort to conduct a face-to-face meeting. But that rule — scheduled to go into effect on Jan. 1, 2025 — adds provisions in which an in-person meeting is not required.

In the final weeks of the Biden administration, FHA has published multiple Mortgagee Letters as the current leadership team prepares to leave office. Prior to the Thanksgiving holiday, the agency published its forward and reverse mortgage lending limits. Earlier this week, it published a separate ML that extended the time frame for reporting a cybersecurity incident after detection from 12 to 36 hours.