FHA Proposes Update to Limited 203(k) Draw Request Policy

FHA recently announced FHA Info 2025-53 and a proposed update to its Limited 203(k) Rehabilitation Mortgage Insurance Program.  This proposal focuses on increasing the maximum number of draw requests allowed for contractors under the Limited 203(k) program. Currently restricted to a maximum of two draws per contractor, the new draft ML proposes to increase the maximum number of draws to four draws per contractor and further provides that the Mortgagee may split a draw into two separate disbursements.  Splitting a draw in this manner does not count toward the maximum number of draws.

The proposed policy shift is a direct response to industry feedback and seeks to enhance the efficiency of the rehabilitation process. By allowing up to four draw requests, the FHA aims to improve cash flow for contractors, which, in turn, is expected to reduce administrative burden and project risk for all parties involved, ultimately benefiting the FHA’s Mutual Mortgage Insurance Fund.

Interested mortgagees and other industry stakeholders are encouraged to review the full draft Mortgagee Letter (ML), and provide feedback on FHA’s Office of Single Family Housing Drafting Table .  Feedback will be accepted through January 19, 2026.   It is important to remember that this is a draft ML and not yet official departmental policy, meaning current FHA policies remain in effect until a final ML is published.