FHA Publishes Mortgagee Letters to Boost Affordability

FHA recently announced 14 policy updates through a series of Mortgagee Letters (MLs).  These initiatives aim to reduce operational costs, eliminate redundant regulatory hurdles, and enhance mortgage credit access.  Among other matters, FHA has made appraisal field review requirements an optional component of the Quality Control (QC) process, eliminating the previous mandate that mortgagees obtain field reviews on at least 10% of origination and underwriting QC samples.  Additionally, the FHA has permanently exempted early payment defaults resulting from Presidentially Declared Major Disaster Areas (PDMDA) from required monthly QC review samples and formally rescinded the requirement for lenders to provide borrowers Form HUD-92900-B. 

For the Limited 203(k) Rehabilitation Mortgage Insurance Program, FHA has increased the maximum number of allowable draws from two to four per contractor.  Further streamlining efforts include removing redundant “Identifying Patterns” requirements, eliminating outdated document accessibility mandates, and rescinding the requirement for the mortgagee officer in charge to be a full-time corporate officer exclusively employed by the mortgagee.  These adjustments are designed to alleviate administrative burdens and provide lenders with more flexibility to tailor their internal controls based on their specific risk profiles.

Finally, FHA has modernized its loss mitigation requirements to make Trial Payments Plans (TPPs) more efficient.  New policies establish a formal basis for TPP failure when a borrower fails to accept a TPP agreement for the third time, permit payment increases under permanent home retention options due to tax or insurance changes, and limit borrower re-review requests prior to foreclosure to instances where a change in circumstances impacts eligibility.

While most of these changes are effective immediately, mortgagees must implement the loss mitigation updates no later than September 21, 2026.