HUD Issues Mortgagee Letter Modernizing Engagement with Borrowers in Default

HUD recently issued Mortgagee Letter 2025-14 (ML), which streamlines engagement policies with borrowers in default and loss mitigation options and requirements for FHA-insured mortgage loans.

In the ML, HUD noted its policies on engagement with borrowers in default required modernization as the previous enacted requirements in Mortgagee Letter 2024-24 were “unnecessarily burdensome.”  The previous requirements were designed to broaden avenues for borrowers in default to meet with mortgagees via remote means.  In an effort to reduce the burden of mortgagees, the ML replaces “Loss Mitigation Consultation” with “Interview,” defines the term “Interview,” and simplifies mortgagee obligations under the Early Default Intervention provisions and how mortgagees can satisfy the reasonable effort requirements.  These new changes are effective July 1, 2025.

In addition, the ML provides technical corrections to loss mitigation options and requirements previously published in Mortgagee Letter 2025-06 and the revisions in Mortgagee Letter 2025-12 (Prior MLs).  This includes ending certain COVID-era loss-mitigation practices in September 2025 and clarifying requirements set forth in the Prior MLs to tighten rules on repayment plan eligibility and borrower attestations for affordability of such plans.  These latter changes are effective October 1, 2025.