FHA extends deadline for part of 'face-to-face' rule update

The Federal Housing Administration's new rules for contacting borrowers in default generally make the process easier, but the FHA recently acknowledged part of the update will require a little more time to set up.

The updated requirements for what the Department of Housing and Urban Development used to call "face-to-face" rules will require servicers to expand outreach beyond borrowers who are either within a 200 mile radius of a mortgagee/branch office or are owner-occupants.

Ballard Spahr's recent analysis of the rule published earlier in the Federal Register indicates the leeway in the Jan. 1 deadline for complying with the new rule applies specifically to borrowers in those expanded categories.

"HUD decided to extend to July 1, 2025 the requirements to follow the new role for conducting meetings in such circumstances," according to Ballard Spahr's Compliance Monitor.

The need to work remotely amid the pandemic paved the way for FHA to phase in modernized methods for distressed borrower communication next year.

The department found remote communication had several long-term advantages.

"The increased flexibility will assist mortgagors with disabilities, immuno-compromised mortgagors, and mortgagors with limited English proficiency," HUD noted in comments about the rule posted on the administration's single-family drafting table earlier this year.

The administration released its first concrete proposal for updating face-to-face requirements in 2023.

The FHA previously required servicers to meet in-person with borrowers or make a reasonable effort to do so when obligors missed three payments. It instituted a temporary, partial waiver from this requirement during the pandemic. The administration subsequently extended the waiver several times, most recently until January.

Mortgage companies must still make "at least two verifiable attempts" to contact borrowers in default under the new rule.