FHA posts near-final draft of updated borrower contact rules

The Federal Housing Administration on Wednesday released what could be the final draft of modernized rules for interacting with borrowers who have distressed mortgages.

The draft replacement for in-person meeting requirements is largely unchanged from an earlier one. Only "minor, substantive revisions" have been made, according to the Department of Housing and Urban Development.

If finalized, the modernized rules could end a temporary, partial exemption from the original mandate. That exemption was put in place due to the need for remote contact during the pandemic and has been sustained pending a time when takeaways from that experience could be incorporated into long-term policy.

Remote communication was found to have several long-term advantages, according to HUD.

"The increased flexibility will assist mortgagors with disabilities, immuno-compromised mortgagors, and mortgagors with limited English proficiency," the department noted in comments on the rule that is posted on its single-family drafting table.

Rather than having to schedule meetings with borrowers with FHA-insured loans at their properties, servicers would be able to continue using automated methods in default intervention under the proposed update.

The industry also would no longer have some exemptions that were available in the original rule for borrowers not living in mortgaged properties, or who have a loan on a home that is more than 200 miles from their lender/servicer or its nearest branch office.

Outside of certain exemptions like the 200-mile rule, prior to the pandemic servicers had to meet in-person with borrowers or make a reasonable effort to do so when obligors missed three payments.

Comments on the latest version of modernized rule are due by Sept. 13.