News
Major Changes are Coming to the Servicing Requirements for FHA Loans
On June 3, 2025, the Federal Housing Administration (FHA) published Mortgagee Letter (ML) 2025-14, which updates and revises HUD's servicing and loss mitigation requirements for FHA-insured loans. It replaces certain requirements established by ML 2024-24 and incorporates technical corrections to MLs 2025-06 and 2025-12. The updates will be codified in HUD Handbook 4000.1 and affect all FHA Title II Single Family forward mortgages.
Broadly speaking, ML 2025-14: (i) reduces burdens from ML 2024-24 by allowing more flexible communication methods; (ii) aligns FHA servicing requirements with Regulation X (12 C.F.R. § 1024.39); (iii) expands documentation requirements for borrower contact and interview efforts; (iv) reinforces structured timelines for contact, notices, and loss mitigation evaluations; and, (vi) phases out COVID-19 loss mitigation tools and replaces them with standardized processes.
The changes effective July 1, 2025, update the requirements related to borrower engagement and early delinquency servicing, and impact the following provisions in HUD Handbook 4000.1:
- III.A.1.f.ii(B) – Prohibited Fees: Prohibits charging borrowers for interviews, internal staff attorney work, tax data services, etc.
- III.A.2.h.iii(B) – Communication Timeline: Establishes detailed contact and notification steps on Days 10, 25, 30, 32, 45, 61, and 90 of delinquency.
- III.A.2.h.xii – Borrower Interview: Replaces the “Loss Mitigation Consultation” with a more flexible interview requirement using various communication methods.
- III.A.3.c.ii(A) – Section 247 Assignments: Clarifies the requirement to attempt an interview at least 30 days before applying for assignment to HUD.
- IV.A.2.b.i(C) – Hawaiian Home Lands Claim Submission: Specifies the documentation, timing, and method of submitting HUD-27011 forms after borrower
The changes effective October 1, 2025, address broader loss mitigation rules and the phase-out of COVID-19 tools:
- III.A.2.g.vii(A)(1) – Notice of Homeownership Counseling: Revises the content and method for providing HUD housing counseling information.
- III.A.2.i – Loss Mitigation Options: Codifies end of COVID-19 ALM and Recovery Options as of 9/30/2025; consolidates rules for permanent retention options.
- III.A.2.i.ii(A)(3) – Repayment Plan Borrower Qualifications: Adds arrearage limits, ineligibility rules, and criteria for mortgage revenue bond loans.
- III.A.2.i.iii(A)(1) – Mortgage Status: Establishes delinquency threshold (61+ days) for sending TPP agreements, with allowances for imminent default.
- III.A.2.i.iii(B)(2) – Borrower Affordability Attestation: Allows for verbal, electronic, or written attestations with mandatory 30-day return period and follow-up.
- III.A.2.i.iii(C) – Trial Payment Plan (TPP): Sets clear durations: 3 months standard, 4 months for imminent default, 6 months for non-borrowers under exempt transfers.
- III.A.2.i.v(F)(1)(a) – 30-Year Standalone Loan Modification: Provides exception from 25% P&I reduction if borrower affirms ability to resume payment.
- III.A.2.l.iv(A) – Disaster Forbearance for PDMDAs: Standardizes forbearance policy for disaster-impacted areas and waives certain foreclosure prerequisites.
- III.A.3.c.i(C) – Section 247 Loss Mitigation Program: Lists acceptable options (no Partial Claims); aligns tools with Hawaiian state law limitations.
