FHA streamlines mortgage servicing operational requirements

Agency Rule-Making & Guidance FHA HUD Mortgages Mortgage Servicing Consumer Finance Loss Mitigation

On April 19, FHA issued an update to Section III of the Single Family Housing Policy Handbook 4000.1, which streamlines many standard mortgage servicing operational requirements. The updates also incorporate FHA actions taken to support borrowers experiencing Covid-19-related financial hardships. The changes/updates include:

• A revised loss mitigation home retention “waterfall” to help servicers quickly review borrowers in danger of foreclosure for a permanent FHA Home Affordable Modification Program option without a lengthy forbearance. FHA noted in its announcement that this process “has been proven to be highly effective at helping borrowers avoid redefault and foreclosure.”
• Streamlined documentation requirements designed “to avoid unnecessary delays” and be more closely aligned “with standard industry servicing practices.” One example includes removing signature requirements on trial payment plans.
• A revised structure for certain allowable costs and fees corresponding with other industry participants’ fee structures.

The changes take effect August 17.