On June 23, HUD announced 14 policy changes to the FHA Single Family mortgage insurance program designed to lower costs, reduce regulatory burdens, and improve affordability for borrowers seeking FHA-insured mortgages. The changes, issued through a series of mortgagee letters, span origination through servicing and quality control (QC), and were executed in accordance with President Trump’s Executive Order, “Promoting Access to Mortgage Credit” (previously covered by InfoBytes here). The updates bring the total to more than 150 streamlining measures taken in the FHA Single Family program since the start of the current administration.

Among the changes, FHA made appraisal field reviews an optional component of the QC process, removing the prior requirement that mortgagees obtain field reviews on at least 10 percent of origination and underwriting QC samples. The agency estimated the change will save industry participants approximately $3.3 million annually. The updates also increase the maximum number of allowable draws under the Limited 203(k) Rehabilitation Mortgage Insurance Program from two to four per contractor, and permanently exempt early payment defaults resulting from Presidentially Declared Major Disaster Areas from the required monthly QC review sample.

FHA also formally rescinded the requirement for lenders to provide borrowers the Important Notice to Homebuyers Form HUD-92900-B. With respect to loss mitigation, the updates establish a new basis for trial payment plan failure when a borrower fails to accept a TPP agreement for the third time, permit payments under a permanent home retention option to increase after a TPP due to tax or insurance changes, and limit borrower requests for re-review for loss mitigation prior to foreclosure initiation to instances where a change in circumstances impacts eligibility. The changes are effective immediately, except for the loss mitigation updates, which require implementation no later than September 21.