The Federal Housing Administration’s proposed implementation of a new rule removing the face-to-face meeting requirement for certain mortgagees could actually increase the complexity and risk of the borrower engagement process, the American Bankers Association and three associations said today in a joint letter to the agency.
In August, FHA issued a final rule that made permanent a pandemic-related rule that waives the Department of Housing and Urban Development’s requirement for mortgagees to meet in person with borrowers who are in default on their mortgage payments. The agency has since published a draft mortgagee letter outlining how the policy change will be implemented. ABA and the other associations support providing more flexibility in the engagement processes, but said the draft letter could make the process more onerous as it is “vague and operationally infeasible.”
One issue is the draft letter’s definition of a “verifiable attempt” to contact a borrower to arrange a loss mitigation consultation, which among other things, would not allow servicers to use text messaging, they said. The letter also does not clearly define what constitutes “evidence of delivery or attempted delivery,” and its requirements for the information that must be kept for proving a verifiable attempt are excessively technical and prescriptive. The associations also said that a proposed post-loss mitigation consultation notice should be eliminated entirely, that the policy should include an exception for uninterested borrowers, and that the draft letter should clarify the specific timeline requirements.
Finally, they said the rule’s Jan. 1, 2025, implementation date should be postponed and the draft letter reproposed, which would set off a new round of public comment and review. They also said the temporary waiver that has been in place for face-to-face meetings since the pandemic should be extended to June 1, 2025, if the rule is postponed.
