FHA aims to enable remote communication between defaulted borrowers and lenders

The Federal Housing Administration (FHA) announced Friday that it has published a final rule in the federal register opening up communications between mortgage lenders and defaulting borrowers to remote and electronic methods. This is intended to broaden the opportunities for borrowers to meet with lenders following the success of remote communication on housing issues during the COVID-19 pandemic.

The U.S. Department of Housing and Urban Development (HUD) signaled last summer that it would explore such a policy, saying the rule as currently applied is outdated and does not take into account modern communications methods that would comply with the protection of personal information for the parties involved.

“This final rule is an update to HUD’s current regulations, which require mortgage holders to meet in person with borrowers who are in default on their mortgage payments,” the announcement said. “The final rule permits the use of electronic and other remote communication methods to comply with HUD’s requirement to meet with a borrower in default.”

These updated regulations aim to “keep pace with advances in electronic communications technology and borrower engagement preferences, while maintaining necessary consumer protections,” FHA explains. The final rule is expected to go into effect on January 1, 2025.

The regulation as published in the Federal Register still emphasizes that lenders must make every effort to arrange an in-person meeting, but adds four provisions in which an in-person meeting is not required.

An in-person meeting is not required if the lender does not reside on the mortgaged property, or if the mortgaged property is not within 200 miles of the lender, servicer, or an associated branch office.

Other circumstances include if the borrower has “clearly indicated that he or she will not participate in the discussion,” if a repayment plan is set up that is consistent with the borrower’s circumstances, thus eliminating the need for a meeting, or if a “reasonable attempt to unable to arrange a meeting. ”

HUD added that a draft mortgage letter (ML) detailing these provisions will soon be published on the Single Family Drafting Table, an online portal where HUD’s proposed single-family policy can be reviewed before it becomes fully effective.

Previously, the FHA issued regulatory waivers allowing lenders to use remote communication tools during the pandemic, which were most recently extended last April until January 1, 2025.