Joint Comments to FHA on the Proposed New Loss Mitigation Waterfall

Dear Commissioner Gordon:

Thank you for the opportunity to comment on the Federal Housing Administration’s (FHA) proposal to update the Servicing and Loss Mitigation, Claims, and Dispositions sections and Appendix 4.0 of the Single-Family Housing Policy Handbook. The Mortgage Bankers Association (MBA), American Bankers Association (ABA), and National Mortgage Servicing Association (NMSA) welcome FHA's proposal to establish a permanent loss mitigation waterfall after the upcoming COVID-19 Recovery Loss Mitigation Waterfall (COVID-19 Waterfall) expires on April 30, 2025. To that end, we stress the importance of FHA finalizing its proposal and implementing the necessary improvements promptly before publishing effective policy guidance.

FHA's proposal reflects much of the feedback that MBA previously provided, advancing two policy objectives that have guided its longstanding advocacy. First, as FHA’s proposal accompanies the expiration of FHA-HAMP, a full-document review, the use of streamlined loss mitigation solutions with targeted payment reduction is critical to ensure sustainable borrower performance and positive outcomes to avoid foreclosure. Additionally, FHA's proposal creates a durable loss mitigation waterfall that provides borrowers and mortgage servicers with effective tools to help distressed borrowers in any market environment, regardless of a borrower’s financial hardship. We support a permanent loss mitigation waterfall that appropriately balances the shared interests of both borrower's and servicers’ in preserving affordable homeownership and FHA's statutory obligation to protect the Insurance Fund.

Nonetheless, while FHA’s proposal thoughtfully considers the lessons learned from the COVID-19 pandemic, FHA should make additional improvements to its proposed guidance before mortgage servicers adjust their operations ahead of a mandatory compliance deadline.

Download the joint comment letter to read the full text.