Joint Trades Letter on the Modernization of Engagement with Borrowers in Default Mortgagee Letter

Dear Commissioner Gordon,

The American Bankers Association, Housing Policy Council, Mortgage Bankers Association, and the National Mortgage Servicing Association (the Associations) appreciate the opportunity to submit comments on the Draft Mortgagee Letter (ML), Modernization of Engagement of Borrowers in Default.

The industry has for many years urged HUD and FHA to end the outdated requirement for FHA-insured mortgage servicers to conduct in-person meetings ("face-to-face") with borrowers who are in default on their mortgage payments (and, by extension, the onerous efforts necessary to schedule such meetings). We support the goal of providing greater flexibility for mortgage servicers to educate borrowers on available loss mitigation solutions utilizing modern communication technology in a manner that preserves important consumer protections. We believe that the adoption of newer technologies holds the potential to improve borrower outcomes and reduce costs for servicers.

We also commend FHA for utilizing its Drafting Table to receive feedback on the Modernization of Engagement of Borrower in Default. This best practice contributes meaningfully to more effective policy making.

However, after careful review, we are concerned that the proposed changes to the borrower engagement process would increase complexity and level of difficulty to execute, and they would increase the associated risk and cost for participants. Specifically, FHA’s new definition of a "Verifiable Attempt" as the lynchpin of its proposal is operationally impractical without providing clear guidance for servicers to document compliance. Thus, we have determined that the proposed ML is inconsistent with the stated purposes of FHA’s efforts to modernize outreach requirements. As such, it is imperative that FHA extend the regulatory waiver until June 1, 2025, which would allow time to reform the ML guidance and provide servicers with sufficient implementation time once the changes are finalized.

Download the joint comment letter to read the full text.