FHA Publishes Rule Regarding Modernizing Engagement with Borrowers in Default

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The Federal Housing Administration on Friday published a final rule, Modernization of Engagement with Mortgagors in Default, in the Federal Register.  

The rule updates HUD’s current regulation (24 CFR 203.604) that requires mortgagees to meet in person with borrowers who are in default on their mortgage payments. It allows the use of electronic and other remote methods of communication to satisfy HUD’s requirement to meet with a borrower who is in default.

“HUD’s updated regulation will align with advances in electronic communication technology and borrower engagement preferences while preserving necessary consumer protections,” HUD said.

The provisions become effective on January 1, 2025. 

FHA noted it will soon post a draft of the Mortgagee Letter that will implement the provisions of the rule on the Single Family Housing Drafting Table for stakeholder feedback. FHA will consider all feedback received before publishing a final Mortgagee Letter.   F

HA issued regulatory and Handbook waivers permitting mortgage borrowers to use electronic and remote means of communication during the COVID-19 pandemic. These waivers were extended on April 4, 2024. They remain in effect through Jan. 1, 2025 unless the final rule amending 24 CFR § 203.604 and a ML or Single Family Housing Policy Handbook 4000.1 (Handbook 4000.1) update amending Section III.A.2.h.xii. become effective before.