MBA, Industry Groups Send Joint Letter on Engagement of Borrowers in Default
The Mortgage Bankers Association, American Bankers Association, Housing Policy Council and the National Mortgage Servicing Association sent a joint letter on Sept. 13 to Assistant Secretary for Housing and Federal Housing Commissioner Julia Gordon, to serve as 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“The industry has for many years urged HUD and FHA to end the outdated requirement for FHA insured mortgage servicers to conduct in-person meetings (‘face-to-face’) with borrowers who are in default on their mortgage payments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,” the letter reads.
But, the groups wanted to highlight a number of issues it has identified with the FHA’s recent draft of the Modernization of Engagement of Borrowers in Default.
“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,” the letter continued. “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.”
Specifically, the groups pointed to the current mortgagee letter as being vague and operationally infeasible; the need for modernization to align with existing early intervention requirements; the need for modernization to remain operationally feasible; the need to define ‘verifiable attempt’; that documentation requirements should be streamlined to modernize process; that other technical issues should be addressed; and that additional time is needed for implementation.
Click here to see the full letter and recommendations.
