The Federal Housing Administration (FHA) announced on Friday that it has published a final rule in the Federal Register opening up communications between mortgage lenders and defaulted borrowers to remote and electronic methods. This is designed to broaden the ways for borrowers to meet with lenders following the success of remote communications 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(HUD) signaled last summer that it would explore such a policy, saying that the rule as currently enforced is outdated and does not account for modern methods of communication that would comply with the protection of personal information for the involved parties.
“This final rule updates HUD’s current regulation that requires mortgagees to meet in person with borrowers who are in default on their mortgage payments,” the announcement stated. “The final rule allows for the use of electronic and other remote methods of communication to satisfy HUD’s requirement to meet with a borrower who is in default.”
This updated regulation aims to “align with advances in electronic communication technology and borrower engagement preferences while preserving necessary consumer protections,” FHA explained. The final rule is scheduled to go into effect on Jan. 1, 2025.
The regulation as published in the Federal Register still emphasizes that lenders should make an effort to conduct a face-to-face meeting, but it adds four provisions in which an in-person meeting is not required.
A face-to-face meeting is not required if the lender does not reside in the mortgaged property, or if the mortgaged property is not within 200 miles of the lender, servicer or a corresponding branch office.
Other circumstances are if the borrower “has clearly indicated that he will not cooperate in the interview,” if a repayment plan consistent with the borrower’s circumstances is engaged, making a meeting redundant, or if a “reasonable effort to arrange a meeting is unsuccessful.”
HUD added that a draft Mortgagee Letter (ML) detailing these provisions will soon be published on its Single Family Drafting Table, an online portal where proposed HUD single-family policies can be reviewed prior to going into full effect.
Previously, FHA issued regulatory waivers that permitted lenders to use remote communication tools during the pandemic, which were most recently extended this past April to Jan. 1, 2025.
