In a move that’s designed to simplify prior policy, the Federal Housing Administration (FHA) on Tuesday published a new Mortgagee Letter (ML) that targets borrower default engagement practices that were published in the waning days of the Biden administration.
ML 2025-14 makes changes to final guidance first floated last summer to open up communications between mortgage lenders and defaulted borrowers to remote and electronic methods.
The original guidance, codified in December’s ML 2024-24, was 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.
But after reviewing the policy that was scheduled to go into effect July 1, the new U.S. Department of Housing and Urban Development (HUD) leadership under the Trump administration has determined that the provisions in the prior guidance were too onerous and are making some changes.
“HUD has since determined that the permanent requirements established in ML 2024-24 are unnecessarily burdensome,” Tuesday’s letter reads in part. “Through this ML, HUD is updating the permanent policies established in ML 2024-24, effective July 1, 2025.
“This ML also expands what may be utilized to meet the reasonable effort requirements, including allowing [lenders] to demonstrate compliance with [regulations].”
The new ML also makes technical corrections to guidance that was published in January, shortly before Trump’s inauguration, which extended COVID-19 recovery options to February 2026. The FHA at the time aimed to give stakeholders “time to implement the new loss mitigation, claims, and reporting requirements.”
This week’s letter said that COVID-era loss-mitigation practices will end in September 2025, but cases already in the pipeline and approved after that point will be allowed to proceed.
Terms are also updated in the new letter. What was previously known as a “loss mitigation consultation” is now simply known as an “interview,” and the definition and burden of a “reasonable effort” to contact an impacted borrower has also been changed.
Early borrower engagement in the process remains encouraged, but the new guidance is designed to give lenders some procedural flexibility in the process of achieving the statutory outcome.
Rules on repayment plan eligibility have also been tightened in the new letter, and an attestation from a borrower for the affordability of such plans will now be required.
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