FHA Permanently Removes Face-to-Face Meeting Requirement for Defaulted Borrowers

The Federal Housing Administration (FHA) has permanently waived the requirement for mortgagees to meet face-to-face with borrowers who are in default, making permanent a key Covid-era change.

On August 2, the FHA released a final rule eliminating the requirement for mortgagees to make at least one in-person trip to the mortgaged property to schedule a meeting with the borrower. In what it called a “modernization” of engagement with mortgagors in default, the regulator said these face-to-face meetings can permanently be replaced by remote, technology-driven communication methods.

“This rule modernizes those requirements by amending HUD's [the Department of Housing and Urban Development’s] regulations to better align with advances in electronic communication technology and mortgagor engagement preferences while preserving consumer protections,”  the regulator said.

It also expanded the rule to apply to all mortgagors in default, including those who do not reside in the mortgaged property and those with a mortgaged property not within 200 miles of their mortgagee.

The suspension of in-person meeting requirements was first introduced as a temporary measure in March 2020, in response to the outbreak of Covid-19. It was made permanent amid fervent lobbying by housing associations.

The Mortgage Bankers Association (MBA), American Bankers Association (ABA), Housing Policy Council (HPC) and the National Mortgage Servicing Association (NMSA) all joined forces last year to urge the FHA to make the change permanent, calling in-person meetings an “anachronistic requirement”.

“As our industry continues to emerge from the Covid-19 pandemic and mortgage servicers simplify processes to improve borrower outcomes, borrowers facing financial hardship should be able to continue to engage with their servicers through methods of contact that have proven their effectiveness and ability to reach borrowers,”  the four associations said.

The change comes amid a broader push for modernized support for homeowners who are struggling to pay their mortgages.

Last month, the Consumer Financial Protection Bureau (CFPB) proposed a new rule to require banks and other mortgage servicers to prioritize helping homeowners over initiating foreclosure proceedings while removing “unnecessary obstacles”.

The proposal aims to streamline the process for borrowers when they seek assistance, including by reducing paperwork, improving communication and capping fees for borrowers while they assess potential assistance options.