The Federal Housing Administration (FHA) has issued Mortgagee Letter (ML 2025-14), which clarifies and streamlines servicing requirements for FHA-insured loans—reducing burdens on servicers, while maintaining strong borrower protections.
The updated guidance provided in Mortgagee Letter 2025-14 (Updates to Modernization of Engagement With Borrowers in Default and Loss Mitigation) expands borrower contact requirements in a way that makes it easier to reach more borrowers in a timely and effective manner. FHA also provided clarity in Reg X requirements and issued technical corrections to recent loss mitigation policies.
Released in December 2024, Mortgagee Letter 2024-24 (Modernization of Engagement with Borrowers in Default), was issued to expand ways for borrowers to meet with lenders following the success of remote meetings throughout the pandemic. After review of this policy, originally planned to go into effect July 1, the U.S. Department of Housing & Urban Development (HUD) felt that the provisions in the prior guidance required changes.
“The Community Home Lenders of America commends FHA for thoughtfully eliminating unnecessarily burdensome servicing rules while preserving the critical duty of servicers to work with distressed borrowers to avoid foreclosure,” said Scott Olson, Executive Director of the Community Home Lenders of America (CHLA), a national non-profit association focused on small and mid-sized community-based mortgage lenders. “This is a meaningful step toward aligning compliance with practical servicing realities—particularly for independent mortgage banks that are on the front lines of helping borrowers stay in their homes.”
Under the new guidance, effective July 1, 2025, the mortgagee must not charge the borrower for the following services:
- Costs of telephone calls, certified mail, arranging, and conducting interviews, or other activities that are normally considered a part of servicing activity.
- Preparing and providing evidence of payoff, reconveyance, or termination of the mortgage.
- Providing information essential to the payoff of the mortgage.
- Recording the payoff of the mortgage in states where recordation is the responsibility of the mortgagee.
- Fees for services performed by attorneys or trustees who are salaried members of the mortgagee’s staff.
- The mortgagee’s use of an independent contractor, such as services related to the interview or a tax service, to furnish tax data and information necessary to pay property taxes or make the payments on behalf of the mortgagee.
“The revised rule is vastly better than the first draft. The rule mostly achieves the same results without overburdening the process,” said Donna Schmidt, President & CEO, DLS Servicing. “Specific requirements which would have proven extremely difficult to small servicers with geographically diverse portfolios have been removed. These include requiring that contact attempts be made during certain times of the day and requiring meetings during specific hours within a property’s time zone. Mortgage servicers and borrowers alike will both benefit from the new approach, and more successful outcomes can be expected.”
Click here for more on FHA’s Mortgagee Letter 2025-14.
