“Specifically,
we
appreciate
FHA’s
efforts
to
reinstate
a
cap
on
the
number
of
times
a
borrower
can
utilize
a
home-retention
program
and
require
the
successful
completion
of
trial
payments
to
demonstrate
long-term
affordability,”
said

Bob
Broeksmit,
MBA’s
president
and
CEO.
“Together,
these
safeguards
will
improve
sustainability,
protect
the
FHA
insurance
fund,
preserve
borrower
equity,
and
further
align
FHA
with
the
GSEs.”

Acknowledging
current
realities

Broeksmit
added
that
FHA’s
approach
“appropriately
balances
borrower
access
to
streamlined
loss
mitigation
with
prudent
risk
management,”
and
that
it
looked
forward
to
advocating
for
continued
efficiency
in
mortgage
servicing.

Matt
Tully,
chief
compliance
officer
at


Sagent,
said
that
mortgage
loss
mitigation
standards
are
now
being
brought
back
to
“a
pre-COVID
state,”
and
that
FHA
is
acknowledging
that
the
market
has
adjusted
to
current
realities.

“During
COVID,
extended
forbearance
was
needed,
and
some
of
these
policies
were
made
permanent
in
post-COVID
years
until
now,”
Tully
said.
“[Tuesday’s]
FHA
action
acknowledges
that
the
market
has
normalized
and
seeks
to
balance
homeowner
hardship
relief
with
an
FHA
MMI
fund
that’s
stable
over
the
long-term.”

Regarding
one
change
that
will
now
allow
for
one
permanent
loss
mitigation
option
every
24
months
instead
of
every
18
months,
Tully
said
that
such
eligibility
“is
still
favorable”
for
any
borrower
who
becomes
strained.

Scott
Olson,
executive
director
of
the


Community
Home
Lenders
of
America
(CHLA),
said
that
the
action
appropriately
recognizes
that
COVID-era
practices
are
not
representative
of
current
realities.

“Just
as
the
country
has
moved
beyond
COVID,
it
is
time
for
FHA
to
move
beyond
the
2020
COVID
loss
mitigation
framework,”
he
said.
“Homeownership
retention
programs
must
achieve
an
appropriate
balance
between
the
objectives
of
keeping
families
in
their
home
and
protecting
the
safety
and
soundness
of
FHA.
The
changes
FHA
is
making
will
help
achieve
this
balance.”

However,
the
timeline
of
the
changes
was
less
than
ideal
for
Courtney
Thompson,
EVP
of
servicing
at

CMG
Financial.

“From
a
pure
operations
or
supporting
technology
perspective,
it’s
a
bit
uncouth
to
update
a
series
of
rules,
after
a
period
of
uncertainty,
and
also
shorten
the
time
period
to
implement
the
same
rules,”
she
said.
“But
this
is
pretty
standard
issue
in
the
loss
mitigation
space
—
never
a
dull
moment.
Loss
mitigation
operators
are
heroes
and
will
be
ready—because
they
don’t
have
a
choice.”

MMI
Fund,
risk
management

Dworkin
said
that
the
program
changes
can
do
more
to
address
distressed
borrowers
moving
in
and
out
of
the
waterfall.

“What
[the
changes
don’t]
do
is
allow
for
a
recycling
of
people
through
the
system
who
just
aren’t
able
to
get
back
on
track,
which
is
bad
for
the
taxpayer,”
he
said.
“It’s
not
good
for
the
person
who
is
in
trouble
because
it
delays
their
moving
on,
and
it’s
particularly
bad
for
the
people
who
need
FHA
mortgages,
who
depend
on
the
program
and
are
paying
on
time.”

When
the
cost
of
modifying
mortgages
is
increased
continuously,
this
serves
to
discourage
lenders
from
making
these
kinds
of
loans
in
the
first
place,
he
added.

“We’ve
seen
that
with
banks
who
have
exited
the
FHA
market
during
COVID,”
he
said.
“We
needed
to
take
extraordinary
measures,
but
that’s
already
years
ago.
Now,
what
FHA
has
done
is
they’ve
made
permanent
the
best
parts
of
the
COVID
loss
mitigation
waterfall
and
ended
the
parts
that
have
been
the
most
problematic.
We’re
very
supportive.”

One
of
the
core
reasons
for
the
change,
according
to
FHA,
was
to
further
protect
the
MMI
Fund
from
losses
despite
it
being
in
very
good
financial
condition
based
on
the
most
recent
data.
Dworkin
acknowledged
that,
but
said
the
guidance
is
still
necessary
for
thinking
ahead
to
a
point
where
that
may
not
be
the
case.

“I’d
much
rather
the
department
perform
risk
management
than
crisis
management,
and
part
of
that
means
they
have
to
pay
attention
to
problems
before
they
become
crises,”
he
said.
“This
is
an
example
of
a
long-term
investment
in,
and
maintaining,
the
health
of
the
fund.
Given
that
we’re
five
years
removed
from
the
pandemic
outbreak,
and
three
years
removed
from
it
being
pretty
reasonably
under
control,
it’s
the
right
thing
to
do.”

Dworkin
added
that
he’s
not
concerned
about
the
health
of
the
MMI
Fund
at
the
moment,
but
is
concerned
“anytime
we
take
it
for
granted,”
he
said.
And
I
think
what’s
happened
in
this
decision
is
that
HUD
has
said
they’re
not
going
to
take
it
for
granted,
and
that
they’re
going
to
do
what’s
responsible
in
the
long
run
by
not
waiting
for
a
crisis.
Instead,
they
want
to
avoid
one,
and
I
think
that
makes
a
lot
of
sense.”

James
Kleimann
contributed
reporting.