Jump to Content
close
close
ABA: The American Bankers Association
Comment Letter

Joint Industry Letter on the Proposed New Loss Mitigation Waterfall

  • From American Bankers Association, Center for Responsible Lending, Housing Policy Council HPC, Mortgage Bankers Association MBA, The National Mortgage Servicing Association, National Consumer Law Center
  • Published December 20, 2024

RE: Handbook 4000.1: Servicing and Loss Mitigation; Claims and Disposition; and Appendix 4.0
Download

Dear Commissioner Gordon:

On behalf of the clients, communities, companies, and borrowers we serve, we are writing to express our joint policy recommendations in response to FHA’s November 25, 2024 draft handbook. Our recommendations demonstrate strong support for HUD’s draft and alignment on significant points related to the loss mitigation process. We applaud FHA for incorporating successful aspects of its pandemic-related waterfall into the draft handbook and offer the following comments:

  • FHA should finalize a streamlined loss mitigation process for loss mitigation reviews as reflected in the proposed handbook. FHA implementation of streamlined loss mitigation in connection with the pandemic reduced unnecessary barriers to loss mitigation access. FHA should keep this process and not return to a system based on collecting documents.
  • We urge FHA to extend the current loss mitigation waterfall to February 1, 2026 and correspondingly set February 1, 2026 as the implementation deadline for the final, revised handbook. Because the draft handbook covers a broad range of topics and includes new options, a substantial implementation time window is necessary even though many parts of the draft are familiar.
  • We support the use of one waterfall of permanent loss mitigation options for all hardships, including natural disasters, which includes access to standalone partial claims, loan modifications, and payment supplements. While individual circumstances may impact when permanent loss mitigation options are appropriate and effectively implemented, the waterfall of permanent options should be flexible enough to provide relief for any hardship. Having one waterfall eases servicer implementation without unnecessarily limiting the options borrowers can access.
  • We support FHA’s decision to incorporate targeted payment reductions in the permanent waterfall. Research has shown that targeting a reduction in monthly payment, which does not require a comprehensive evaluation of the borrower’s financial situation, is more effective at reducing redefaults than meeting an income-based affordability target.

Download the letter to read the full text.

In Depth

Related Products

Our Experts

Teshale Smith

Teshale Smith

Senior Counsel, Regulatory Compliance and Policy

Contact Teshale

Related to This