In a series of five Mortgagee Letters, the U.S. Department of Housing and Urban Development (HUD) recently modified policies for Federal Housing Administration (FHA) insured residential mortgage loans to reduce regulatory burdens and promote affordability. A HUD summary of the modifications indicates that the modifications are in accordance with Executive Order 14393, Promoting Access to Mortgage Credit. (To view the summary, click on “June” under 2026 and scroll to June 23, 2026.) The modifications will be incorporated into HUD Handbook 4000.1

The Mortgagee Letters are:

Mortgagee Letter 2026-06 entitled Increase in the Maximum Number of Draw Requests for Limited 203(k) Rehabilitation Mortgage Insurance Program.

Mortgagee Letter 2026-07 entitled Rescission of the Important Notice to Homebuyers Form HUD-92900-B Requirement.

Mortgagee Letter 2026-08 entitled Updates to Loss Mitigation Requirements.

Mortgagee Letter 2026-09 entitled Eliminating Requirements for FHA Mortgagee Approval and Quality Control.

Mortgagee Letter 2026-10 entitled Updates to FHA Quality Control Requirements for Appraisal Field Reviews.

The provisions of Mortgagee Letter 2026-08 may be implemented immediately and must be implemented no later than September 21, 2026. The provisions of the other Mortgagee Letters are effective immediately.

Mortgagee Letter 2026-06

In July 2024 HUD finalized enhancements to the FHA 203(k) rehabilitation mortgage loan program. Among the enhancements, HUD increased the maximum total rehabilitation costs under the Limited Program from $35,000 to $75,000 and increased the allowable rehabilitation period under the Program from six to nine months. The Limited Program provides funds for minor remodeling and non-structural repairs, such as energy-efficient improvements.

The recent Mortgagee Letter explains that “[w]ith no changes to the draw structure or maximum number of allowable draws accompanying these changes, FHA’s Mutual Mortgage Insurance Fund (MMIF) was put at risk through larger disbursements of funds for work yet to be completed.” The Mortgagee Letter provides for smaller disbursements by increasing the maximum amount of draws per contractor from two to four. These consist of the initial draw at closing, no more than two intermediate draws during the rehabilitation process, and the final draw. While the total number of draw requests remains at five, four intermediate and one final, the Mortgagee Letter provides that there may be two disbursements per draw request.

Mortgagee Letter 2026-07

The Mortgagee Letter rescinds the requirement for lenders to provide borrowers with form HUD-92900-B, Important Notice to Homebuyers  at application, and to obtain and retain an executed copy of the form. The form included information for homebuyers, including information about interest rates and points, the need for the borrower to provide accurate information and not commit loan fraud, and information about property inspections, recommending that the borrower have an inspection of the property performed.

HUD had previously waived the requirement to provide the form because it contained information about insurance premiums and discounts that were no longer in effect and because it duplicated disclosures required under federal laws, such as the Truth in Lending Act.  The Mortgagee Letter permanently removes the requirement.

Mortgagee Letter 2026-08

The Mortgagee Letter adds the failure of a borrower to accept a Trial Payment Plan (TPP) Agreement for a third time as a TPP failure. When a borrower fails a TPP, the lender must apply all funds remaining in suspense to the borrower’s account in accordance with FHA guidelines. Additionally, when a borrower fails a TPP, HUD provides an automatic 90-day extension for the lender to approve another loss mitigation option or to commence or recommence foreclosure.

The Mortgagee Letter also removes the restriction on a borrower making a payment on a TPP more than 15 days before the month in which the payment is due. HUD explains that the modification ensures that proactive borrowers are not penalized, and that the action aligns with the housing policy waiver issued on March 3, 2026.

The Mortgagee Letter modifies the following Handbook provision that sets forth one of the situations in which a lender may initiate foreclosure: “[T]he Mortgagee has completed its review of the Borrower’s loss mitigation request, determined that the Borrower does not qualify for a Loss Mitigation Option, properly notified the Borrower of this decision, and rejected any available appeal by the Borrower.”

The modified provision is as follows:

“[T]he Mortgagee has completed its review of the Borrower’s initial complete loss mitigation request and, if applicable, of any subsequent complete loss mitigation request after a change in the Borrower’s circumstances that impacts their eligibility for a Loss Mitigation Option, and:

◦     determined the Borrower does not qualify for a Loss Mitigation Option;

◦     properly notified the Borrower of this decision; and

◦     rejected any available appeal by the Borrower.”

HUD explains that the modification “[l]imits borrower requests for re-review for loss mitigation prior to foreclosure initiation to instances where a change in the borrower’s circumstances impacts their eligibility for a loss mitigation option.”

Finally, the Mortgagee Letter modifies the TPP requirements to clarify that the monthly payment during the TPP stage and the Permanent Home Retention Option or Outside of the Waterfall Loss Modification Option stage may change based on an increase in escrow payments for taxes and insurance.

Mortgagee Letter 2026-09

Previously for FHA purposes a lender was required to designate an officer in charge who was a full-time corporate officer who worked exclusively for the lender, except that for investing mortgagees without servicing authority the officer in charge was not required to work exclusively for the lender. The officer is charge is the corporate officer designated by a lender to manage and direct a lender’s FHA operations, and to be a corporate officer an individual must serve in one of various specified positions. The Mortgagee Letter removes the requirement that a lender’s officer in charge be full-time and work exclusively for the lender. HUD explained that because all officers in charge are subject to the same conditions, the full-time, exclusive employment requirement is unnecessary.

The Mortgagee Letter removes the requirements under FHA quality control provisions that lenders review their loan performance data for patterns of noncompliance, and document the methodology used for such review, the results of the review and any corrective actions taken as a result of the review. HUD explained that (1) other FHA policy requires lenders to expand the scope of loan-level quality control reviews when fraud or patterns of deficiencies are identified, (2) instead of focusing on loan performance, focusing on loan quality is the most direct way to uncover control weaknesses, and (3) the expectation that lenders review loan performance data is addressed indirectly by FHA credit watch termination provisions.

The Mortgagee Letter creates a permanent exception to the requirement that lenders review all loans that experience an early payment default, regardless of whether the lender is the servicer of the loan, for situations in which the home securing the loan is located in a Presidentially declared major disaster area. The exception applies only if the loan was closed before the start of the incident period for the disaster established by the Federal Emergency Management Agency and the default occurred after the start of the period. HUD notes that previously FHA repeatedly issued waivers to the review requirement for loans impacted by such disasters, that increased early payment defaults following a major disaster are expected, and that many defaults in disaster areas are likely the result of loss of employment/income, property damage, forced relocation, and other factors unrelated to noncompliance with FHA requirements.

The Mortgagee Letter removes the requirement that a lender provide loan administration and quality control staff with access to FHA guidance, either on the internet or in hard copy form. HUD explained that internet access is essentially universal for the mortgage industry, with all current FHA guidance being available online, and that lenders are responsible for compliance with applicable guidance whether their staff are actively referencing such guidance or not.

Mortgagee Letter 2026-10

The Mortgagee Letter removes the requirement that lenders obtain appraisal field reviews on at least 10% of the FHA loans selected for origination and underwriting quality control review, making them an optional component of appraisal quality control. A lender now may obtain appraisal field reviews if needed to adequately assess the appraisal report for compliance with all applicable requirements. HUD explains that “FHA’s previous appraisal field review requirement resulted in significant costs for Mortgagees, which often outweighed the limited risk mitigation benefits considering the frequent use of third-party tools and appraisal desk reviews. By making field reviews optional, FHA is removing a potential barrier to Mortgagee participation in FHA programs, as well as an expense that may be passed indirectly to consumers.”