FHA issued Mortgagee Letter (ML) 2025-12 ending the COVID-19 loss mitigation waterfall. Per the ML, FHA ended the COVID-19 loss mitigation waterfall, modified and replaced certain provisions in ML 2025-06 (Updates to Servicing Loss Mitigation, and Claims), and reestablished requirements for the servicing of FHA-insured mortgages (including those in default, and the filing of associated claims).
Highlights of the ML include:
- Permanently sunsetting the COVID-19 Loss Mitigation Options on September 30, 2025;
- Moving up the effective date of the new permanent loss mitigation options to October 1, 2025 (from February 2, 2026);
- Continuing the suspension of FHA-HAMP and sunsetting the program effective September 30, 2025;
- Extending the time on the eligibility of a borrower for a subsequent permanent loss mitigation option to once every 24 months, from once every 18 months; and
- Canceling the scheduled increases in borrower compensation under FHA’s Pre-foreclosure Sale Program, Deed-in-Lieu of Foreclosure disposition options, and Cash for Keys incentives, maintaining the current amounts.
FHA-Home Affordable Modification Program Options (FHA-HAMP) and the currently published Standard Pre-Foreclosure Sale (PFS) and Standard Deed-in-Lieu of Foreclosure (DIL) will remain suspended through September 30, 2025, except for non-borrowers who acquired title through an exempted transfer, and these options will expire on September 30, 2025. The COVID-19 Recovery Loss Mitigation Options are extended through and will expire on September 30, 2025. The remaining provisions of this ML are effective on October 1, 2025.
Click to view the FHA Mortgagee Letter 2025-12: https://www.tenaco.com/wp-content/uploads/2025/05/FHA-Mortgagee-Letter-2025-12-04-15-25.pdf
