[Federal Register Volume 88, Number 145 (Monday, July 31, 2023)]
[Proposed Rules]
[Pages 49392-49397]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-16128]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 203

[Docket No. FR-6353-P-01]
RIN 2502-AJ66


Modernization of Engagement With Mortgagors in Default

AGENCY: Office of the Assistant Secretary for Housing--Federal Housing 
Commissioner, Department of Housing and Urban Development, HUD.

ACTION: Proposed rule.

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SUMMARY: HUD's regulations require that mortgagees of Federal Housing 
Administration (FHA) insured single family mortgages (mortgagees) meet 
in person, or make a reasonable effort to meet in person, with 
mortgagors who are in default on their mortgage payments. This rule 
proposes to modernize this requirement by updating HUD's regulation to 
better align with advances in electronic communication technology and 
mortgagor engagement preferences, while preserving consumer 
protections. Specifically, this rule proposes to update HUD's current 
in-person, face-to-face meeting requirements by permitting mortgagees 
to utilize methods of communication most likely to receive a response 
from the mortgagor as determined by the Secretary, including electronic 
and other remote communication methods, such as telephone calls or 
video calls, to meet with mortgagors who are in default on their 
mortgage payments. This proposed rule would also expand the meeting 
requirement to all mortgagors in default, including mortgagors who do 
not reside in the mortgaged property and those with a mortgaged 
property not within 200 miles of their mortgagee, its servicer, or a 
branch office of either.

DATES: Comment Due Date: September 29, 2023.

ADDRESSES: There are two methods for submitting public comments. All 
submissions must refer to the above docket number and title.
    1. Electronic Submission of Comments. Comments may be submitted 
electronically through the Federal eRulemaking Portal at 
www.regulations.gov. HUD strongly encourages commenters to submit 
comments electronically. Electronic submission of comments allows the 
commenter maximum time to prepare and submit a comment, ensures timely 
receipt by HUD, and enables HUD to make comments immediately available 
to the public. Comments submitted electronically through 
www.regulations.gov can be viewed by other commenters and interested 
members of the public. Commenters should follow the instructions 
provided on that website to submit comments electronically.
    2. Submission of Comments by Mail. Comments may be submitted by 
mail to the Regulations Division, Office of General Counsel, Department 
of Housing and Urban Development, 451 7th Street SW, Room 10276, 
Washington, DC 20410-0500.

    Note:  To receive consideration as a public comment, comments 
must be submitted through one of the two methods specified above.

    Public Inspection of Public Comments. HUD will make all properly 
submitted comments and communications available for public inspection 
and copying during regular business hours at the above address. Due to 
security measures at the HUD Headquarters building, you must schedule 
an appointment in advance to review the public comments by calling the 
Regulations Division at 202-708-3055 (this is not a toll-free number). 
HUD welcomes and is prepared to receive calls from individuals who are 
deaf or hard of hearing, as well as individuals with speech or 
communication disabilities. To learn more about how to make an 
accessible telephone call, please visit https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs. Copies of all comments 
submitted are available for inspection and downloading at 
www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Graham Mayfield, Acting Director, 
Office of Single Family Asset Management, Department of Housing and 
Urban Development, 451 7th Street SW, Room 9278, Washington, DC 20410, 
telephone 202-768-2838 (this is not a toll-free number). HUD welcomes 
and is prepared to receive calls from individuals who are deaf or hard 
of hearing, as well as individuals with speech or communication 
disabilities. To learn more about how to make an accessible telephone 
call, please visit https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs.

SUPPLEMENTARY INFORMATION: First codified in 1976, HUD's regulations at 
24 CFR 203.604 require mortgagees to meet in person, or make a 
reasonable effort to meet in person, with mortgagors who are in default 
on their mortgage payment. This requirement for an in-person meeting 
with the mortgagor, commonly referred to as the ``face-to-face 
meeting'' requirement, originated during a time when mortgage lending 
and servicing activities were conducted in person at locations in the 
local communities a mortgagee served. At that time, a ``face-to-face'' 
meeting was the most effective way to discuss and facilitate loss 
mitigation options because knowledgeable mortgagee staff were available 
at locations near the mortgaged property. Beginning in the mid-1990s, 
many mortgagees began consolidating origination and servicing 
activities in centralized locations. Today, many mortgagees have a 
national presence and often employ a single national servicing center 
or a limited number of regional servicing centers, operate without 
retail places of business altogether, and tend to conduct origination 
and servicing activities with employees and clients not being in close 
physical proximity. In addition, mortgagors prefer to conduct business 
online or through other remote methods. This proposed rule would permit 
the use of electronic and other remote communication methods to make it 
more convenient for mortgagors in default to participate in meetings 
with their mortgagee.
    The current face-to-face meeting requirement also reflects a time 
when electronic methods for conducting virtual meetings were not widely

[[Page 49393]]

available or commonly used. Since 24 CFR 203.604 was last amended, 
significant advances have been made in the mortgage industry's use of 
technology and mortgagors' access to such, including smartphones, 
tablets, and live video communications. Over the years, HUD has updated 
certain mortgage servicing policies to increase requirements for 
mortgagees to engage with mortgagors in default on their mortgage 
payments. To adapt to changing uses of communication technology, in 
updates to the FHA Single Family Policy Handbook, HUD has expanded its 
acceptable methods for communicating with mortgagors in default 
situations, which currently include phone calls, emails, web portals, 
and other previously used electronic methods.\1\ In addition to HUD 
increasing its requirements for mortgagees to engage with mortgagors in 
default, the Consumer Financial Protection Bureau (CFPB) servicing 
regulations at 12 CFR part 1024 and State laws in many jurisdictions 
require engagement with mortgagors, causing mortgagees to expand their 
outreach processes to offer mortgagors timely loss mitigation options.
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    \1\ FHA Single Family Housing Policy Handbook 4000.1, section 
III.A.2.h. Early Default Intervention.
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    As a result of mortgagees' expanded outreach processes to 
mortgagors and mortgagors' ability to independently research loss 
mitigation options, mortgagees reported very few mortgagors who agreed 
to participate in face-to-face meetings with their mortgagees prior to 
the COVID-19 pandemic. Data obtained in 2017 and 2018 from members of 
the Mortgage Bankers Association (MBA) demonstrate mortgagors' limited 
participation and mortgagees' burdensome costs associated with face-to-
face meetings. ``According to data from one mortgagee, the cost of 
complying with the face-to-face interview requirement in just one year 
amounted to $3.9 million; however, these efforts resulted in a 
successful loss mitigation document collection rate of only 5.8 percent 
for that same period.'' \2\ As stated in this feedback to HUD, MBA 
members' ``compliance with this requirement results in a significant 
commitment of resources by mortgagees, and offers no additional 
benefits or protections to mortgagors than those already required by 
other consumer protection servicing regulations.'' \3\ In 2018, MBA 
collected additional data from three mortgagees that service the 
largest FHA-insured portfolios, to further illustrate the limited 
mortgagor acceptance rate for face-to-face meetings. In the data 
collected by the MBA, one mortgagee that services over 300,000 FHA-
insured mortgages reported hand-delivering over 50,000 face-to-face 
meeting request letters throughout the year. From those letters, the 
mortgagee conducted or referred 14 mortgagors for face-to-face 
meetings, resulting in a 0.028 percent acceptance rate. Another 
mortgagee that services approximately 610,000 FHA-insured mortgages 
sent 53,000 letters and conducted 18,000 property visits to deliver 
face-to-face meeting offers. From that population of sent letters and 
property visits, no mortgagors accepted the face-to-face meeting offer. 
A third mortgagee that services approximately 930,000 FHA-insured 
mortgages conducted 145,000 property visits to deliver face-to-face 
meeting request letters. From these property visits, 124 mortgagors 
accepted the face-to-face meeting offers, for a 0.085 percent 
acceptance rate.\4\
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    \2\ MBA letter re: Docket No. FR-6030-N-01, Reducing Regulatory 
Burden; Enforcing the Regulatory Reform Agenda Under Executive Order 
13777, addressed to HUD's Office of General Counsel, Regulations 
Division, June 14, 2017.
    \3\ Id.
    \4\ Correspondence from the MBA to HUD regarding face-to-face 
meetings, March 14, 2023.
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    Due to public health concerns around the spread of COVID-19, in 
March 2020, HUD issued a temporary, partial waiver of the face-to-face 
meeting requirement found in 24 CFR 203.604, which has been extended on 
three occasions and remains in effect through December 31, 2023 
(collectively, the ``waiver'').\5\ Similar to the updates described in 
this proposed rule, the waiver permitted mortgagees to use alternative 
methods for contacting mortgagors, including electronic methods of 
communication, e.g., phone interviews, email, video calling services, 
and other communication technologies, to meet the requirements of 24 
CFR 203.604. With this waiver in place, mortgagees provided over 1.5 
million mortgagors in default with loss mitigation assistance during 
this time. HUD received positive feedback from mortgagees and consumer 
advocates related to the added flexibility to existing loss mitigation 
outreach requirements permitted by the waiver.
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    \5\ The original waiver issued on March 13, 2020, and subsequent 
additional temporary, partial waivers to the face-to-face meeting 
requirement in 24 CFR 203.604 are posted on HUD's Housing Waivers 
web page, available at https://www.hud.gov/program_offices/administration/hudclips/waivers.
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    Mortgagors are demonstrating their preference for interacting with 
mortgagees through technology. For example, in May 2021, Forbes 
published the results of a new survey on borrowing and lending 
conducted by ICE Mortgage Technology, which found the pandemic has 
permanently changed the way consumers utilize technology and those 
looking to buy or refinance a home are seeking lenders who offer online 
tools to complete their mortgage loans from home.\6\ According to the 
survey, ``the importance of lenders offering digital solutions such as 
online applications during the lending process increased for borrowers 
in 2020, with 58 percent saying the availability of an online 
application would affect their lender decision (up from 50 percent in 
2018).'' Respondents to the survey who were offered online and/or 
mobile options by their lenders took advantage of these tools during 
the mortgage loan process. ``Sixty-one percent of borrowers used an 
online application in 2020, slightly up from 58 percent in 2018. Sixty-
one percent also used an online portal for electronically signing and 
notarizing documents, compared to 56 percent in 2018.'' As expected, 
decreased in-person interactions became more important in 2020 due to 
the COVID-19 pandemic. Only 37 percent of survey respondents in 2018 
cited ``no need to meet in person'' as an aspect they preferred about 
their online application process. ``Whether they had been through the 
mortgage loan process or not, 63 percent of consumers surveyed believe 
that an online mortgage process would make buying a home easier than an 
in-person process.''
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    \6\ Brenda Richardson, Forbes, ``How Digital Technology Changed 
the Face of the Mortgage Industry,'' May 13, 2021, https://www.forbes.com/sites/brendarichardson/2021/05/13/how-digital-technology-changed-the-face-of-the-mortgage-industry/?sh=555736f82856.
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    Even prior to the COVID-19 pandemic, mortgagees were taking note of 
the trend of mortgagors' preference for interacting with their 
mortgagee using technology. As an example, in 2018, the Federal Reserve 
Bank of New York published research conducted on the role of technology 
in mortgage lending.\7\ While the report focused on mortgage 
originations by `FinTech lenders,' which are lenders that offer an 
application process that can be completed entirely online, similar 
mortgagor preferences and behaviors are exhibited in mortgage servicing 
as well. The Federal Reserve Bank of New York's research revealed that 
``FinTech lender originations have grown annually by 30 percent from 
$34bn of total originations in 2010 (2 percent of

[[Page 49394]]

market) to $161bn in 2016 (8 percent of market). The growth has been 
particularly pronounced for refinances and for mortgages insured by the 
Federal Housing Administration (FHA), a segment of the market which 
primarily serves lower income borrowers.'' The study also found that 
``default rates on FinTech mortgages are about 25 percent lower than 
those for traditional lenders, even when controlling for detailed loan 
characteristics.''
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    \7\ Andreas Fuster, Matthew Plosser, Philipp Schnabl, James 
Vickery, The Role of Technology in Mortgage Lending, Federal Reserve 
Bank of New York, February 2018, https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr836.pdf.
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    The evidence shows mortgagees are seeking ways to automate, 
simplify, and expedite mortgage origination and servicing processes 
through technological innovation. HUD's proposed updates to the in-
person meeting requirement, as described below, align with such 
advances and better support mortgagor engagement preferences.

I. This Proposed Rule

A. Mortgages Insured Pursuant to 24 CFR Part 203, Except Mortgages 
Insured on Indian Land Pursuant to Section 248 of the National Housing 
Act 8
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    \8\ This section describes proposed requirements for mortgages 
insured pursuant to 24 CFR part 203, except mortgages insured on 
Indian Land pursuant to section 248 of the National Housing Act. Due 
to statutory requirements, the in-person, face-to-face meeting 
requirement found at 24 CFR 203.604 for mortgages insured pursuant 
to section 248 of the National Housing Act will remain in place. 
This proposed rule proposes certain other changes to 24 CFR 203.604 
regarding mortgages insured pursuant to section 248 of the National 
Housing Act, those proposed changes are described later in this 
preamble.
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    HUD's current regulations at 24 CFR 203.604 require mortgagees to 
conduct a face-to-face meeting or make a reasonable effort to arrange 
such a meeting, with mortgagors who are in default on their mortgage 
payments. For mortgages insured pursuant to 24 CFR part 203, except 
mortgages insured on Indian Land pursuant to section 248 of the 
National Housing Act, HUD proposes to make it more convenient for 
mortgagors in default to meet with their mortgagee by updating the 
requirement that mortgages must have a face-to-face meeting requirement 
with mortgagors to permit mortgagees to meet with mortgagors who are in 
default on their mortgage payments either through a face-to-face 
meeting or other communication methods as determined by the Secretary, 
including electronic or other remote communication methods such as 
telephone or video calls. Additionally, given these expanded methods of 
engagement permitted and recent FHA policy updates that make loss 
mitigation options available to mortgagors who do not reside in the 
mortgaged property, HUD proposes to eliminate two of the exemptions to 
the meeting with the mortgagor requirement currently found in 24 CFR 
203.604(c). The exemptions proposed to be eliminated are that (1) 
mortgagees are not required to meet with a mortgagor if the mortgagor 
does not reside in the mortgaged property and (2) a meeting with the 
mortgagor is not required if the mortgaged property is not within 200 
miles of the mortgagee, its servicer, or a branch office of either. 
Finally, the proposed updates would amend the definition of a 
``reasonable effort'' to arrange a meeting with the mortgagor to align 
with the proposed updates regarding the addition of the option to use 
electronic or other remote communication methods as determined by the 
Secretary to conduct a meeting with the mortgagor.
    HUD believes that these proposed updates to 24 CFR 203.604 would 
improve mortgagee engagement with mortgagors, reduce the cost of 
mortgage default servicing, and align HUD's regulations with 
advancements made in electronic communication technology and in 
mortgagor communication preferences, while preserving consumer 
protections. According to the survey results published by Forbes in 
2021, discussed above, ``online applications and online portals are 
currently the digital tools most commonly offered by lenders, with more 
than 9 in 10 offering both options to borrowers (91 percent). Of 
lenders who offer online applications, 38 percent said that more than 
80 percent of their applications were completed online in 2020, while 
60.4 percent said that more than half of all loan applications were 
submitted online. Homeowners who used an online application appreciated 
the simpler application process (55 percent) reduced time to close (53 
percent) and fewer in-person interactions (49 percent).'' \9\
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    \9\ Brenda Richardson, Forbes, How Digital Technology Changed 
the Face of the Mortgage Industry, May 13, 2021, https://www.forbes.com/sites/brendarichardson/2021/05/13/how-digital-technology-changed-the-face-of-the-mortgage-industry/?sh=555736f82856.
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    While HUD's proposed updates would update the acceptable method(s) 
that mortgagees may use to meet with a mortgagor in default, the 
purpose for the meeting remains the same. The meeting requirement is 
the mortgagor's opportunity to meet directly with trained mortgagee 
staff who can provide information about FHA loss mitigation options to 
assist the mortgagor in curing the default episode and bringing the 
FHA-insured mortgage current or otherwise avoiding foreclosure. 
Generally, mortgagors are unfamiliar with FHA's home retention loss 
mitigation options and do not understand what a short-term forbearance, 
loan modification, or partial claim would entail. Many are also unaware 
that FHA provides home disposition options for mortgagors in default 
who are unable to retain their homes and want to avoid foreclosure. In 
addition to the meeting providing an opportunity for mortgagors in 
default to meet with knowledgeable mortgagee staff who can explain all 
loss mitigation options available, the meeting also provides the 
opportunity for the mortgagee to begin collecting the information 
needed to evaluate mortgagors for FHA's loss mitigation options.
    With the addition of other Secretary approved options for 
mortgagees to conduct the meeting with the mortgagor, the proposed 
updates would permit mortgagees to utilize more flexible communication 
and scheduling options to meet with the mortgagor at the mortgagor's 
convenience. Additionally, the proposed updates would reduce the 
expense incurred by mortgagees and the difficulties associated with 
making at least one trip to see the mortgagor at the mortgaged property 
to schedule a meeting with the mortgagor.
    HUD is committed to requiring mortgagees to engage with mortgagors 
in default to provide information about loss mitigation options 
available to mitigate losses to HUD's Mutual Mortgage Insurance Fund 
and avoid foreclosure. This proposed rule would maintain the 
requirement that mortgagees meet, or make a reasonable effort to meet, 
with mortgagors who are in default on their mortgage by updating HUD's 
regulations to align with advances in electronic communication 
technology and changes in mortgagor engagement preferences, while 
preserving consumer protections. This proposed rule would also expand 
the meeting requirement to all mortgagors in default, including 
mortgagors who do not reside in the mortgaged property and those with a 
mortgaged property that is not within 200 miles of the mortgagee, its 
servicer, or a branch office of either. A paragraph-by-paragraph 
summarized explanation and description of the proposed updates to 24 
CFR 203.604 are outlined immediately below.
Proposed 24 CFR 203.604(a)
    HUD proposes to add language to paragraph (a), currently reserved, 
to clarify that paragraph (a) applies to all mortgages insured pursuant 
to 24 CFR part 203, except mortgages insured on Indian Land pursuant to 
section 248 of

[[Page 49395]]

the National Housing Act. As described below, the proposed text in 
paragraph (b) would apply to mortgages insured on Indian Land pursuant 
to section 248 of the National Housing Act (Section 248 Mortgages on 
Indian Land).
Proposed 24 CFR 203.604(a)(1)
    HUD proposes to add paragraph (a)(1) to Sec.  203.604, which would 
largely consist of language currently found in Sec.  203.604(b). The 
proposed paragraph (a)(1) would update the requirement that mortgagees 
must meet ``face-to-face'' with mortgagors. As discussed earlier, the 
proposed updates would require that the mortgagee meet with the 
mortgagor either through a face-to-face meeting or by using other 
communication methods as determined by the Secretary. These may include 
electronic or other remote communication methods such as telephone or 
video calls. Specific guidance detailing acceptable communication 
methods that may be used for conducting the meeting with mortgagors in 
default, in addition to a face-to-face meeting option, will be 
established through a Mortgagee Letter or an update to the FHA Single 
Family Housing Policy Handbook 4000.1.
    In addition, HUD proposes to eliminate reference to Section 248 
Mortgages on Indian Land, as listed in the current paragraph (b), 
because HUD proposes to describe the face-to-face meeting requirements 
for Section 248 Mortgages on Indian Land in a revised paragraph (b), as 
described below. Finally, HUD proposes to eliminate reference to 
mortgages authorized by section 203(q) of the National Housing Act, as 
listed in the current paragraph (b), because section 203(q) of the 
National Housing Act was repealed on July 30, 2008.
Proposed 24 CFR 203.604(a)(1)(i)
    HUD proposes to add paragraph (a)(1)(i) to Sec.  203.604, which 
would largely consist of language currently found in Sec.  203.604(b). 
The proposed paragraph (a)(1)(i) would clarify that mortgagees are also 
required to meet with a mortgagor when default occurs on a repayment 
plan.
Proposed 24 CFR 203.604(a)(2)
    HUD proposes to add paragraph (a)(2) to Sec.  203.604, which would 
replace Sec.  203.604(c), while using most of the language from the 
current paragraph (c). The proposed paragraph (a)(2), as changed from 
the language currently in paragraph (c), would remove reference to a 
``face-to-face'' meeting with mortgagors, consistent with and as 
described in the proposed paragraph (a)(1).
    In proposed paragraph (a)(2), HUD also proposes to eliminate 
certain exemptions from the meeting with the mortgagor rule, which are 
currently detailed in paragraph (c). The two exemptions proposed to be 
eliminated from the current paragraph (c) are (1) a meeting with the 
mortgagor is not required if the mortgagor does not reside in the 
mortgaged property, and (2) a meeting with the mortgagor is not 
required if the mortgaged property is not within 200 miles of the 
mortgagee, its servicer, or a branch office of either.
    Loss mitigation options were previously unavailable to mortgagors 
who do not reside in the mortgaged property. As the availability of 
loss mitigation has expanded to include these mortgagors, it is 
appropriate to require that mortgagees meet the same engagement 
requirements as for mortgagors who occupy the mortgaged property. The 
current exemption for mortgagors with properties not within 200 miles 
of the mortgagee was intended to prevent an unreasonable burden on the 
mortgagor and mortgagee. HUD proposes to eliminate these two exemptions 
to expand the requirement that mortgagees meet, or make a reasonable 
effort to meet, with all mortgagors in default on their mortgage 
payments. These two current exemptions would generally be unnecessary 
given the proposal that mortgagees would be permitted to meet with 
mortgagors via electronic communication methods.
Proposed 24 CFR 203.604(a)(3)
    HUD proposes to add paragraph (a)(3) to Sec.  203.604, which would 
replace the language currently found in paragraph (d). The proposed 
paragraph (a)(3), as changed from the language currently in paragraph 
(d), would remove reference to a ``face-to-face'' meeting with 
mortgagors, consistent with and as described in the proposed paragraph 
(a)(1). In proposed paragraph (a)(3), HUD also proposes to redefine 
what constitutes a mortgagee's ``reasonable effort'' to arrange a 
meeting with a mortgagor as required by Sec.  203.604. For the purposes 
of the proposed paragraph (a)(3), HUD proposes to remove the language 
currently found in paragraph (d) that a ``reasonable effort'' consists 
of the mortgagee sending the mortgagor at least one letter certified by 
the Postal Service and that the mortgagee must make at least one trip 
to the mortgaged property in an effort to arrange a meeting with the 
mortgagor. Instead, HUD proposes to define a ``reasonable effort'' to 
arrange a meeting with a mortgagor to require, at a minimum, two 
verifiable attempts to contact the mortgagor utilizing methods 
determined by the Secretary. The definition for a ``verifiable 
attempt'' will be established through Mortgagee Letter or an update to 
the FHA Single Family Housing Policy Handbook 4000.1.
    HUD specifically seeks public comment on its proposed revisions to 
what constitutes a ``reasonable effort,'' including what should 
constitute a ``verifiable attempt.''

B. Mortgages Insured on Indian Land Pursuant to Section 248 of the 
National Housing Act

    Due to statutory requirements, HUD is leaving the in-person, face-
to-face meeting requirement found in 24 CFR 203.604 in place for 
Section 248 Mortgages on Indian Land. Unlike other single-family 
mortgage insurance programs regulated under 24 CFR part 203, the 
National Housing Act specifically requires that mortgagees conduct a 
face-to-face meeting with mortgagors who are in default on their 
mortgage payments for Section 248 Mortgages on Indian Land. Given these 
statutory requirements, HUD is proposing no substantive updates to the 
requirements for Section 248 Mortgages on Indian Land found in 24 CFR 
203.604; however, HUD is proposing updates to the text of 24 CFR 
203.604 to reorganize the paragraph structure and to make the 
requirements for Section 248 Mortgages on Indian Land easier to 
understand.
    A summarized explanation and description of the proposed updates 
are outlined immediately below.
Proposed 24 CFR 203.604(b)
    HUD proposes to create a new paragraph (b) to Sec.  203.604, which 
will replace the language currently found in paragraph (e). The 
proposed paragraph (b) would detail the face-to-face meeting 
requirements for Section 248 Mortgages on Indian Land. While the 
language in the proposed paragraph (b) will appear expanded from the 
text currently in paragraph (e), substantively, the requirements in the 
proposed paragraph (b) would be the same as the requirements that 
currently exist for Section 248 Mortgages on Indian Land found in the 
current paragraph (e). The text in the proposed paragraph (b) appears 
expanded from the current paragraph (e) because the current paragraph 
(e) cross references the existing face-to-face meeting requirements 
that are detailed in the current paragraphs (b), (c), and (d) of Sec.  
203.604. Given the proposed updates to the meeting with the mortgagor

[[Page 49396]]

requirement for mortgages insured pursuant to 24 CFR part 203, except 
mortgages insured on Indian Land pursuant to section 248 of the 
National Housing Act, described above, the face-to-face meeting 
requirements for Section 248 Mortgages on Indian Land would be directly 
incorporated into the proposed paragraph (b). Additionally, various 
wording changes from the current paragraph (e) would be made in the 
proposed paragraph (b) to ensure clarity and consistency in word choice 
throughout Sec.  203.604.

III. Findings and Certifications

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.) 
generally requires an agency to conduct a regulatory flexibility 
analysis of any rule subject to notice and comment rulemaking 
requirements, unless the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities. 
The updates described in this proposed rule would be limited to 
permitting mortgagees to communicate with mortgagors who are in default 
on their mortgage methods via electronic or other remote communication 
methods as determined by the Secretary rather than in-person. Since 
mortgagees are already required to communicate with these mortgagors, 
this proposed rule would, if finalized, only alter the options for how 
mortgagees communicate with this population of mortgagors. If there is 
an economic effect on mortgagees, it would fall equally on all 
mortgagees. Further, HUD anticipates that the proposed rule, if 
finalized, would have a net positive economic impact on mortgagees by 
reducing the expenses associated with making an in-person visit to a 
mortgagor's property to comply with the requirements of 24 CFR 203.604.

Environmental Impact

    This proposed rule does not direct, provide for assistance or loan 
and mortgage insurance for, or otherwise govern or regulate, real 
property acquisition, disposition, rehabilitation, alteration, 
demolition, or new construction, or establish, revise, or provide for 
standards for construction or construction materials, manufactured 
housing, or occupancy. Accordingly, under 24 CFR 50.19(c)(1), this 
proposed rule is categorically excluded from environmental review under 
the National Environmental Policy Act of 1969 (42 U.S.C. 4321).

Executive Order 13132, Federalism

    Executive Order 13132 (Federalism) prohibits an agency from 
publishing any rule that has federalism implications if the rule 
either: (i) imposes substantial direct compliance costs on State and 
local governments and is not required by statute, or (ii) preempts 
State law, unless the agency meets the consultation and funding 
requirements of section 6 of the Executive Order. This proposed rule 
does not have federalism implications and does not impose substantial 
direct compliance costs on State and local governments or preempt State 
law within the meaning of the Executive Order.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538) (UMRA) establishes requirements for Federal agencies to 
assess the effects of their regulatory actions on State, local, and 
Tribal governments, and on the private sector. This proposed rule would 
not impose any Federal mandates on any State, local, or Tribal 
governments, or on the private sector, within the meaning of the UMRA.

List of Subjects in 24 CFR Part 203

    Hawaiian Natives, Home improvement, Indians--lands, Loan programs--
housing and community development, Mortgage insurance, Reporting and 
recordkeeping requirements, Solar energy.

    For the reasons stated above, HUD proposes to amend 24 CFR part 203 
as follows:

PART 203--SINGLE FAMILY MORTGAGE INSURANCE

0
1. The authority citation for part 203 continues to read as follows:

    Authority:  12 U.S.C. 1707, 1709, 1710, 1715b, 1715z-16, 1715u, 
and 1715z-21; 15 U.S.C. 1639c; 42 U.S.C. 3535(d).

0
2. Revise Sec.  203.604 to read as follows:


Sec.  203.604  Contact with the mortgagor.

    (a) For mortgages insured pursuant to this part, except those 
mortgages insured on Indian Land pursuant to section 248 of the 
National Housing Act:
    (1) The mortgagee must conduct a meeting with the mortgagor, or 
make a reasonable effort to arrange such a meeting, before three full 
monthly installments due on the mortgage are unpaid and at least 30 
days before foreclosure is commenced, or at least 30 days before 
assignment is requested if the mortgage is insured on Hawaiian home 
lands pursuant to section 247 of the National Housing Act. The meeting 
with the mortgagor must be conducted in a manner as determined by the 
Secretary.
    (i) If default occurs on a repayment plan, the mortgagee must 
conduct a meeting with the mortgagor, or make a reasonable effort to 
arrange such a meeting, within 30 days after such default.
    (ii) [Reserved]
    (2) A meeting with the mortgagor is not required if:
    (i) The mortgagor has clearly indicated that they will not 
cooperate in the meeting;
    (ii) The mortgagor is on a repayment plan to bring the mortgage 
current, and the mortgagor is meeting the terms of the repayment plan; 
or
    (iii) A reasonable effort to arrange a meeting with the mortgagor 
is unsuccessful.
    (3) A reasonable effort to arrange a meeting with the mortgagor 
shall consist of, at a minimum, two verifiable attempts to contact the 
mortgagor utilizing methods determined by the Secretary.
    (b) For mortgages insured on Indian Land pursuant to section 248 of 
the National Housing Act:
    (1) The mortgagee must conduct a face-to-face meeting with the 
mortgagor, or make a reasonable effort to arrange such a meeting, 
before three full monthly installments due on the mortgage are unpaid 
and at least 30 days before assignment is requested.
    (i) If default occurs on a repayment plan arranged other than 
during a face-to-face meeting, the mortgagee must have a face-to-face 
meeting with the mortgagor, or make a reasonable effort to arrange such 
a meeting, within 30 days after default or at least 30 days before 
assignment is requested.
    (ii) [Reserved]
    (2) A face-to-face meeting is not required if:
    (i) The mortgagor has clearly indicated that they will not 
cooperate in the meeting;
    (ii) The mortgagor is on a repayment plan to bring the mortgage 
current, and the mortgagor is meeting the terms of the repayment plan; 
or
    (iii) A reasonable effort to arrange a meeting with the mortgagor 
is unsuccessful.
    (3) A reasonable effort to arrange a face-to-face meeting with the 
mortgagor shall include at a minimum, one letter sent to the mortgagor 
certified by the Postal Service as having been dispatched and at least 
one trip to see the mortgagor at the mortgaged property. In addition, 
the mortgagee must document that it has made at least one telephone 
call to the mortgagor for

[[Page 49397]]

the purpose of trying to arrange a face-to-face meeting. The mortgagee 
may appoint an agent to perform its responsibilities under this 
paragraph.
    (4) The mortgagee must also:
    (i) inform the mortgagor that HUD will make information regarding 
the status and payment history of the mortgagor's loan available to 
credit bureaus and prospective creditors;
    (ii) Inform the mortgagor of other available assistance, if any; 
and
    (iii) Inform the mortgagor of the names and addresses of HUD 
officials to whom further communications may be addressed.

Julia R. Gordon,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 2023-16128 Filed 7-28-23; 8:45 am]
BILLING CODE P