HUD Rescinds Biden-Era Mortgagee Letters – Five Key FHA Rollbacks
HUD has rescinded five Mortgagee Letters viewed as imposing regulatory burdens on FHA lenders. These rollbacks suggest a policy shift toward less compliance friction, greater lender discretion, and lower FHA origination costs.
Each rescission targets a specific area of FHA appraisal or origination policy. Combined, they may represent a meaningful pivot toward a leaner, more flexible FHA framework.
What HUD Just Rolled Back
1. Fannie/Freddie Form 1103 – ML 2025-15
This update rescinds the requirement for lenders to submit the Fannie Mae/Freddie Mac Form 1103, also known as the Supplemental Consumer Information Form (SCIF). This form had previously been used to collect and report specific borrower information.
2. Direct Endorsement Underwriter Employment – ML 2025-16
This Mortgagee Letter removes the full-time employment requirement for Direct Endorsement underwriters, allowing FHA-approved Mortgagees to employ qualified underwriters on a part-time basis.
3. Flood Standards for New Construction – ML 2025-17
HUD has rescinded the Federal Flood Risk Management Standard (FFRMS), rolling back elevation requirements that added complexity to new construction in Special Flood Hazard Areas. FHA now returns to pre-2024 requirements.
4. Appraisal Protocols – ML 2025-18
This rescission eliminates appraisal documentation standards that exceeded industry norms, including economic life reporting and photo-heavy assignments. The result: faster, less costly FHA appraisals.
5. Disaster Area Inspections – ML 2025-19
FHA will no longer mandate pre-endorsement inspections in Presidentially Declared Major Disaster Areas. Lenders can now apply their own risk-based assessments.
Why It Matters for FHA Originators
These rescissions aim to reduce regulatory friction across the FHA pipeline:
Appraisal and property eligibility standards are streamlined, removing process bottlenecks and trimming closing timelines.
Lenders gain more discretion in disaster response and property condition reviews—reducing overhead tied to rigid HUD mandates.
Compliance costs decrease, especially for builders and originators navigating flood zones and rural water systems.
But with greater discretion comes greater responsibility. Lenders must ensure that internal controls and risk assessments are prepared to fill the gap left by HUD’s rollbacks.
What Mortgage Executives Should Do Next
Review your FHA pipeline to identify processes impacted by these changes.
Update internal guidelines for water systems, flip transactions, FFRMS, appraisals, and PDMDAs.
Evaluate risk protocols in light of the shift toward lender-driven assessments.
Communicate updates to underwriting, processing, and appraisal teams.
Coordinate with compliance counsel to revise policies accordingly.
Next Steps
Questions about how these rescissions may affect your business? Let’s discuss. Contact troy@garrishorn.com.
Find the HUD Mortgagee Letters here.