Written by: Internal Analysis & Opinion Writers
The Federal Housing Administration (FHA) has rescinded more than a dozen sub-regulatory mortgage policies in an aggressive effort to streamline operations, cut costs, and reduce regulatory burdens on lenders and borrowers. The move is part of a broader strategy aimed at making FHA-backed loans more accessible and affordable.
HUD Secretary Scott Turner described the policy rollback as a necessary modernization of outdated procedures. He emphasized that the FHA is focused on clearing the path to homeownership by eliminating redundant and unnecessary requirements that complicate the mortgage process without delivering added value.
Among the rescinded policies is a longstanding requirement for lenders to collect the Supplemental Consumer Information Form, which documented a borrower’s housing counseling participation or language preference. The FHA deemed this form duplicative and burdensome, particularly as it overlapped with other disclosures.
Also removed is the requirement for FHA-approved lenders to employ a full-time Direct Endorsement underwriter for each office location. The change allows for greater flexibility, enabling part-time underwriters to review files without requiring a supervisor’s signoff. Lenders say this update could ease staffing constraints and speed up underwriting during high-volume periods.
Another major change affects post-disaster lending. The FHA no longer requires property damage inspections in presidentially declared disaster areas prior to closing. Previously, such inspections could delay closings by weeks. The elimination of this step is expected to accelerate recovery-related home sales and refinances while still allowing lenders discretion to assess property conditions when appropriate.
The FHA also revoked the Federal Flood Risk Management Standard that previously applied to new construction. This rule had mandated that buildings in flood zones be elevated above base flood elevations. Officials argued the requirement added cost and complexity, especially in high-risk regions where housing is already expensive to build.
These changes were communicated through a series of recently issued mortgagee letters. Though the updates received little media attention at first, industry insiders say they represent one of the most significant FHA regulatory revisions in years.
For lenders, the impact could be substantial. By reducing paperwork and compliance requirements, many expect loan processing timelines to shrink and administrative costs to decline. Several lenders say these changes will make FHA loans more attractive for borrowers who may have otherwise turned to conventional or non-QM products.
The FHA said the changes are part of a broader push to lower barriers to homeownership and address ongoing affordability challenges. With mortgage rates still elevated and inventory constrained, even small reductions in closing timelines or fees can make a difference for first-time buyers and low- to moderate-income households.
However, some housing advocates and risk analysts have urged caution. They warn that removing safeguards—especially in disaster zones or flood-prone areas—could increase exposure to loan defaults or uninsured property losses. The FHA responded by affirming that lenders still have the discretion to order inspections or apply additional scrutiny when warranted.
Industry observers say the move signals a philosophical shift in FHA policy—away from rigid procedural mandates and toward a more risk-based, outcome-oriented model. Rather than relying on blanket rules, the agency appears to be giving lenders more responsibility to make common-sense decisions based on borrower profiles and property conditions.
As the policy changes begin to take effect, mortgage professionals are advised to review updated guidelines closely and adjust their internal procedures accordingly. The FHA has indicated that further revisions may be on the horizon as it continues to assess the effectiveness and relevance of remaining regulations.
For now, the streamlined rules are expected to give both lenders and borrowers a bit more breathing room in an increasingly complex housing market. If executed carefully, the shift could help the FHA fulfill its core mission: expanding access to safe, affordable housing for all Americans.
