At the tail end of the Biden administration, the Federal Housing Administration (FHA) published Mortgagee Letter 2025-06, which was tilted Updates to Servicing, Loss Mitigation, and Claims. The 251-page mortgagee letter outlines various changes to FHA’s servicing requirements in Handbook 4000.1, such as updated requirements for forbearances and extending the availability of COVID-19 Recovery Options to February 1, 2026. However, on April 15, 2025, FHA published Mortgagee Letter 2025-12, which replaced the content and implementation of Mortgagee Letter 2025-06.
Mortgagee Letter 2025-12 is titled Tightening and Expediting Implementation of the New Permanent Loss Mitigation Options. The title of the mortgagee letter is reflective of some of the major differences between it and Mortgagee Letter 2025-06. For example, FHA highlighted the following impacts of Mortgagee Letter 2025-12 in its announcement titled FHA INFO 2025-21:
- Ending the availability of COVID-19 Recovery Options on September 30, 2025, as opposed to February 1, 2026;
- Moving up the effective date of FHA’s new permanent loss mitigation options to October 1, 2025, as opposed to February 2, 2026;
- Officially ending the FHA-HAMP option on September 30, 2025;
- Limiting a borrower to one permanent loss mitigation option every 24 months, as opposed to 18 months; and
- Reversing scheduled increases in borrower and/or servicer incentives related to certain loss mitigation options.
In addition to these published changes, there are some notable differences between Mortgagee Letters 2025-12 and 2025-06 that FHA did not highlight in its announcement. For example, Mortgagee Letter 2025-12 completely deletes the language accessibility requirements Mortgagee Letter 2025-06 proposed for Handbook 4000.1.III.A.1.a.ii.(D). The language accessibility requirements would have required mortgagees to include a disclosure on all notices sent to borrowers addressing the availability of language access services for borrowers with limited English proficiency (LEP). The LEP disclosure would have been required to be sent, at a minimum, in English and Spanish. Additionally, Mortgagee Letter 2025-12 removes any reference to discrimination based on “sexual orientation or gender identity” from the Nondiscrimination Policy in Handbook 4000.1.III.A.1.a.ii.(C).
From a mortgage servicer’s point of view, the biggest challenge in Mortgagee Letter 2025-12 is the faster deadline for phasing out COVID-19 Recovery Options. Servicers must adjust to updated FHA servicing rules more quickly and cannot offer certain COVID-19 Recovery Options after September 30, 2025.
Finally, looking ahead, it is important to note that FHA’s announcement of Mortgagee Letter 2025-12 appears to call into question the future of the Payment Supplement Program. While there is nothing definitive at this point, the announcement does state that FHA is conducting an “overall evaluation… to determine if it should remain a part of HUD’s loss mitigation program.” Given the current administration’s recent “tightening” of other aspects of the FHA servicing program through Mortgagee Letter 2025-12, it is likely that there are more FHA servicing changes to come.