New guidance removes appraisal, underwriting, and inspection mandates to streamline FHA lending
The Federal Housing Administration (FHA) has announced a sweeping rollback of several policies within its Single-Family mortgage insurance program, impacting the loan process from application through endorsement.
The changes, issued through a series of new Mortgagee Letters (MLs), are designed to address what the FHA calls outdated or burdensome requirements that have added complexity and cost for lenders and borrowers.
The policy shift follows president Trump’s Jan. 20, 2025 executive orders, which called for reversing policies seen as burdensome to the housing market and broader economy. FHA emphasized that these policy rollbacks are intended to remove red tape and expand access to affordable housing—particularly for first-time homebuyers.
As part of the changes, FHA appraisers will no longer be required to complete a set of procedural steps that have been deemed “antiquated and burdensome.” The agency cited improvements from the FHA Catalyst platform, developed during the first Trump administration, which now supports more efficient collateral valuation analytics.
FHA has also rescinded the full-time employment requirement for DE underwriters, allowing part-time staff to perform underwriting functions if employed by an FHA-approved mortgagee. This change is expected to help lenders manage staffing more flexibly while cutting origination costs.
FHA has eliminated the requirement to submit Form 1103, the Supplemental Consumer Information Form (SCIF), with the case binder. The form collected data on a borrower’s language preference but was deemed to provide “limited benefit” while increasing the documentation burden.
In another reversal, the FHA rescinded Mortgagee Letter 2024-20, which mandated that the lowest floor in newly constructed homes within 100-year flood zones be built two feet above the Base Flood Elevation (BFE). According to the FHA, the rule constrained available land and raised construction costs, further limiting access to affordable housing.
Lastly, FHA is removing the pre-endorsement inspection requirement for properties in Presidentially-Declared Major Disaster Areas (PDMDAs). Under the new guidance, mortgagees will have discretion to assess risk and property condition without triggering automatic inspections.
The changes take effect immediately and will be formally incorporated into an upcoming revision of the FHA’s Single Family Housing Policy Handbook 4000.1.
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
