The Washington Report

The Federal Housing Administration (FHA) issued multiple Mortgagee Letters (ML) on June 27, 2025, implementing several policy changes affecting FHA-insured single family loans. These changes, which take effect immediately, are part of what the Trump administration says is a broader effort to reduce regulatory burden in the housing market. The policy modifications affect various aspects of the FHA-insured loans, from construction standards in flood zones to appraisal protocols and borrower data collection.

• Rescission of Federal Flood Risk Management Standard (FFRMS) for New Construction Eligibility: This ML rescinds the FFRMS for new construction that was implemented in November 2024. Under FFRMS, new construction in Special Flood Hazard Areas was required to be built at least 2 feet above the FEMA Base Flood Elevation. The ML reverts to the previous standard that required building at or above the 100-year flood elevation. In 2023, NAR supported the FFRMS, noting that the extra height requirements help reduce flood risk for FHA borrowers and create fewer challenges for real estate professionals marketing properties in flood-prone areas.
• Rescission of Outdated and Costly FHA Appraisal Protocols: This ML modifies several FHA appraisal requirements. The changes eliminate requirements for appraisers to estimate the remaining economic life of properties and remove additional appraisal requirements for Section 223(e) mortgages, which cover properties in older, declining urban areas. The ML also reduces photography requirements and provides appraisers with more flexibility when conducting a market analysis. These streamlined requirements should make the FHA loan process more efficient for borrowers.
• Rescission of Mandatory Pre-Endorsement Inspection Requirements for Properties Located in Presidentially Declared Major Disaster Areas (PDMDAs): This ML eliminates mandatory damage inspection requirements for properties in disaster areas before FHA loan endorsement. For example, if a house is under contract and a hurricane hits the area before closing, the property would automatically require a mandatory FHA inspection under the old rules, even if the house appeared undamaged. The new policy gives lenders discretion to determine if inspections are necessary based on their own risk assessment. This change should benefit NAR members by reducing transaction delays in disaster-affected areas, as lenders now determine inspection needs based on their own risk assessment rather than automatic requirements.
• Rescission of the Supplemental Consumer Information Form Requirement: This ML eliminates the requirement for FHA borrowers to complete the Supplemental Consumer Information Form (SCIF), which collects data about borrowers' language preferences and homeownership education or counseling received. The SCIF requirement was implemented in June 2023 but is not statutorily mandated. This new policy removes a data collection tool that could help the government and housing industry better understand how to serve diverse homebuyers and help families avoid foreclosure.

Democratic Members of the House Veterans’ Affairs Committee (HVAC) invited NAR, along with other industry partners, Veteran Service Organizations (VSOs), and non-profits, to participate in a roundtable on the VA Loan Guaranty Program, a vital homeownership tool that provides veterans with a centralized, affordable, and accessible method of purchasing homes as a benefit for their service to our nation. The roundtable discussion focused on the health of the program; mitigation measures to prevent veteran foreclosures; how to make more veterans aware of the program; and how to ease program requirements to increase veteran homeownership.

NAR is a strong supporter of the VA Loan Guaranty Program, which has empowered millions of veterans to achieve the American Dream of homeownership, with approximately 490,000 purchases and refinances facilitated in 2024 alone. However, our data shows that VA loan usage has fluctuated significantly in recent years across demographic groups and generations. Today's veterans are less competitive and losing out on home sale purchases because sellers are hesitant to sell their homes to buyers using the program due to the strict conditions of these loans, including limits on fees that can be charged to the buyer using a VA Loan, like pest inspections or certifications, and stringent home inspections. Sellers also cite concerns with lower appraisals and slower closing timelines. During the roundtable, NAR highlighted and recommended necessary programmatic changes that encourage flexibility and enhanced veteran competitiveness in the market while preserving program integrity.

NAR remains committed to advancing veteran homeownership and welcomes any opportunity to work with Congress and VA to improve the program. Veterans using VA loans deserve the same opportunities as all other homebuyers, including the right to be represented by a real estate professional of their choosing. NAR successfully advocated for programmatic changes that allow veterans to directly compensate their real estate representatives when using VA home loans. While this temporary policy change represents a significant step forward, NAR’s efforts to make this change permanent continue.

Watch the recording: “Housing More Veterans Using the VA Loan Guaranty Program”