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Over the past decade, the costs associated with servicing both performing and non-performing mortgages throughout the industry have increased significantly.  While servicing costs have increased across the mortgage finance market since the financial crisis, independent estimates indicate that the FHA’s servicing costs for non-performing loans are now multiples above the costs of servicing conventional mortgage loans.  As outlined in HUD’s Housing Finance Reform Plan, FHA proposes to make changes to reduce costs of servicing, update and modernize regulations, and protect its portfolio. This proposed rule would streamline, reform, and update HUD’s regulations for servicing and claim requirements for FHA-insured mortgages, reduce burdens on borrowers and mortgagees, reduce FHA costs of servicing, and help safeguard FHA’s Mutual Mortgage Insurance Fund (MMIF). The reforms in this proposed rule include limiting required mortgagee curtailment of interest to the length of the mortgagee’s delay; limiting reimbursement of operating expenses incurred to certain established timeframes; establishing a deadline that defines FHA’s liability for claim payments for insurance benefits; modernizing requirements for lender contact with borrowers; clarifying requirements regarding second chance sales; streamlining default milestone timelines; updating program requirements to improve the loss mitigation process, the management of borrower defaults, the conveyance process, and the utilization of alternatives to conveyance; and clarifying regulations for payment of partial claims to align with the 2008 Housing and Economic Recovery Act (HERA).