FHA’s new streamlined loss mitigation waterfall is now in effect, and it is by far the most complicated host of options that servicers have faced in years.
To drive down defaults, servicers should provide clear, transparent notice of all eligible loss mitigation options before a borrower reaches 90 days delinquent. Recent data has shown that borrowers who default are increasingly struggling to recover.
At the same time, the market is tightening:
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- FHA serious delinquencies are gradually rising
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- Borrower confusion is increasing formal complaints
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- New rules require faster evaluation, clearer communication, and better documentation
Servicers need a way to deliver accurate, borrower-ready information earlier in the delinquency cycle, without adding more friction to their operations.
The Challenge: Complex Rules and Compressed Timelines
The updated FHA waterfall introduces a simpler framework for borrowers by using an affordability attestation instead of full financial documentation. But the operational lift for servicers increases:
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- Determining eligibility under a revised decision tree
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- Explaining multiple workout paths in plain language
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- Providing evaluations notices before 90 days
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- Ensuring accuracy and consistency across letters and calculations
Borrowers often receive communication they cannot interpret, especially FHA borrowers, who make up 27% of all mortgage complaints despite representing about 15 percent of the market.
When borrowers don’t understand their options, they delay engagement. When servicers cannot clearly explain those options, risk increases.
The Solution: The Truth in Loss Mit (TILM) Report
To meet these new expectations, WaterfallCalc created the Truth in Loss Mit (TILM) Report, supported operationally by DLS Servicing.
Its purpose is simple: provide borrowers with a straightforward, accurate comparison of every FHA workout they qualify for using the same logic behind the new waterfall.
Each report shows:
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- The borrower’s eligible options
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- Estimated payments
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- Term impacts
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- Partial claim specifics
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- Modification suitability
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- A clear comparison of long-term outcomes
The format is designed so borrowers can actually understand what each option means for their household.
For servicers, it offers a standardized, compliance-aligned way to fulfill the pre-90-day notice requirement without reinventing communication from scratch.
Why Servicers are Moving Toward This Approach
1. It aligns directly with FHA expectations.
The TILM Report satisfies the requirement for early, transparent option disclosure.
2. It accelerates borrower response.
FHA borrowers typically don’t engage until they are 5–6 months delinquent. Early communication changes borrower behavior.
3. It reduces downstream workload.
Clear comparisons reduce call times, confusion, and repeat outreach.
4. It reflects the new affordability-attestation model.
Borrowers understand what they’re attesting to and why.
5. It improves accuracy and standardization.
Servicers don’t risk misinterpreting the waterfall or issuing unclear notices.
Early Results: Strong Borrower Engagement
One servicer recently issued the TILM Report across their delinquent portfolio, and within the first week:
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- 38% of borrowers responded with an attestation
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- 25% cured their delinquency immediately
For context, blind outreach for traditional options like a Fannie/Freddie Flex Mod typically sees a 30–40% response and often over a longer timeline.
This early test validates the core premise:
When borrowers receive clear information, they engage sooner.
More data will be released as additional servicers complete their rollouts.
Why Borrowers Benefit
The TILM Report gives borrowers:
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- A plain-language explanation of each option
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- A visual comparison of outcomes
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- Clarity on payments, terms, and partial claims
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- A simplified entry point into a process that often feels overwhelming
This reduces hesitation and improves decision-making at a stage where timing is critical.
Why Servicers Benefit
Servicers gain:
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- Automated waterfall calculations
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- A compliance-ready borrower communication tool
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- Reduced manual effort
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- Support from DLS Servicing for mailing, tracking, and workflow execution
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- Better forecasting and earlier cures
It is a purpose-built solution for a regulatory moment that demands precision and consistency.
The Market is Changing. Borrower Communication Must Change with It.
Rising delinquencies, updated FHA expectations, and increased borrower stress mean servicers cannot rely on legacy letters or generic templates.
Borrowers need clarity earlier.
Servicers need communication tools that align with updated rules.
The TILM Report brings both together.
Get Started with the TILM Report
Implementation is straightforward:
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- Send your delinquency file
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- Receive your generated TILM Reports
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- DLS Servicing handles operational execution, if desired
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- Your team receives borrower responses and reporting
To learn more or begin offering the TILM Report, reach out to us by clicking the link below.
Contact Us Today