New certifications are being proposed for Federal Housing Administration mortgagees. But the mortgage industry’s primary trade group is concerned that a lack of clarity leaves lenders unnecessarily exposed.
In a public filing Tuesday, the Department of Housing and Urban Development
said it it proposing to revise its application for lender approval and annual certification of FHA-approved lenders. The revision includes a new certification statement.
The new statement would require confirmation that no principals or officers at the mortgagee have been debarred, proposed for debarment, suspended,
declared ineligible or voluntarily excluded from covered transactions by any federal department or agency.
In addition, mortgagees must certify that they haven’t been convicted or had a civil judgment against them for fraud or a criminal office tied to a governmental public transaction during the previous three years.
Certification is also needed to confirm there has been no violation of federal or state antitrust statutes or commission of embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements or receiving stolen property.
FHA-approved lenders would be required to certify compliance with FHA requirements about events or occurrences that are currently covered under form HUD-92900-A, item G, which HUD proposes to remove from the form.
“HUD has determined that this statement should apply at the lender level rather than the loan level so that any related noncompliance is subject to the procedures of the Mortgagee Review Board as set forth in sections 202(c) and 536 of the National Housing Act (12 U.S.C. 1708(c) and 1735f-14), and parts 25 and 30 of title 24 of the Code of Federal Regulations (24 CFR parts 25 and 30),” the filing states.
HUD is seeking public comments on the proposal during the next 60 days, and implementation is expected early next year.
In a conference call with reporters today, Ed Golding,
principal deputy assistant secretary at HUD’s office of housing, said the agency’s goal with the new certification is to clarify the lender’s role in verifying borrowers’ information “and to use common sense when deciding to take corrective action for minor mistakes that don’t affect insurability.
“Additionally, we have included a provision
that requires all lenders to certify that they have completed a pre-endorsement review of all loans, and that no deficiencies or defects were revealed that would render the loan ineligible for FHA insurance,” Golding stated.
He explained that this proposal is open for comment for 30 days and is expected to be in effect by the end of the year.
Mortgage Bankers Association President and Chief Executive Officer David Stevens, who served as Federal Housing Commissioner early on in the Obama administration, expressed concern about the proposed loan certification.
“The language in the certification … lacks clarity as to the insurability of a loan and doesn’t embody a reasonable diligence standard for FHA underwriters, address the significance of any errors in terms of risk to the FHA, or allow for an opportunity for lenders to correct any mistakes, regardless of how minor they may be,” Stevens said in a written statement. “This lack of clarity continues to leave the door open to possible enforcement actions, and also encourages federal agencies, other than FHA, to take action against lenders.
“Absent clarity, some lenders may continue to re-evaluate which borrowers they are willing to extend FHA backed lending to and at what prices.”
Stevens said the trade group will continue to work on fostering a lending environment that protects consumers while encouraging responsible lending.
But while Stevens said that MBA looks forward to working with FHA, it’s not clear that there is a whole lot of wiggle room.
“Holding lenders accountable is a central pillar of this administration’s work, and we will not back away from these efforts,” Golding said.
