In an effort to provide more clarity for Federal Housing Administration mortgagees, new loan-level and lender-level certifications have been released.
The Department of Housing and Urban Development has received many comments from lenders about
the uncertainty of originating FHA-insured loans.
At the same time, HUD had to balance the concerns voiced by those in real estate finance with mortgage lender compliance and borrower protection.
On Tuesday, HUD Principal Deputy Assistant Secretary for Housing and Head of FHA Ed Golding issued a statement about changes to certifications.
He noted that
new loan-level and annual lender-level certifications have been released.
The final loan-level certification clearly identifies which mistakes that would have altered a loan decision mortgagees will be held accountable for, according to Golding.
He explained that it is very clear with the new certification that minor mistakes which don’t impact loan approval, aren’t the focus of compliance efforts.
“The new language reinforces FHA’s longstanding position that lenders should not be penalized for minor mistakes,” Golding stated. “Clarifying that we are interested only in errors that would have altered a decision to approve the loan should put to rest any confusion regarding FHA compliance policy.”
Other revisions to the loan-level certification include clarification that the lender, to the best of its knowledge, is certifying what they know to be true.
The FHA chief explained that the certification isn’t intended to
hold mortgagees responsible for mistakes or fraud they didn’t commit nor couldn’t have known about.
Golding added that references to the pre-endorsement review requirement have been removed, and the certification has been aligned with policies in the updated FHA handbook.
The primary revision to the annual lender certification — language requiring lenders to certify they haven’t been involved in fraud or other serious criminal or civil violations that would impair their ability to carry out the responsibilities of the program — was originally communicated in September 2015.
Golding said the provision, which covers three years prior to the certification period, uses language that was previously included in the loan-level certification. It was moved to the lender-level certification because such a provision is best certified by an officer of the company at the institutional level instead of on a loan-by-loan basis.
He said that comments are being taken for 30 days on the lender certification.
“These certifications are key tools that help to ensure lenders comply with our policies, including those that are designed to protect borrowers and ensure quality lending practices,” the notice stated. “We recognize the important role these particular certifications play for the industry, and believe we have achieved the clarity that we and the industry sought while maintaining accountability.”
The move by HUD follows concerns voiced by mortgage lenders like JPMorgan Chase & Co., Quicken Loans Inc. and Wells Fargo & Co. about excessive liability on FHA-insured loans they originate due to settlements and litigation.
Mortgage Bankers Association President and Chief Executive Officer David H. Stevens issued a statement indicating that, on first review, the language
appears to be an improvement over the previous certifications.
But he did offer some cautionary advice.
“Individual lenders will need to review the new certifications, assess the legal and reputational risks associated with FHA lending, and determine whether the new language provides sufficient protection to allow them to responsibly expand liquidity for FHA lending,” Stevens said. “Similarly, we intend to study these updated requirements.”
