FHA Adds 2 New MLs for Loan-Level Certification, Manufactured Home Standards

On the heels of announcing a slew of Mortgagee Letters (MLs) this week dedicated to continuing relief programs in the midst of the COVID-19 coronavirus, the Federal Housing Administration (FHA) on Tuesday published two additional Mortgagee Letters (MLs) which apply to both the traditional forward mortgage and Home Equity Conversion Mortgage (HECM) programs.

Manufactured housing criteria

In the first letter, the FHA Manufactured Housing criteria for appraisal comparable selection has been updated by the agency, with a standard specific to manufactured homes that have been certified under the Fannie Mae MH Advantage or the Freddie Mac CHOICEHome program. This is according to the publication of ML #2020-48.

“The change in this ML updates the sales comparison approach comparable selection guidance for a category of Manufactured Housing that meet the Fannie Mae’s MH Advantage or Freddie Mac’s CHOICEHome program certification requirements,” the letter reads in part.

Revised loan-level certification

In the second letter, FHA announced the completion of its revised and “streamlined” loan-level certification form required from lenders when originating a single family forward or reverse mortgage intended for FHA insurance endorsement. This is according to the release of ML 2020-49.

With an aim to simplify the form by eliminating “unnecessarily dense language while remaining consistent with pertinent statutes and other program requirements,” the new form will also better safeguard FHA against fraud by requiring lenders and borrowers alike to certify the truthfulness and veracity of required information.

“As outlined in HUD’s Housing Finance Reform plan, we have taken great steps to provide clarity and certainty needed for qualified lenders to continue participating in FHA’s Single Family insurance program and providing borrowers affordable homeownership opportunities,” said HUD Secretary Ben Carson in an announcement of the new form. “Today’s announcement capstones the work done by HUD, including our Memorandum of Understanding with the Department of Justice on the use of the False Claims Act, and the revisions to our Single Family defect taxonomy and the annual lender certification.”

The form is available for immediate use, but will only be required for all FHA single family forward and Home Equity Conversion Mortgages (HECMs) submitted for FHA insurance endorsements with case numbers assigned on or after March 22, 2021. The revised form, with the official designation of ‘HUD Form 92900-A, Addendum to Uniform Residential Loan Application’ is mandated by FHA and requires signatures from the underwriter or other lender representative, and the borrower.

‘Final piece’ of promised certification reforms

FHA describes the new guidance related to the updated certification form as “the final piece” of promised reforms by FHA initially laid out in HUD’s Housing Finance Reform Report from 2019, designed to minimize concerns that banks or other lenders could expose themselves to legal action over minor errors made in underwriting.

“[FHA] must provide clarity and transparency in its regulatory expectations for participating lenders, including addressing lender and loan-level certification standards and the defect taxonomy,” the 2019 report said.

This follows up on the aforementioned Memorandum of Understanding (MOU) between HUD and the Department of Justice regarding False Claims Act violations, reached between HUD Secretary Carson and Attorney General William Barr.

Read MLs #2020-48 and #2020-49 at HUD.

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