FHA Clarifies Policies on Annual Lender Certifications

The Federal Housing Administration (FHA) this week updated its loan-level and annual lender-level certifications, in efforts to provide better clarity to lenders as they comply with agency policies and regulations.

In a memo issued March 15, FHA announced the completion of its revised and final form for its Uniform Residential Loan Application (Form 92900-A Loan-Level Certification), effective for use with FHA case numbers assigned on or after August 1, 2016.

Concurrently, the agency also published a 30-day solicitation of public comments in the Federal Register, which is the next step toward FHA finalizing its proposed revisions to the Lender Initial and Annual Certifications (Lender-Level Certifications).

In this final loan-level certification, FHA reinforces its position that lenders should not be penalized for minor mistakes, clarifying that the agency is only interested in errors that would have altered a decision to approve the loan.

“This important move makes it very clear that minor mistakes that do not affect the decision to approve a loan are not the focus of our compliance efforts,” stated a letter from the desk of Edward Golding, principal deputy assistant secretary for housing at the Department of Housing and Urban Development (HUD). “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.”

This certification includes a few other notable revisions, including changes that clarify the lender is certifying to what they know to be true to the best of their knowledge.

FHA emphasized that the certification is not intended to hold lenders responsible for mistakes or fraud committed by a third party that the lender did not, or could not, have had reason to know of.

“Our goal is to make sure that lenders make every effort to obtain accurate information and to validate that information but also recognize that due to the complexity of putting a home loan together, minor errors in information may occur from time to time,” Golding stated.

Additionally, FHA has removed references to the pre-endorsement review requirement and has made the certification consistent with the policies in its updated FHA Handbook.

For the annual lender certification, which is currently open to for 30-day comment period, FHA’s primary revision remains the addition of language requiring lenders to certify that they have not been involved in fraud or other serious criminal or civil violations.

This provision, Golding stated, is designed to obtain certification from the corporate entity and its officers that no activity has occurred within the certification time period, or during the three years prior, that calls into question their fitness to administer the responsibilities of the FHA program.

“Adding this provision to the annual lender-level certification, coupled with requirements to report these activities as they arise, reinforces HUD’s ability to make sure lenders are held accountable for wrong-doing,” Golding said.

Although this is not an entirely new requirement—since this language was previously included within the loan-level certification—FHA moved this requirement  to the lender-level certification because it believes the provision is best certified by an officer of the company at the institutional level rather than on a loan-by-loan basis.

Revising the lender-level certification in this manner responds to concerns that changes made to the loan-level certification had the unintended impact of weakening HUD’s enforcement authority, however, Golding assures that has never been FHA’s intention.

“None of the changes to either of the certifications hinders or undermines our ability to take action against any bad actors in the industry,” he stated. “Overall, these certifications increase clarity and protect FHA, taxpayers and lenders.”

FHA believes that the improved clarity set forth in its certification updates will make it easier for lenders to comply with agency policies, while also strengthening FHA’s ability to hold them accountable.

“We are confident that the proposed revisions to the loan-level and lender-level certifications reflect a significant step forward for the FHA program and responsiveness to industry concerns,” Golding stated.

Written by Jason Oliva

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