FHA Proposes Further Revisions to Annual Lender Certification

The Federal Housing Administration announced Thursday some newly-proposed changes to its annual lender certification in an effort to, “better align with statute and regulation” in a way that does not undermine its ability to hold lenders accountable for compliance with FHA approval and continuing eligibility requirements.

The agency made its initial proposal on the matter in May, which was designed to improve clarity of compliance rules, and to expand financing options for borrowers in an effort to bring more depository institutions back into the FHA lending process, the agency said at the time.

“We are proposing to overhaul the certifications that approved lenders are required to make to FHA both annually, and for each mortgage loan they originate,” said Brian Montgomery, FHA commissioner and acting Deputy Secretary for the Department of Housing and Urban Development (HUD) in May on a call with reporters. “In addition, we are proposing to more clearly define what FHA considers a defective loan, and how our participating lenders may remedy those defects.”

After the initial proposal, it was posted to FHA’s Single Family Housing Drafting Table for feedback from May 9 through June 8, 2019.

“After assessing the feedback received, FHA made additional changes to streamline the annual lender certification,” the agency said in an informational notice. The agency has solicited further public comment by posting its proposals, “FHA Lender Approval, Annual Renewal, Periodic Updates and Required Reports by FHA-Approved Lenders,” to the Federal Register.

The new proposal was lauded by the Mortgage Bankers Association (MBA), which released a statement shortly after FHA made its announcement.

“MBA commends HUD for proposing these revisions to the annual lender certification and providing the opportunity for further stakeholder input,” said Bob Broeksmit, President and CEO of MBA in a statement. “These initiatives are critical to restoring more active participation in the FHA program from all types of lenders in order to serve first-time and low-to-moderate-income homebuyers.”

The commenting period is open until September 13, and the changes to the annual lender certification statements are also posted on the Office of Single Family Housing’s Drafting Table so that relevant stakeholders can be aware of them.

Among the key goals that these changes hope to meet is in bringing clarity to compliance rules that discourage lenders and banks from doing business with FHA, and to be more transparent in doing business with lenders who may make mistakes or errors on loan documentation, according to statements made by Commissioner Montgomery in May.

One of the primary reasons that FHA has engaged in proposing these changes is due to an observed drop in depository institutions’ participation with FHA, including lenders and banks. The original proposal was lauded by the National Reverse Mortgage Lenders Association (NRMLA).

More information about these proposed changes can be found in FHA-INFO #19-42, available on HUD’s website.

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