Earlier this month, notice of the cause and descriptions of administrative actions taken by the Mortgagee Review Board (“MRB”) against HUD approved mortgagees between August 31, 2011, and December 31, 2011, was published in the Federal Register.
If you’ll allow me a football analogy given this special time of year, these administrative actions serve to remind originators and servicers of FHA insured mortgage loans to perfect blocking, tackling and securing the football before spending too much time installing a wildcat package to show off that flashy, athletic quarterback acquired in the off-season. In other words, it is a reminder to nail down the fundamentals.
Much like a failure to timely remit insurance premiums or failing to notify HUD/FHA within 15 days of the termination of contracts for mortgage insurance, most of the issues leading to administrative action by the MRB are easily avoided by having good control over the fundamentals of your operation and a disciplined compliance management program. Though not exhaustive, below are some issues for which HUD approved mortgagees were penalized and references to HUD guidance that will help your company avoid these costly mistakes.
- Failing to notify HUD of fines and/or other findings by another regulator.
- Failing to notify HUD of changes subsequent to approval.
- False certification. A consistent partner with the failure to notify is making a false certification. If subjected to a finding by a state or other regulator you must be very careful when completing your annual certification. When in doubt, check “cannot certify,” report the finding again and wait for HUD’s response.
- Using the official HUD seal on an advertisement. Mortgagees are not allowed to use HUD’s official seal.
- Quality control shortcomings. Companies continue to overlook the requirement that each and every loan that becomes an early payment default must be subjected to a quality control review.
Make HUD’s notification requirements part of your examination protocols and/or checklists. When an exam or investigation wraps up, have the person with primary responsibility for oversight of that matter verify whether notice was required and if so, that notice was properly given. Review HUD Mortgagee Letter 2009-31 and Mortgagee Letter 2011-34 to refresh your recollection of reporting requirements for these types of events.
When you open a branch, close a branch, obtain a license in a new jurisdiction or voluntarily surrender a license – send a notification to HUD pursuant to Chapter 6 of HUD’s Mortgagee Approval Handbook (“notification of changes subsequent to approval”) and HUD Mortgagee Letter 2009-17. Remember also, that certain events related to your employees, changes in officers, etc. may trigger a HUD notification requirement.
Maintain excellent records of issues that arise during the year and thoroughly review the past year’s worth of business changes and regulatory interactions before filing your annual certification. Review HUD Mortgagee Letter 2010-38 with regard to notification and annual certification. If in doubt about any aspect of the certification, ask.
Review HUD Mortgagee Letter 2011-17 concerning use of the HUD/FHA logo, name and acronym in advertising.
Review Mortgagee Approval Handbook (4060.1), Chapter 7, Section 7-6D and ensure that your quality control policy requires a review of every early payment default. Monitor FHA Connection each month for early payment defaults.