Question
Is
it true that the new FHA Guidelines require Pre-Closing Quality Control
reviews?
Answer
Yes. The U.S. Department of Housing and Urban
Development issued a new handbook, FHA Single Family Housing Policy Handbook
4000.1, which is effective as of September 14, 2015 (“Handbook”). Under the Handbook, mortgagees must select
FHA-insured mortgages for pre-closing quality control reviews on a monthly
basis.
Mortgages selected must be
reviewed after the mortgage is approved by an FHA Directed Endorsement
Underwriter and prior to closing. [4000.1 - V.A.3.a.i.(A)]
As
with post-closing reviews, loans selected for pre-closing reviews must consist
of both random and discretionary samplings. [4000.1 - V.A.3.a.iv]
However,
unlike post-closing reviews, pre-closing reviews do not require mortgagees to
obtain a new credit report or re-verify income, employment, assets and housing
expense information. Rather, for
pre-closing reviews mortgagees must evaluate all documents supporting
employment, income, assets and housing expense information to ensure original
documents comply with FHA’s policy requirements and to resolve any
discrepancies in the documentation prior to closing. [4000.1 - V.A.3.c]
Mortgagees
must also conduct a review of the property appraisal for all FHA-insured
mortgages chosen for pre-closing quality control reviews.
At
a minimum, the following areas must be reviewed:
- appraisal data,
- validity of the comparables,
- value conclusion (as required by FHA guidance),
- any changes made by the underwriter, and
- the overall quality of the appraisal. Field reviews are not required for pre-closing reviews. [4000.1 - V.A.3.c]
Michael
Barone
Director/Legal
& Regulator Compliance
Lenders Compliance
Group
