The Helping Families Save Their Homes Act of 2009 (HFSH) and Mortgagee Letter 2009-31 stated that lenders are "subject to unresolved findings contained in a Department of Housing and Urban Development (HUD) or other governmental audit, investigation, or review."
A new Mortgagee Letter (ML 2010-38) clarifies that all principal owners and corporate officers of FHA mortgagees must confirm that their institutions and the officers, partners, directors, managers, principals, supervisors, loan processors, loan underwriters, and loan originators of their institutions who participate in FHA programs are not subject to any unresolved findings or federal lawsuits resulting from:
(1) an investigation, audit, or review by HUD, or
(2) other federal, state, or local governmental agencies, or
(3) any other regulatory/oversight entities (i.e., banking institution) with jurisdiction over the activities of their institutions and/or employees.
Entities already approved by FHA will not be permitted to renew their status at the next annual recertification date if they are not in compliance with the eligibility criteria.
What are "Unresolved Findings"?
Include, but are not limited to:
- Fair Housing Act lawsuits by the Department of Justice alleging an ongoing pattern or practice of discrimination
- HUD letters of findings or charges alleging systemic violations of the Fair Housing Act
- Open issues in any HUD OIG audit, investigation or review
- Any action by HUD's Mortgagee Review Board
- The suspension, surrender, or revocation of a license of any kind (i.e., Mortgage Broker License, CPA) by a state or local jurisdiction
- The imposition of fines, settlement agreements, or other monetary sanctions by a state or local entity
- Any other action taken by a government agency
Confirmation Associated with Criminal Activity - Timeframes
FHA lenders must confirm that none of its employees or their subsidiaries are involved in investigations or reviews that may be due to an instance of fraud, embezzlement, forgery, or any other crime related to the real estate or mortgage loan industry.
Matters remain "unresolved" until such time as an action is taken by the investigating entity, or the entity formally determines that no action is warranted.
Confirmation must provide that their officers, partners, directors, managers, principals, supervisors, loan processors, loan underwriters, and loan originators participating in FHA programs have not been convicted of, or pled guilty or nolo contendere to, a felony related to participation in the real estate or mortgage loan industry:
(i) during the 7-year period preceding the date of the application for licensing and registration; or
(ii) at any time preceding such date of application, if the felony involved an act of fraud, dishonesty, or a breach of trust, or money laundering.
Confirmation of SAFE Act Compliance
FHA lenders must confirm that their institution and its officers, partners, directors, principals, managers, supervisors, loan processors, loan underwriters, or loan originators participating in FHA programs are not in violation of the provisions of the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) or any applicable provision of state law.
Principal owners and corporate officers must confirm that all employees, as required, consistently meet their respective state's licensing requirements as well as all federally-mandated licensing or registration requirements including registration with the Nationwide Mortgage Licensing System and Registry (NMLS).
Visit Library for Issuances
Mortgagee Eligibility Requirements and Clarification of FHA's Electronic
Annual Certification Requirements and Procedures,
Mortgagee Letter 2010-38, November 17, 2010
Strengthening Counterparty Risk Management,
Mortgagee Letter 2009-31, September 18, 2009
LENDERS COMPLIANCE GROUP is the first full-service, mortgage risk management firm in the country, specializing exclusively in mortgage compliance and offering a full suite of hands-on and automated services in residential mortgage banking.
