Are You Prepared?
Several months ago, HUD/FHA released a draft copy of its “Origination through Post-Closing Endorsement” Handbook (4000.1) on its website. Most noteworthy is the fact that the policy & procedural changes that are being implemented by HUD/FHA via this Handbook are scheduled to be effective as of June 15, 2015 – which is now less than 3 months away.
Also, on March 18, 2015 HUD/FHA released updates and additional sections of this Handbook (HB) that will impact appraisers and 203(k) consultants as well as Quality Control (QC) operations for lenders. These policy and procedural changes will also become effective on June 15, 2015.
On April 8, 2015 HUD/FHA Headquarters staff conducted an industry Webinar to discuss the new Handbook sections that deal with Lender Approval procedures, as well as Quality Control & Compliance.
In this regard, the most significant change from current policies is that HUD/FHA will now require pre-closing (also known as pre-funding) reviews as part of a lender’s monthly Quality Control (QC) sample. Although these pre-closing reviews cannot account for more than 10% of the overall QC sample size, in the past HUD/FHA only recommended that such reviews be performed.
In order to prepare for this change, it is recommended that lenders begin planning how they intend to process these pre-closing reviews (with internal staff or via a third-party QC vendor) as well as their anticipated workload volume and process flow.
One item of concern with the draft HB requirements is that it is indicated that re-verifications (employment, income, assets, etc.) must be performed as part of the pre-closing review and that such re-verifications must be in writing or done electronically.
If such requests are not successful, a telephone re-verification must be attempted. This re-verification requirement will add processing time delays to a pre-closing review which is detrimental to a lender’s operations.
I have shared these concerns with HUD/FHA staff subsequent to the Webinar and they have promised to reconsider this re-verification requirement on pre-closing reviews as currently proposed in the 4000.1 HB.
Stay tuned for future developments. Many of my future Blog Posts and upcoming LendingLogics Newsletters will address the numerous FHA policy & procedural changes that are being implemented by HUD in June 2015.
It is highly recommended that all those entities that are currently involved with FHA financing (lenders, brokers, appraisers, etc.) access the www.hud.gov website – then search for “HUDclips” and look for Housing Handbook 4000.1. The new updates and sections have just been added to this document and are accessible for all to read.