Many investors and agencies, such as Fannie Mae, Freddie Mac, and FHA, require its lenders to have an active quality control plan in place. We wanted to help make the regulations more understandable for you, so we published an article summarizing basic quality control guidelines for Fannie Mae, Freddie Mac, and FHA. We hope you find the information useful — and we are always happy to answer your questions.
Read the full article summarizing QC guidelines for Fannie Mae, Freddi Mac, and FHA.
Showing posts with label fha quality control. Show all posts
Showing posts with label fha quality control. Show all posts
Monday, November 16, 2009
Thursday, October 1, 2009
The Effects of HUD's Announcement from September 18, 2009
On September 18, 2009, HUD published a press release announcing numerous changes that are either proposed or already implemented, which affect FHA lenders and FHA loans. The most sweeping proposed change is that HUD/FHA will approve only Sponsor (investor, full eagle) lenders. FHA will then have the Sponsors approve the FHA brokers with whom they are willing to do business. Within one year, HUD intends to require an increase in the Sponsor’s net worth of $1,000,000 (increased from the present $250,000).
While the final rules are not yet in effect, it appears they will be implemented after a “notice and comment period.” Although these changes raise many questions which will require upcoming information from HUD/FHA, the following reflects our views on how this will affect lenders and brokers.
It is clear from the language of the press release that HUD is trying to make it easier for brokers to do FHA business, while at the same time putting more responsibility and accountability on both the broker and the Sponsor to make justified loans. HUD stated in the press release that “these lenders must have skin in the game,” which seems a clear indication that brokers and Sponsors will be held more accountable for loans produced than in the past.
Given the apparent intent of this new rule, it seems that the Sponsor will now be responsible to see that brokers are in compliance with the Quality Control expected by FHA, and presumably desired by the Sponsor. These Quality Control programs help ensure loans that comply with all regulations and laws, as well as minimize losses from bad loans. It is likely that even though the net worth requirements for brokers will be reduced or eliminated, Sponsors will continue to require Quality Control Plans and Quality Control audits in order to do business with them.
As HUD/FHA comes out with further announcements, we will keep you updated through our newsletter and social networks. Visit HUD's website to read the entire press release from September 18, 2009.
Keeping up with changing regulations can be a daunting task. Mortgage Compliance Advisors offers lending manuals for FHA, VA, and HECM that are easy to use and updated quarterly. For more information, visit www.MortgageComplianceAdvisors.com or call 877-226-3152.
While the final rules are not yet in effect, it appears they will be implemented after a “notice and comment period.” Although these changes raise many questions which will require upcoming information from HUD/FHA, the following reflects our views on how this will affect lenders and brokers.
It is clear from the language of the press release that HUD is trying to make it easier for brokers to do FHA business, while at the same time putting more responsibility and accountability on both the broker and the Sponsor to make justified loans. HUD stated in the press release that “these lenders must have skin in the game,” which seems a clear indication that brokers and Sponsors will be held more accountable for loans produced than in the past.
Given the apparent intent of this new rule, it seems that the Sponsor will now be responsible to see that brokers are in compliance with the Quality Control expected by FHA, and presumably desired by the Sponsor. These Quality Control programs help ensure loans that comply with all regulations and laws, as well as minimize losses from bad loans. It is likely that even though the net worth requirements for brokers will be reduced or eliminated, Sponsors will continue to require Quality Control Plans and Quality Control audits in order to do business with them.
As HUD/FHA comes out with further announcements, we will keep you updated through our newsletter and social networks. Visit HUD's website to read the entire press release from September 18, 2009.
Keeping up with changing regulations can be a daunting task. Mortgage Compliance Advisors offers lending manuals for FHA, VA, and HECM that are easy to use and updated quarterly. For more information, visit www.MortgageComplianceAdvisors.com or call 877-226-3152.
Tuesday, September 22, 2009
Summary of FHA's guidelines for quality control plans
If you're just starting out with FHA or you'd like to know FHA's guidelines for quality control plans, check out our article summarizing FHA's requirements for QC plans.
Monday, July 13, 2009
FHA Guidelines: How to Become FHA Approved
An easy to understand summary of FHA approval requirements for lenders.
FHA has grown rapidly in the past few years, fueled largely by tightening credit. In fact, over 20% of new home purchases are currently through FHA. As the volume of FHA loans increases, more lenders across the country are becoming FHA approved. However, the FHA approval process and paperwork can appear overwhelming, especially to smaller companies. To help lenders understand the guidelines, below is a brief summary of FHA’s approval requirements. (For a detailed list of all requirements, visit www.hud.gov.)
Organization Requirements
In order to reduce risk, FHA limits its approval to experienced, well-established organizations; the officer in charge of an organization’s FHA operation must have at least three years of mortgage experience. Furthermore, to be considered for FHA approval, an organization cannot be a sole proprietorship. Corporations, partnerships, LLC’s, chartered financial institutions, and government agencies are acceptable. Along the same lines, FHA approved organizations must have at least two full time employees and a commercial office location (not a home office).
Paperwork
Each prospective FHA lender must fill out the HUD 11701 application. FHA also requires certain letters and other documents, depending on the desired type of FHA approval (non-supervised loan correspondent, investing lender, etc.). For example, brokers wanting to become FHA approved must submit a sponsor/funding letter, whereas lenders need a funding program. For a list of all required documents by FHA approval type, see FHA Lender Approval Requirements.
Finances
Excluding “Government Mortgagee,” the application fee for all FHA approval types is $1,000. Additionally, lenders must submit audited financial statements with the application. The lender’s financial statements need to show at least $63,000 net worth with 20% liquid assets.
Quality Control Plan
Finally, FHA approval requires organizations to submit a quality control plan, in order to mitigate fraud and errors. Organizations can create a quality control plan themselves, or purchase one from a third party. As part of the quality control plan, lenders must audit 10% of the FHA loans they originate. These audits need to be performed regularly—within 90 days of the end of the month in which the loan closed.
Quality control audits may be performed in-house, if the lender properly trains and establishes a unit solely for quality control. The staff must not be involved in loan production. Alternatively, lenders may have a third party, such as Mortgage Compliance Advisors, LLC, perform the quality control function, as long as it meets HUD’s requirements.
For more information on FHA approval services or quality control audits, visit www.MortgageComplianceAdvisors.com or call 877-226-3217.
About Mortgage Compliance Advisors (MCA):
MCA has grown to help clients across the country through the FHA approval process, and continues to help them stay compliant with regulations after approval. MCA's principals have a combined sixty years of experience in the mortgage industry, including thirteen years at the Salt Lake City HUD/FHA office. As a former FHA branch chief, MCA’s principal Bob Warnock can advise clients through every step of the FHA approval process.
FHA has grown rapidly in the past few years, fueled largely by tightening credit. In fact, over 20% of new home purchases are currently through FHA. As the volume of FHA loans increases, more lenders across the country are becoming FHA approved. However, the FHA approval process and paperwork can appear overwhelming, especially to smaller companies. To help lenders understand the guidelines, below is a brief summary of FHA’s approval requirements. (For a detailed list of all requirements, visit www.hud.gov.)
Organization Requirements
In order to reduce risk, FHA limits its approval to experienced, well-established organizations; the officer in charge of an organization’s FHA operation must have at least three years of mortgage experience. Furthermore, to be considered for FHA approval, an organization cannot be a sole proprietorship. Corporations, partnerships, LLC’s, chartered financial institutions, and government agencies are acceptable. Along the same lines, FHA approved organizations must have at least two full time employees and a commercial office location (not a home office).
Paperwork
Each prospective FHA lender must fill out the HUD 11701 application. FHA also requires certain letters and other documents, depending on the desired type of FHA approval (non-supervised loan correspondent, investing lender, etc.). For example, brokers wanting to become FHA approved must submit a sponsor/funding letter, whereas lenders need a funding program. For a list of all required documents by FHA approval type, see FHA Lender Approval Requirements.
Finances
Excluding “Government Mortgagee,” the application fee for all FHA approval types is $1,000. Additionally, lenders must submit audited financial statements with the application. The lender’s financial statements need to show at least $63,000 net worth with 20% liquid assets.
Quality Control Plan
Finally, FHA approval requires organizations to submit a quality control plan, in order to mitigate fraud and errors. Organizations can create a quality control plan themselves, or purchase one from a third party. As part of the quality control plan, lenders must audit 10% of the FHA loans they originate. These audits need to be performed regularly—within 90 days of the end of the month in which the loan closed.
Quality control audits may be performed in-house, if the lender properly trains and establishes a unit solely for quality control. The staff must not be involved in loan production. Alternatively, lenders may have a third party, such as Mortgage Compliance Advisors, LLC, perform the quality control function, as long as it meets HUD’s requirements.
For more information on FHA approval services or quality control audits, visit www.MortgageComplianceAdvisors.com or call 877-226-3217.
About Mortgage Compliance Advisors (MCA):
MCA has grown to help clients across the country through the FHA approval process, and continues to help them stay compliant with regulations after approval. MCA's principals have a combined sixty years of experience in the mortgage industry, including thirteen years at the Salt Lake City HUD/FHA office. As a former FHA branch chief, MCA’s principal Bob Warnock can advise clients through every step of the FHA approval process.
Tuesday, July 7, 2009
MCA Quoted in American Banker
On July 2, 2009, Mortgage Compliance Advisors was mentioned in the national publication American Banker, in the article FHA Enforces Fine Print as Its Volume Swells. The article discusses how FHA is more strictly enforcing regulations, because of its rapid growth.
“The Department of Housing and Urban Development, which runs FHA, has stepped up …enforcement actions in the last year. And with FHA now guaranteeing roughly 30% of all originations, raising the agency's public profile and its risk, many in the industry expect a further, and dramatic, increase.”
The article cites specific examples of FHA enforcement actions, and quotes MCA’s principals Bob Warnock and Craig Christensen regarding FHA quality control and a few necessary actions to comply with FHA. To read the full article, click here (Note: American Banker requires a login to view full articles).
“The Department of Housing and Urban Development, which runs FHA, has stepped up …enforcement actions in the last year. And with FHA now guaranteeing roughly 30% of all originations, raising the agency's public profile and its risk, many in the industry expect a further, and dramatic, increase.”
The article cites specific examples of FHA enforcement actions, and quotes MCA’s principals Bob Warnock and Craig Christensen regarding FHA quality control and a few necessary actions to comply with FHA. To read the full article, click here (Note: American Banker requires a login to view full articles).
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