HUD Cracks Down On FHA Renewal Slackers
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HUD has always had a little patience with those lenders who did not get their audited financials prepared in time. The FHA guidelines up to now have provided for a 30 day warning notice. During that 30 days the lender had the opportunity to cure the infraction, pay a $1000 fee and not risk losing their FHA approval. As usual in the mortgage business, lenders have taken advantage of this accommodation.
To quote HUD:
… In order to maintain its status as an FHA-approved mortgagee, a mortgagee is required, among other things, to timely file annual audited financial statements that meet the requirements of the Secretary, sign and submit a yearly verification report and pay an annual fee for its main and registered branch offices.
The Department considers the timely annual renewal of FHA approval requirements to be critical to its ability to adequately monitor and assess the condition of the mortgagee and determine if the mortgagee poses a risk to the Department, its programs or the public. A mortgagee’s failure to renew its FHA-approval in a timely manner has caused significant expenditures of staff time and office resources. Moreover, many mortgagees have repeatedly failed to comply with the Department’s filing deadlines.. (emphasis added)
Paragraph 4-9 of HUD Handbook 4060.1, REV-2 (Mortgagee Approval Handbook) provided the legal basis for giving tardy lenders a break. However, Mortgagee Letter 2009-01 rescinds that paragraph. That paragraph had provided that mortgagees were only turned over to the Mortgagee Review Board to consider terminating their FHA approval until after the 30 day period had elapsed.
Now, however:
The Department will no longer permit mortgagees to settle the matter prior to consideration by the Mortgagee Review Board. The mortgagee may, however, cure the violation, which will be taken into account by the Mortgagee Review Board when it considers the matter.
Mortgagees must now appeal the Notice of Violation in accordance with the regulations at 24 C.F.R. Part 25 and the matter will be considered by the Mortgagee Review Board. The Mortgagee Review Board may, among other things, impose penalties and/or withdraw the mortgagee’s FHA-approval or permit the Department to enter into a settlement agreement. The sanctions available to the Mortgagee Review Board may be found at 24 C.F.R. § 25.5. If a mortgagee’s FHA-approval is terminated, that mortgagee may not reapply for FHA approval until 12 months after the effective date of their termination.
In other words, straight to the big boys. Don’t pass go and don’t collect $200. So if you are a lender or mortgage broker who wants to avoid sharp penalties or termination of your lender approval, be sure to go ahead and get started on your audited financials right away.
Tagged with: FHA guidelines • FHA lender approval
Filed under: FHA guidelines
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I just received my FHA approval 108/2008. It is my understanding that this approval is good through 12/09.
Please advise if this information is correct. Also if it is, do I automatically renew my FHA approval or does HUD send me a renewal notice.
I would suggest that you call the local Home Ownership Center or the National Customer Service Line to verify this, but my understanding is that you must have certified financials done and submitted within 90 days of the close of your fiscal year regardless of your original approval date. If they were done recently, they should be fairly inexpensive. This is different from renewal of your approval. HUD expects you to keep up with the dates. Although they may send you a notice, it is your responsibility to keep up with it.