V.A.2.b. Operational Compliance (09/14/15)

Owned by Kacey Olson
Nov 21, 2018
5 min read

© HUD Single Family Housing Policy Handbook 4000.1

The Mortgagee must ensure that its QC Plan provides for the following required reviews.

Included in this section are:

i. Personnel
ii. Affiliate Quality Control Reviews
iii. Fair Housing and Fair Lending
iv. Escrow Funds
v. Mortgage Insurance Premiums
vi. Timely and Accurate Submission for Insurance
vii. Advertising

i. Personnel

(A) Training

(1) Loan Administration and Quality Control Processes

(a) StandardThe Mortgagee must train all staff involved in FHA Loan Administration and QC processes to ensure that staff know all current FHA requirements for the FHA Loan Administration practices for which the Mortgagee is responsible.

(b) Required DocumentationThe Mortgagee must maintain a list of all training provided to staff. For each training, the Mortgagee must include a summary of the content covered.

(2) Access to FHA Guidance

(a) StandardThe Mortgagee must provide all Loan Administration and QC staff with access to current FHA guidance including Handbooks, Mortgagee Letters (ML), Frequently Asked Questions (FAQ), and other guidance issued by FHA.

(b) Required DocumentationThe Mortgagee must confirm that all Loan Administration and QC staff have access to the Internet or to hard copies of current FHA guidance.

(B) Restricted Participation

(1) StandardThe Mortgagee must confirm it verified, through each of the following systems, that the designated employees and/or Affiliates listed below were permitted to participate in FHA programs. If any of the designated employees and/or Affiliates are found to be ineligible, they are restricted from participating in FHA programs.Checks to verify employee eligibility must be conducted at least semiannually.

(a) Excluded Parties ListThe Mortgagee must verify employee eligibility for all officers, partners, directors, principals, managers, supervisors, loan processors, loan underwriters, loan originators, and all other employees and Affiliates participating in U.S. Department of Housing and Urban Development (HUD) programs for or on behalf of the Mortgagee, using the System for Award Management (SAM) Excluded Parties List.

(b) Limited Denial of ParticipationThe Mortgagee must verify employee eligibility for all officers, partners, directors, principals, managers, supervisors, loan processors, loan underwriters, loan originators, and all other employees and Affiliates participating in HUD programs for or on behalf of the Mortgagee, using the Limited Denial of Participation (LDP) list.

(c) National Mortgage Licensing System and RegistryThe Mortgagee must verify that all employees and Affiliates participating in HUD programs for or on behalf of the Mortgagee are registered with the National Mortgage Licensing System and Registry (NMLS), unless excluded from NMLS requirements by law or regulation.

(2) Required DocumentationMortgagees must maintain documentation that supports each employee’s eligibility.

ii. Affiliate Quality Control Reviews

(A) StandardThe Mortgagee must perform QC reviews of its Affiliates in the same manner and under the same conditions as required for the Mortgagee’s own operations. At a minimum, Affiliate monitoring must include a periodic (semiannual at a minimum) re-verification of the Affiliate’s compliance with all applicable laws related to licensing, qualification, eligibility, or approval to originate or subservice Mortgages.

(B) Required DocumentationThe Mortgagee must document the methodology used to review Affiliates, the results of each review, and any corrective actions taken as a result of review Findings. The procedures used to review and monitor a Mortgagee’s Affiliates must be included in the Mortgagee’s QC Plan.

iii. Fair Housing and Fair Lending

The Mortgagee must verify that its operations comply with applicable state and federal fair lending laws, including the following:

  • Fair Housing Act (42 U.S.C. § 3601 et seq.)
  • ECOA (15 U.S.C. § 1691 et seq.)
  • Federal Truth in Lending Act (15 U.S.C. § 1601 et seq.)

(A) Rejected Mortgage Applications

(1) StandardThe Mortgagee must review a random statistical sample of rejected applications within 90 Days from the end of the month in which the decision was made. Reviews must be conducted on a monthly basis and ensure that:

  • the reasons given for rejection were valid;
  • each rejection has the concurrence of an officer, senior staff person, or underwriter with sufficient approval authority, or a committee chaired by an officer, senior staff person, or underwriter with sufficient approval authority;
  • the requirements of the ECOA are met and documented in each file; and
  • no civil rights violations were committed in the rejection of the application.

Where possible discrimination is noted, the Mortgagee must take immediate corrective action to ensure its operations comply with applicable state and federal fair lending laws.

(2) Required DocumentationThe Mortgagee must document the methodology used to review rejected applications, the results of each review, and any corrective actions taken as a result of review Findings. The procedures used to review rejected applications must be included in the Mortgagee’s QC Plan.

(B) Fair Housing Poster and Equal Housing Opportunity Logo

(1) StandardThe Mortgagee must verify that a fair housing poster is prominently displayed in the Mortgagee’s home office and any branch offices that deal with Borrowers and the general public. The Mortgagee must verify that the equal housing opportunity logo is prominently displayed on all documents, including both hard copy and electronic documents, distributed by the Mortgagee to the public.

(2) Required DocumentationThe Mortgagee must confirm that a fair housing poster is prominently displayed in the Mortgagee’s offices. The Mortgagee must be able to demonstrate that all documents distributed by the Mortgagee to the public contain the equal housing opportunity logo.

(C) Fair Housing or Discrimination Violations

(1) StandardPotential fair housing violations or instances of discrimination must be reported to HUD’s Office of Fair Housing and Equal Opportunity (FHEO) immediately.

(2) Required DocumentationFair housing violations and complaints may be reported online using the HUD Form 903 Online Complaint, contacting HUD’s local FHEO Regional Office or by calling the Fair Housing Complaint Hotline at 1-800-669-9777.

iv. Escrow Funds

(A) StandardThe Mortgagee must verify that escrow funds received from Borrowers were used only for the purpose for which they were received, and are in compliance with all Consumer Financial Protection Bureau (CFPB) escrow requirements.

(B) Required DocumentationThe Mortgagee must retain the results of each review and any corrective actions taken as a result of review Findings.

v. Mortgage Insurance Premiums

(A) StandardThe Mortgagee must verify that FHA Mortgage Insurance Premiums (MIP) were remitted to FHA within the required time period or, if not, that the remittance included late charges and interest penalties. Mortgagees must address any pattern of late submissions and promptly take corrective measures.

(B) Required DocumentationThe Mortgagee must retain the results of each review and any corrective actions taken as a result of review Findings.

vi. Timely and Accurate Submission for Insurance

(A) StandardThe Mortgagee must verify that Mortgages are being submitted to FHA for insurance within the required time frames (see Case Binder Submission – Direct Endorsement Non-Lender Insurance).

(B) Required DocumentationThe Mortgagee must retain the results of each review and any corrective actions taken as a result of review Findings.

vii. Advertising

(A) StandardThe Mortgagee must review all advertisements generated by the Mortgagee or on its behalf to verify compliance with HUD/FHA advertising requirements (see Advertising). The Mortgagee must take prompt corrective action upon discovering any violation of advertising requirements described in this SF Handbook.

(B) Required DocumentationThe Mortgagee must retain copies of any Advertising Device the Mortgagee produces, or that is produced on the Mortgagee’s behalf, that is related to FHA programs. The Mortgagee must retain samples of the advertising reviewed, the results of each review, and any corrective actions taken as a result of review Findings.