FHA taking more steps to strengthen origination oversight

by Diana Aqra31 Jul 2013

In its efforts to continually improve oversight of loan origination, the Department of Housing and Urban Development is requesting comment from FHA lenders on how to improve their Quality Assurance Process (QAP).

Comments will be used to strengthen the current QAP, which is intended to enable FHA lenders to evaluate the accuracy, validity and completeness of lenders’ loan origination and servicing operations, according to written notice by HUD on July 9.

FHA’s quality control plan (QCP) is designed to assure compliance with FHA’s and lender’s own origination or servicing requirements throughout operations; protect the lender and FHA from unacceptable risk; guard against errors, omissions, and fraud; and assure swift and appropriate action, HUD said.

FHA wrote that its current oversight includes independent reviews from time-to-time to assure lenders are in-line with quality standards. For example, FHA can take a sampling of loans and measure early default and claim rate on that lender’s FHA mortgages, relative to early default and claim rates on all FHA mortgages in that geographical area.

The FHA is looking for comment on several areas:

1. What types of loan manufacturing or compliance defects found in the QAP should be subject to indemnification or other administrative remedies?

2.How should the FHA examine how, within the current parameters, review and compare mortgage performance? (For example should FHA set a specific standard of defaults and claims which mortgages could not exceed?) – (Currently, FHA does samplings at least once a year).

3. Should lenders compensate FHA for the additional risk they posed based on the results of the statistical sampling?

Comments are due September 9th to Regulations Division, Office of General Counsel, Department of Housing and Urban Development, 451 7th Street SW., Room 10276, Washington, DC 20410–0500

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