"The proposed language requires lenders to report all errors, regardless of their materiality to compliance," said MBA Senior Vice President of Residential Policy and Member Engagement Pete Mills in a letter to HUD. "Under this strict standard--meeting all requirements at all times--the FHA
certification does not recognize good faith compliance by the majority of its approved lenders and causes them to qualify certifications under a more stringent and inconsistent annual reporting standard."
In August, HUD proposed changes to its loan-level certification form, HUD 92900-A, HUD/VA
Addendum to Uniform Residential Loan Application with the purpose of clarifying the scope of liability associated with errors that can occur in the origination of Federal Housing Administration-insured mortgages, the MBA said.
However, the MBA argues the proposed change doesn’t meet the objectives of implementing lender and consumer safeguards.
Under the current rule, lenders must certify their compliance with FHA
program requirements within 90 days of the end of the prior fiscal year, according to the MBA. Lenders unable to certify on their FHA
annual renewal must provide a written explanation of the reasons for its inability to certify compliance.
And the MBA is arguing lenders have willingly begun imposing stricter underwriting internally to minimize risk.
"Use of the False Claims Act by the Department of Justice has had a significant effect on lenders' willingness to expand access to credit to borrowers with less-than-pristine credit," MBA said. "As a direct consequence of the uncertainty surrounding legal liability, lenders have begun to impose new credit overlays and/or limit involvement in FHA
lending in an attempt to minimize risk.”
to access the MBA’s full list of concerns.
The U.S. Department of Housing and Urban Development (HUD) proposed changes to loan applications that are meant to clarify liability associated with errors, but one association is arguing the change goes too far.