This past March, the Federal Housing Administration (FHA) sent out a notification stating that it has revised the form lenders must file when submitting a loan for FHA-insurance. In addition, the administration also announced proposed changes to the certification statements that lenders and other mortgagees must file when applying to participate in the FHA’s homeownership programs.
Each year, lenders must submit an annual certification to the FHA stating that both their institution and its loan officers are qualified to originate FHA-backed loans. Before a loan can be backed by the program, lenders must also submit a certification verifying that the loan meets FHA standards.
Many industry participants have complained that the wording within these certifications is extremely vague and exposes them to buyback demands and other penalties if the loan defaults. As a result, some of the nation’s largest banks have either stiffened their FHA-lending standards or have pulled back from the program entirely.
In order to implement its revised certification requirements, the FHA has amended the HUD/VA Addendum to the Universal Residential Loan Application (or Form 92900-A), which is the official form that lenders must file when requesting FHA-insurance for a mortgage loan. The amendments clarify what liabilities lenders might face if the loan is found to contain underwriting or other errors, and the new Form 92900-A is set to become effective on August 1, 2016.
The FHA first proposed revisions to Form 92900-A back in September of 2015, but several industry groups—including the MBA—recommended additional changes. The final version includes these changes, which the administration is hoping will appease and reassure banks and large lending institutions.
The FHA also proposed several changes to the certification that each lender—including government mortgagees, such as HFAs—must file when applying to participate in FHA single-family programs and each subsequent year thereafter. The new certification language requires a lender’s top corporate officer to certify that neither their entity nor any of its employees involved in the home lending process have committed any violations that would make the lender ineligible to participate in FHA programs.
This certification is currently included within Form 9200-A, but the FHA has determined that it would be better to have the lender make such a certification separately as its own entity rather than on an individual loan basis.
The FHA released a chart that compares the current language found on this certification with the proposed new language, and is currently accepting comments on this modified lender certification through April 14th. The administration is hoping to implement the new language by August 2016, if possible.
Edward Golding, HUD’s Principal Deputy Assistant Secretary for Housing, issued the FHA’s statement regarding these revisions and modifications, stating that the purpose of the revisions is to make it clear that lenders “will be held accountable for only those mistakes that would have altered the decision to approve the loan.” Golding then reiterated that minor mistakes will not cause a loan to lose its FHA insurance, and expressed hope that the revisions would reduce confusion about the FHA’s policy and entice more lenders to originate FHA loans.
To read Edward Golding’s statement in its entirety, click here.