HUD Reveals Changes in Financial Reporting Guidelines for Approved Lenders

The U.S. Department of Housing and Urban Development recently released a mortgagee letter detailing changes to the Federal Housing Administration’s (FHA) requirements regarding the submission of audited statements as a condition for FHA lender approval and renewal.

Effective immediately, all lenders are now required to electronically submit audited financial statements within 90 days of their fiscal year end as part of the process for renewing FHA approval. In a similar vein, supervised lenders seeking FHA approval must also submit these financial statements as part of their initial application package.

However, supervised lenders with consolidated assets under a certain threshold are not required to submit audited financial statements to the FHA. Instead, the letter details,they are required to submit a copy of their unaudited regulatory report relative to the end of their fiscal year, as well as report on internal control as it relates to administering HUD-assisted programs, and report on compliance with specific requirements applicable to major and non-major HUD programs.


For FHA lenders in parent-subsidiary structures who choose to submit audited consolidated financial statements of a parent company, the requirement to submit internally prepared consolidating schedules is waived in favor of handing in a copy of the subsidiary’s unaudited regulatory report aligning with the end of their fiscal year.

If lenders do choose to submit audited consolidated financial statements of a parent company, the letter advises them to be aware that all FHA approval requirements remain in effect for the FHA-approved entity, as net worth and liquidity requirements must be met regardless of the lender’s method of financial reporting.

Lastly, the letter speaks to the method of uploading financial documentation to the Lender Assessment Subsystem.

Read the letter from HUD here.

Written by Alyssa Gerace

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  • Why not just require audited financial statements from the entities required to report because of needed lender approval?  Unconsolidated financials rarely contain adjustments which might be applied at the consolidating level particularly by the independent auditors but pertain, in part or in whole, directly to the entity which is requesting approval. 

    Further nothing is harmed by allowing the independent auditors to apply audit procedures based on the transactions of the lender rather than of the consolidated group as a whole.  The additional cost would normally be insignificant when compared to the audit fee as a whole; in fact the additional cost should normally be less than the cost of auditing the same entity if it was not part of a consolidated group which was being audited.  It is not unheard of to make such requirements nor should it be considered unreasonable. 

    Again what is required from some lenders should generally apply to all.  This should especially be the case after the American Banker made its revelations and accusations regarding the emails written by and received by former FHA Commissioner Stevens..

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