The Department of Housing and Urban Development (HUD) plans to roll out a new loan system for reviewing certain Federal Housing Administration loans, including reverse mortgages, the agency announced last week.
With the release of Mortgagee Letter 2017-03, HUD notified Mortgagees of FHA’s plan to implement a new Loan Review System, which will be used to manage Title II Single Family Loan Reviews, Title II Single Family Mortgagee Monitoring Reviews, and Mortgagee self-reporting of fraud, misrepresentation and other material findings.
ML 2017-03 also updates related process guidance in Handbook 4000.1.
HUD intends to confirm the effective date in for the new system in a subsequent Mortgagee Letter no earlier than March 1, 2017, as the agency continues to work on ongoing system development.
Though HECMs are not mentioned in ML 2017-03, the guidance applies to all Mortgagees approved for FHA Title II Single Family programs, according to the National Reverse Mortgage Lenders Association’s outside legal counsel, Jim Milano of Weiner Brodsky Kider PC. The HECM statute, section 255 of the National Housing Act, falls within Title II.
The Loan Review System builds on recent efforts by FHA to align the documentation of loan review results across various divisions, and it incorporates the Single Family Housing Loan Quality Assessment Methodology (Defect Taxonomy), which was posted to hud.gov in June 2015.
The new system will be used to process the review of Test Cases submitted by Mortgagees applying for unconditional Direct Endorsement approval, as well as various post-endorsement Title II Loan Reviews, Title II Mortgagee Monitoring Reviews, and other reviews currently conducted by FHA’s Processing & Underwriting and Quality Assurance Divisions.
Following the transition, HUD states the Loan Review System will replace the Underwriter Review Functions and eFindings functions in FHA Connection.
View Mortgagee Letter 2017-03 here.
Written by Jason Oliva