MBA, Trade Groups Urge FHA to Move Forward on Certification Statements

The Mortgage Bankers Association and three other industry trade groups sent a letter to HUD, urging it to move forward with proposed amendments to FHA lender annual certification statements.

Last May, FHA proposed significant changes to its loan-level and annual lender-level certifications (https://www.hud.gov/sites/dfiles/SFH/documents/SFH_FHA_INFO_19-18.pdf), saying it wanted to provide “more precision and needed clarity to compliance documents.” Specifically, FHA proposed revisions to its Addendum to Uniform Residential Loan Application (Form 92900-A) and to its annual lender certification form. In addition, FHA revised its “defect taxonomy” to clarify various loan defect categories and how the agency weighs the severity of each defect.

In the letter, MBA; the Housing Policy Council; the American Bankers Association; and the Bank Policy Institute sad they appreciate HUD’s efforts to align the certification statements more directly with the existing regulatory requirements for the annual recertification process.

“We also share HUD’s view that it is critical both to create an environment in which lenders can operate with clarity and certainty regarding FHA’s program requirements and to clarify the potential penalties for noncompliance,” the letter said. “We believe that the Proposal’s annual certification statements will assist in accomplishing these goals. The revised certification statements reinforce a mortgagee’s obligation to adhere to FHA program rules and support HUD’s objective to hold lenders accountable and protect the FHA Mutual Mortgage Insurance Fund. The statements accomplish these important goals without requiring overly broad attestations of compliance with regulatory and HUD Handbook 4000.1 provisions to which the mortgagee is already subject that would increase the risk of potential liability under the False Claims Act.”

The trade groups “wholeheartedly” support replacing the current annual certification statements with the Proposal’s certification statements and recommend that implementation of the new statements occur as quickly as reasonably possible. The letter also offered the following suggestions:

—Sanction Definition. The letter asks FHA to consider making one change to the Proposal’s annual certification language. Specifically, in certification statement #3 in Appendix A to the Proposal, it recommends capitalizing the words “sanctioned” and “Sanctions” to make clear that either word carries the definition of “Sanction”
set forth in the Glossary to the Handbook.

—Re-disclosures. The letter urged FHA to clarify that any events reported to HUD during the course of a mortgagee’s Certification Period, as that term is defined in the Handbook, and for which the mortgagee received explicit clearance from HUD to continue with the certification process, would not render any of the Proposal’s annual certification statements inaccurate. This change would mirror the reporting practice that exists in today’s annual recertification process. Further, the recertification process would be more accurate and more efficient for both mortgagees and HUD staff without redisclosure of items previously reported, reviewed, and cleared during the Certification Period.

“We welcome FHA’s commitment to provide the clarity and certainty necessary to increase lender participation in the FHA program,” the letter said. “Implementation of a coordinated and complementary annual certification, loan-level certification and Defect Taxonomy is necessary to create and foster a regulatory environment that will boost lender confidence in the FHA program.”

The letter added the Proposal’s annual certification statements provide a “positive first step” for FHA to achieve this objective, which should “help to increase and diversify lender participation in the FHA program, strengthen the MMI Fund and ultimately expand access to credit to the benefit of FHA, homeowners, and communities.”