FHA Issues Temporary Waiver Suspending Early Payment Default Reviews
The Federal Housing Administration on Monday issued a temporary waiver of its Single-Family Housing Policy Handbook 4000.1 to temporarily suspend the requirement that mortgagees select and review all Early Payment Defaults on a monthly basis.
The temporary waiver is the result of advocacy by the Mortgage Bankers Association, which has been working with FHA since the onset of the coronavirus pandemic to address policy concerns, relay member experiences and offer solutions for the industry.
An MBA summary of the temporary waiver appears below, provided by MBA’s Residential Policy Department:
First, FHA issued a temporary waiver to suspend the requirement that mortgagees select and review all Early Payment Defaults on a monthly basis. With most recent EPDs being attributed to the effects of coronavirus rather than underwriting issues, FHA is suspending the requirement to conduct QC reviews of EPDs for the months of May, June, or July.
Second, FHA announced a temporary partial waiver to provide flexibilities in field reviews of appraisals. Due to social distancing, it may be difficult to assemble a sample to conduct field reviews for the required 10 percent of FHA mortgages issued each month. Mortgagees are now temporarily permitted to use third-party tools as an alternative to field reviews of appraisals. This temporary partial waiver applied to QC reviews currently in process and all other cases under mortgagees’ reviews of May, June or July.
Finally, FHA announced it will consider the impact of the COVID-19 National Emergency as a relevant mitigating factor when assessing mortgagees with Compare Ratios above the designated threshold. FHA cited 24 CFR § 202.3(c)(2) and 24 CFR § 203.4(d) as providing flexibility to consider relevant mitigating factors in determining whether it is appropriate to terminate a mortgagee’s origination authority due to high Compare Ratios.
An EPD refers to all mortgages that become 60-days delinquent within the first six payments.
You can access the temporary waiver of QC requirements for Early Payment Defaults on the Waivers page at https://www.hud.gov/program_offices/administration/hudclips/waivers/.
You can access the online and PDF versions of the Single Family Housing Policy Handbook 4000.1 on the Housing Handbooks web page at: https://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/handbooks/hsgh.
