On July 20, 2021, the Federal Housing Administration (“FHA”) published updates to the Single Family Housing Policy Handbook 4000.1 (“Handbook 4000.1”). The changes were made available for optional implementation immediately, but mandatory implementation is required for all mortgages with case numbers assigned on or after September 20, 2021.
The updates include technical edits along with changes to existing policies. Notable changes in Handbook 4000.1 include:
- Section I — Doing Business with FHA
- Mortgagees must meet all eligibility requirements to be approved by FHA to originate, underwrite, close, endorse for insurance, service, purchase, hold, or sell FHA Title I or Title II mortgages at the time of approval, and continue to meet those requirements on a continuing basis.
- During the Test Case Phase for Direct Endorsement (DE) Authority, mortgagees must ensure that all required certifications are executed and must submit a complete case file post-closing that includes the required origination, underwriting and closing documents specified in the Uniform Case Binder Stacking Order.
- Section II — Origination through Post-Closing/Endorsement
- Eliminates the need for a partial waiver of current hazard, liability, and flood insurance coverage requirements for certain types of condominium projects that do not qualify as a Site Condominium.
- Adds guidance on student loan payment calculations previously announced in ML 2021-13, including an exception for student loan payments in forbearance due to COVID-19.
- Section III — Servicing and Loss Mitigation
- Updates disclosure and submission guidance for Voluntary Termination of Mortgage Insurance.
- Adds requirement for requests exceeding Property Preservation allowances to be submitted at least five days prior to conveyance of the property.
- Adds policy guidance on the COVID-19 Advanced Loan Modification and COVID-19 Forbearance policies provided in ML 2021-15.
- Updates the effective date of Section III - Servicing and Loss Mitigation, Appendix 4.0, and Appendix 5.0, as the implementation date was extended, as announced in ML 2021-14.
- Section IV — Claims and Disposition
- Provides additional options for the alternate claim review documentation that HUD will accept as proof of tax payment from a tax monitoring service.
- Section V — Quality Control, Oversight and Compliance
- Clarifies the required documentation for a mortgagee’s quality control program by stating all applicable documents must be dated to demonstrate compliance with retention and reporting time frames.
- Updates to property and appraisal review requirements, including policy guidance on the number of Early Payment Defaults that require an appraisal field review.
The U.S. Department of Housing and Urban Development (“HUD”) has provided a redline version of the updated Handbook 4000.1 that highlights all the changes and is accepting feedback from interested parties for 30 calendar days following the July 20th publication date.
For questions regarding this article, please contact DocMagic’s Compliance Department.
