FHA Issues Quick Reference Guide for its Quality Control Loan Review System

On August 24, 2017, the Federal Housing Administration (FHA) issued FHA Info #17-32 to announce the availability of a Quick Reference Sheet that outlines instructions regarding the agency’s Quality Assurance Loan Review System (LRS). Lenders use LRS to interact with FHA on the majority of Title II Single Family quality control processes, including:

  • Various Post-Endorsement Loan Reviews
  • Unconditional Direct Endorsement Authority Test Cases
  • Lender Monitoring Reviews
  • Lender Self-Reporting of Fraud and Other Material Findings

The LRS Quick Reference Sheet summarizes the most important information provided in the LRS User Manual. The key points of the reference sheet are outlined below:

  • Review levels: Lenders have a total of four opportunities to respond to FHA-initiated reviews (Initial, Mitigation 1, Escalation 1, and Headquarters Escalation 1). Other levels may be visible to lenders in LRS when the loan is under review by FHA, but they are for FHA’s internal escalation processes only.
  • Timeframes: When FHA requests a response to Unacceptable findings, LRS displays a due date based on the timeframe for each review level. If a lender fails to respond by the due date, the review advances to the next level, resulting in the loss of one lender response opportunity. Due dates cannot be reset or extended. See the Quick Reference Sheet for a complete list of timeframes.
  • Response wrap-up: Even though lenders may have responded to all Unacceptable findings, the responses are not submitted to FHA until the lender clicks “Complete Wrap-Up” on the Findings Overview screen. Failure to click this button may result in missed due dates and the loss of response opportunities.
  • Any response is better than no response: If lenders are unable to submit a complete response by the due date, they should provide a brief explanation for the delay and submit it to FHA.  Although due dates cannot be extended, this may allow FHA to mitigate other findings or manage escalation decisions.

The Quick Reference Sheet provides helpful reminders about system access, indemnifications, and information to include whenever contacting the FHA Resource Center with questions about LRS.

View the Quick Reference Sheet:

https://portal.hud.gov/hudportal/documents/huddoc?id=SFH_LRS_QuickRef.pdf

Visit the LRS Information Page:

https://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/lender/loan_review_system

  • 781-402-6415

Anna DeSimone founded Bankers Advisory in 1986 and is a nationally recognized authority in residential mortgage lending. She has received numerous industry awards and has authored more than 40 best practices guides and hundreds of articles.

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