HUD Clarifies Mortgagee Eligibility Requirements & Annual Certification
by Anna DeSimone
HUD issued Mortgagee Letter ML 2010-38 on November 17, 2010. This Mortgagee Letter provides additional information about FHA’s implementation of these requirements and provides clarification regarding FHA’s electronic annual certification requirements and procedures. The requirements of ML 2010-38 are effective immediately and provided guidance and clarification on several topics including: definitions, notifications, address changes, unresolved findings. Outlined below are significant topics contained in the Mortgagee Letter:
Clarification of Compliance with SAFE Act Requirements
All Principal Owners and Corporate Officers of FHA-approved mortgagees must confirm that their institution and its officers, partners, directors, principals, managers, supervisors, loan processors, loan underwriters, or loan originators participating in FHA programs are not in violation of the provisions of the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (S.A.F.E. Act) (Public Law 12 U.S.C. 5101 et seq.) or any applicable provision of state law. Principal Owners and Corporate Officers must confirm that all employees, as required, consistently meet their respective state’s licensing requirements as well as all federally-mandated licensing or registration requirements including registration with the Nationwide Mortgage Licensing System and Registry (NMLS).
Reminder of HUD’s Annual Recertification Requirements and Definition of “Acceptable” Audited Financial Statements
As a reminder, there are three steps to FHA’s Annual Recertification process. The Annual Recertification process includes: (1) the completion of the online Annual Certification; (2) electronic payment of the Annual Renewal Fee; and (3) electronic submission of “acceptable” Audited Financial Statements. In order for a mortgagee’s Audited Financial Statements to be deemed “acceptable”, they must be prepared in accordance with Generally Accepted Accounting Principles (GAAP), Generally Accepted Auditing Standards (GAAS), Generally Accepted Government Auditing Standards (GAGAS), and HUD’s Office of Inspector General’s Handbook 2000.04, “Consolidated Audit Guide for Audits of HUD Programs.”
All FHA-approved mortgagees must complete the entire Annual Recertification process online via the FHA Connection in order to maintain their FHA approval status. Mortgagees are required to complete the Annual Recertification process within 90 days of their fiscal year end. Government Mortgagees are not required to electronically submit the Annual Renewal Fee and Audited Financial Statements.
New Guidance on Completing the Electronic Annual Certification
FHA’s Annual Recertification process requires all mortgagees to complete the online Annual Certification (formerly known as the Yearly Verification Report) prior to electronically submitting the annual renewal fee and audited financial statements. Each Principal Owner or Corporate Officer responsible for completing a company’s Annual Certification is required to have his or her own FHA Connection user ID and password, and be registered with HUD as an owner or officer. FHA Connection Users are not permitted to share their user IDs and passwords. Doing so will result in a user’s FHA Connection rights being suspended or revoked.
New Information for Mortgagees Unable to Certify
The online Annual Certification requires mortgagees to certify to the accuracy of each of the statements found in the certification. Certification of these statements is required to ensure that mortgagees provide FHA with the most current information about their institution and its compliance with all applicable laws for the fiscal year in which the mortgagee is renewing its FHA approval status. Consequently, a mortgagee’s Principal Owner or Corporate Officer’s online Annual Certification covers the period for the fiscal year the mortgagee is recertifying.
If a mortgagee’s Principal Owner or Corporate Officer is not sure whether one or more of the statements comprising the online Annual Certification is accurate for their institution, then the “Unable to Certify” box must be checked. Checking this box requires the mortgagee to provide an explanation for its inability to certify.
FHA will review a mortgagee’s explanation for being “Unable to Certify” within 15 days and render a final decision regarding the mortgagee’s ability to complete the Annual Recertification process. If additional documentation is needed prior to making a final decision, the mortgagee will be advised and given a date on which the documentation must be provided to FHA. Mortgagees who falsely certify for any reason will be referred to the Mortgagee Review Board.
Questions
If lenders have questions concerning this Mortgagee Letter, please call 1-800- CALLFHA (1-800-225-5342).
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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