U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT ...III.A.1.k.ii(F) Mortgage Insurance Premium Cancellation and Termination – Standard – Artificial Principal Payment Reduction

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

WASHINGTON, DC 20410-8000

ASSISTANT SECRETARY FOR HOUSING- FEDERAL HOUSING COMMISSIONER

Special Attention of: Transmittal: Handbook 4000.1 All FHA-Approved Mortgagees Issued: October 24, 2019 All Direct Endorsement Underwriters Effective Date: Multiple; See Below All Eligible Submission Sources for Condominium

Project Approvals All FHA Roster Appraisers All FHA-Approved 203(k) Consultants All HUD-Approved Housing Counselors All HUD-Approved Nonprofit Organizations All Governmental Entity Participants All Real Estate Brokers All Closing Agents 1. This Transmits: 1. Handbook 4000.1, FHA Single Family Housing Policy Handbook. 2. Previously published updates to Handbook 4000.1, FHA Single Family Housing Policy Handbook. ____________________________ Brian D. Montgomery Assistant Secretary for Housing – Federal Housing Commissioner

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2. Explanation of Materials Transmitted: This revision to the FHA Single Family Housing Policy Handbook, or Handbook 4000.1 (Handbook), is being published to update existing sections. Below is a list of content updates being made to the Handbook:

Handbook Section Handbook Changes Page Number(s)

Section I – Doing Business With FHA

I.A.5.e Title II Direct Endorsement Lender Condominium Project Review and Approval Process Authority

Updated to note effective date of 10/15/2019.

37

Section II – Origination Through Post-Closing /Endorsement

II.A.8.d.v(B)(1) Cash-Out Refinances – Maximum Mortgage Amounts – Standard

Updated the Maximum Loan-To-Value (LTV) and Combined Loan-To-Value (CLTV) percentages to 80 percent on Cash-out Refinance Mortgages, consistent with ML 2019-11.

417

II.A.8.p Condominiums Updated to note effective date of 10/15/2019.

477

II.A.8.p.ii(C) Condominiums – Form HUD-9991, FHA Condominium Loan Level/Single-Unit Approval Questionnaire

Updated requirements for units in Approved Condominium Projects to include form HUD-9991. Updated numbering of subsequent sections.

478-484

II.A.8.p Condominiums Updated required documentation to reference form HUD-9991.

478, 479, 480, 481-482, 484, 486, 487, 488, 489, 490, 491, 492, 493, 494,

495, 496 II.A.8.p.iii(D)(2) Condominiums – Requirements for Eligible Properties – Form HUD-9991, Condominium Loan Level/Single-Unit Approval Questionnaire

Updated requirements for eligible properties to include form HUD-9991. Updated numbering of subsequent sections.

485-495

II.C Condominium Project Approval


510

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II.C.2 Condominium Project Approval – Project Eligibility

Updated required documentation to reference HUD-9992.

512, 514, 518, 519, 520, 520, 521, 522, 524, 525, 526, 527, 529, 531, 532,

533 II.C.2.c.i Condominium Project Approval – Project Eligibility – Form HUD-9992, FHA Condominium Project Approval Questionnaire

Updated requirements for the Condominium Project to include form HUD-9992. Updated numbering of subsequent sections.

512-513

II.C.3.b.iv Condominium Project Approval – Project Approval Submission – HUD Review and Approval Process – Submission Process

Updated Condominium Project Approval Stacking Order Documentation to include form HUD-9992.

535

Section III – Servicing and Loss Mitigation

III.A.1.h.i Insurance Coverage Administration – Hazard Insurance

Updated Hazard Insurance guidelines for Mortgagees and the Payment of Renewal Premium requirements.

623

III.A.1.k.ii(E) Mortgage Insurance Premium Cancellation and Termination – Standard – Borrower-Initiated Cancellation of MIP

Updated the Borrower-Initiated Cancellation of MIP requirements for Mortgages with case number assignments before June 3, 2013.

633

III.A.1.k.ii(F) Mortgage Insurance Premium Cancellation and Termination – Standard – Artificial Principal Payment Reduction

Updated language regarding Borrowers with an outstanding Partial Claim/second mortgage. Updated subsequent numbering.

633-634

III.A.2.h.ii(B)(2) Early Default Intervention – SFDMS Default Reporting – Standard – Time Frame for Reporting

Added language regarding reporting accuracy and quality control.

644

III.A.2.h.vi(A)(2) Collection Letters and Electronic Communications – Standard – Electronic Methods of Communication

Clarified which electronic methods of communication are acceptable.

648

III.A.2.j.ii(B)(2) HUD’s Loss Mitigation Program – Owner Occupancy – Standard for Non-Occupant Borrowers

Updated the standard requirement guidance for Non-Occupant Borrowers.

666

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III.A.2.j.iii HUD’s Loss Mitigation Option Priority Waterfall

Added clarifying guidance in Step 5.

670

III.A.2.k.v(B)(2) FHA-HAMP – Eligibility – Borrower Qualifications

Updated qualification language and extended qualification criteria to Mortgagees in PDMDAs.

680

III.A.2.k.v(H)(3)(b)(ii) Entering into the Trial Payment Plan Agreement – Standard – Trial Payment Plan Terms

Added clarifying language regarding Trial Payment Plan Terms.

684-685

III.A.2.k.v(H)(4) FHA-HAMP Trial Payment Plans – Waiver of Late Charges

Added section regarding waiver of late charges and renumbered all sections that follow.

686-688

III.A.2.k.v(P) FHA-HAMP – Loss Mitigation Assumption

Added Loss Mitigation Assumption guidance and renumbered all sections that follow.

694

III.A.2.l.ii(B)(2) Home Disposition Options – Pre-Foreclosure Sales – Eligibility – Property Maintenance

Added Property Maintenance language. Updated subsequent numbering.

695-701

III.A.2.p.ii(B) Qualification Criteria for Use of Commissioner’s Adjusted Fair Market Value – Standard

Removed language from standard to align with current policy.

725-726

III.A.2.p.iii(A)(2) Property Valuation and CAFMV – Required Appraisal – Extension to Appraisal Validity Period

Clarified requirements to Extension to Appraisal Validity Period.

726

III.A.2.p.iii(C) Property Valuation and CAFMV – Damage to the Property after Appraisal

Clarified guidance for submitting a variance.

727

III.A.2.r.ii(A)(3) Initiating Foreclosure – Notice to HOA or Condominium Associations

Clarified language regarding who is notified during the foreclosure proceedings.

736

III.A.2.r.ii(A)(4) Initiating Foreclosure – Outstanding HOA or Condominium Association Fees

Updated guidance to be consistent with ML 2013-18.

736

III.A.2.r.ii(H) Conduct of Foreclosure Proceedings – CWCOT Post-Foreclosure Sales Efforts

Updated guidance to clarify timing of sales efforts.

742

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III.A.2.s.iii(B) Notice to Occupant of Pending Acquisition – Standard

Updated guidance to include instructions in the event of postponement of a foreclosure sale.

744

III.A.2.t.ii(C)(7)(a) Mortgagee Property Preservation and Protection Action – Securing and Maintaining the Property – Standard

Updated guidance for securing a vacant property.

752

III.A.2.t.iv Conveyance of Acquired Properties – Notice of Property Transfer

Updated guidance on notice of property transfer.

771

III.A.2.t.v(B)(1) Title Evidence – Fee or Owner’s Title Policy

Updated guidance on titles for consistency.

772

III.A.2.t.v(D) Submission of Title Evidence for Conveyance to HUD – HUD Review of Title Evidence

Removed guidance to align with ML 2010-16.

773

III.A.2.t.v(F) Submission of Title Evidence for Conveyance to HUD – Return of the Original Title Evidence to the Mortgagee

Removed guidance to align with ML 2010-16.

773-774

III.A.3.b.vii(B) Assumptions – Acceleration of the Mortgage – Acceleration not Permitted

Updated guidance for transfers by devise or descent.

783

III.A.3.c.iv(B) Loss Mitigation for Borrowers in PDMDAs – Forbearance Options for Borrowers in PDMDAs

Updated section title to specify Borrowers in PDMDAs, to align with ML 2019-14.

786

III.A.3.c.iv(C) Loss Mitigation for Borrowers in PDMDAs – Disaster Loan Modification; III.A.3.c.iv(D) Disaster Standalone Partial Claim; III.A.3.c.iv(E) Required Financial Evaluation for other Loss Mitigation Home Retention Options; III.A.3.c.iv(F) Home Disposition Options

Updated guidance for Borrowers in PDMDAs, to align with ML 2019-14. Updated numbering of subsequent sections.

787-790

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Section IV – Claims and Disposition

IV.A.2.a.iv(A)(2) Submission of Claim Form Parts to HUD for Conveyance Claims – Submission of Part A – To P260

Updated language regarding documentation to be uploaded into P260.

907

IV.A.2.c.iv(A) Hazard Insurance Refund Adjustment – Standard

Updated guidance on submission of claim for a hazard insurance refund adjustment.

914

IV.A.2.c.vii Claims for Additional Funds

Removed guidance supporting when a supplemental claim form may be filed as it relates to Part A and Part B.

915

IV.A.2.c.vii(A)(2) Claims for Additional Funds – Supplemental Claims for Correction of Dates in Part A – Required Supporting Documentation

Updated guidance for required supporting documentations for supplemental claims for correction of dates in Part A.

916-917

IV.A.2.c.vii(B) Claims for Additional Funds when Subject to Administrative Offsets Not Permitted; IV.A.2.c.vii(C) Claims for Funds Related to Partial Claims Not Permitted

Updated title to clarify that such claims are not permitted.

917

IV.A.2.c.viii(A) Submission of Supplemental Claim Form Parts to HUD – To HUD

Updated address where to send supplemental claims.

918

IV.A.2.c.viii(C)(4) Time Frame for Submission of Supplemental Claims – HUD Requests for Additional Information

Removed unnecessary language from guidance on communication between HUD and a Mortgagee.

919

IV.A.2.c.x Appeals of Supplemental Claim Disposition

Updated the address where Supplemental Claim Appeals are to be submitted.

919

IV.A.2.d.iii(B) Computation of Claim Amount – Eviction and P&P Costs when Property is Sold to a Third Party

Updated CWCOT claim guidance.

921

IV.A.2.d.iii(D) Computation of Claim Amount – Deficiency Judgments

Added citation for CFR for more complete guidance.

922

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IV.A.2.d.iii(E) Computation of Claim Amount – Third-party Auction Service Fees

Removed language indicating “net sales prices” for third-party auction service fees.

922

IV.A.2.d.iv Submission of Claim Form Parts to HUD for CWCOT

Removed extraneous language. 922

IV.A.2.e.ii(A)(4) Computation of Claim Amount – Allowable Costs – Attorney’s Fees for Postponed Foreclosure

Updated guidance for clarity. 923-924

IV.A.2.e.ii(A)(7) Computation of Claim Amount – Allowable Costs – Borrower Consideration

Updated guidance regarding claim reimbursement.

924

IV.A.2.h Claim Type 32 ** – FHA-HAMP Loan Modification

Added guidance regarding the FHA-HAMP Loan Modification incentive for this Claim Type.

926

IV.A.3.a.i(A) Processing of Claim Forms – Initial Payment – Definition

Updated the Initial Claim Payment definition for clarity.

927

IV.A.3.a.ii(A) Processing of Claim Forms – Final and Full Payments – Definition

Updated the Final Claim Payment definition.

928

IV.A.4 Title II Claims – Withdrawal or Cancellation of Conveyance Claims

Updated section title to be consistent with current policy.

929

IV.A.4.b.ii(B)(2) Reacquisition by HUD and Resubmission of Claim – Reacquisition Package – Required Documentation

Updated the Required Documentation requirements.

932-933

IV.A.4.b.ii(C) Reacquisition by HUD and Resubmission of Claim – Resubmission of Claim

Updated guidance establishing a time frame for submission.

933

IV.A.4.b.ii(D) Reacquisition by HUD and Resubmission of Claim – Expenses and Interest after Reconveyance

Updated guidance establishing a time frame for submission.

933

IV.A.6.a Title II Claims – Debt Collection and Administrative Offset – Demand Letter

Removed unsupported language.

936

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IV.B.2.d.i(B) REO Property Disposition – Prospective Buyers – Owner-Occupant Buyers – Standard; IV.B.2.d.i(C) REO Property Disposition – Prospective Buyers – Owner-Occupant Buyers – Required Documentation; IV.B.2.d.v(B) REO Property Disposition – Prospective Buyers – HUD Employees – Required Documentation

Updated guidance for consistency.

941

942

947

IV.B.2.d.vi(B) Prohibited Buyers – Participants in HUD REO Marketing and Management

Updated guidance to provide more specific detail on prohibited buyers.

947

IV.B.2.i.ii Selection of Winning Bid – Submission of Sales Documents

Removed language for clarification and consistency.

958-959

Section V – Quality Control, Oversight and Compliance

V.A.2.a.i Institutional Quality Control Program Requirements – Who May Perform Quality Control – Employees

Added language that was inadvertently removed. This update is effective immediately.

975

V.C.2.d DELRAP Mortgagee Monitoring Reviews; V.E.3.a.v Return to Conditional or Withdrawal of Unconditional DELRAP Authority


1001, 1013


Throughout Document

Corrected instances of GTR to COR.

931-932, 967

3. Implementation: Unless noted otherwise in this transmittal, previously announced effective dates are not impacted by these Handbook changes.

9

Handbook changes identified in Section II may be implemented with the original effective date of October 15, 2019, but must be implemented for case numbers assigned on or after January 2, 2020. Handbook changes identified in Sections III and IV may be implemented immediately, but must be implemented no later than January 2, 2020. 4. Public Feedback:

HUD welcomes feedback from interested parties for a period of 30 calendar days from the date of issuance. To provide feedback on this policy document, please send any feedback to the FHA Resource Center at [email protected]. HUD will consider the feedback in determining the need for future updates.

5. Superseded Policy:

Previous versions of Handbook 4000.1 are amended as described in this Transmittal. All previously superseded or canceled Mortgagee Letters, Housing Notices, and/or Handbooks remain canceled or superseded, except for items notated by * below. All superseded or canceled policy documents will continue to be available for informational purposes only on HUD’s website. Policy documents that have been superseded in full by the Handbook can always be found on HUD’s Client Information Policy Systems (HUDCLIPS) web pages, accessible from the Single Family Housing Superseded Policy Documents page at http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/sfhsuperseded.

Mortgagee Letter(s) Superseded in Whole ML Number

Updates to FHA’s Loss Mitigation Options for Borrowers in Presidentially-Declared Major Disaster Areas (PDMDAs)

2019-14

Maximum Loan-To-Value and Combined Loan-To-Value Percentages for Cash-Out Refinance Mortgages

2019-11

Quality Control Requirements for Direct Endorsement Lenders 2011-02 6. Paperwork Reduction Act: The information collection requirements contained in this document have been approved by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned OMB control numbers 2502-0005; 2502-0059; 2502-0117; 2502-0189; 2502-0302; 2502-0306; 2502-0322; 2502-0358; 2502-0404; 2502-0414; 2502-0429; 2502-0494; 2502-0496; 2502-0525; 2502-0527; 2502-0538; 2502-0540; 2502-0556; 2502-0561; 2502-0566; 2502-0569; 2502-0570; 2502-0583; 2502-0584; 2502-0589; 2502-0595 and 2502-0600. In accordance with the Paperwork Reduction Act, HUD may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection displays a currently valid OMB control number.

mailto:[email protected]://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/sfhsuperseded

FHA Single Family Housing Policy Handbook Table of Contents

Handbook 4000.1 i Effective Date: 09/14/2015 | Last Revised: 10/24/2019 *Refer to the online version of SF Handbook 4000.1 for specific sections’ effective dates

FHA Single Family Housing Policy Handbook TABLE OF CONTENTS

I. DOING BUSINESS WITH FHA ................................................................. 1 A. FHA LENDERS AND MORTGAGEES .............................................................................. 1

Types of Program Approvals .................................................................................................... 2 a. Title I ................................................................................................................................... 2 b. Title II ................................................................................................................................. 2

Types of Approved Mortgagees................................................................................................ 2 a. Supervised Mortgagee ........................................................................................................ 3 b. Nonsupervised Mortgagee .................................................................................................. 3 c. Government Mortgagee ...................................................................................................... 4 d. Investing Mortgagee ........................................................................................................... 4

Application and Eligibility Requirements for Approval ........................................................... 5 a. Title I and Title II Program Applications ........................................................................... 5 b. Online Application .............................................................................................................. 5 c. Eligibility Requirements ..................................................................................................... 8 d. Processing of Applications ............................................................................................... 25 e. Application Approval........................................................................................................ 25 f. Application Denial ............................................................................................................ 25

Branch Offices ........................................................................................................................ 25 a. Registration ....................................................................................................................... 25 b. Single Family Lending Area ............................................................................................. 26 c. Managers ........................................................................................................................... 26 d. Net Branching Prohibition ................................................................................................ 27

Supplemental Mortgagee Authorities ..................................................................................... 27 a. Title II Direct Endorsement Authority .............................................................................. 27 b. Title II Single Family Lender Insurance Authority .......................................................... 34 c. Title I Manufactured Housing Loan Direct Endorsement Authority ................................ 37 d. Title II Multifamily Accelerated Processing Authority .................................................... 37 e. Title II Direct Endorsement Lender Condominium Project Review and Approval Process

Authority (Effective 10/15/2019) ..................................................................................... 37 Post-Approval Operations ....................................................................................................... 42

a. Operating Requirements and Restrictions ........................................................................ 42 b. Providing Information to FHA.......................................................................................... 42 c. Compliance with Law ....................................................................................................... 43 d. Servicing of FHA-Insured Mortgages .............................................................................. 43 e. Employee Compensation .................................................................................................. 44 f. Conflicts of Interest........................................................................................................... 44 g. Payment of Operating Expenses ....................................................................................... 44 h. Prohibited Payments ......................................................................................................... 44 i. Staffing .............................................................................................................................. 45 j. Use of Contractors ............................................................................................................ 45 k. Affiliates ........................................................................................................................... 46 l. Branch Office Requirements............................................................................................. 46

http://www.allregs.com/tpl/public/fha_freesite.aspx


Handbook 4000.1 ii Effective Date: 09/14/2015 | Last Revised: 10/24/2019 *Refer to the online version of SF Handbook 4000.1 for specific sections’ effective dates

m. Fair Housing Notice .......................................................................................................... 47 n. Advertising ........................................................................................................................ 47

Post-Approval Changes .......................................................................................................... 49 a. Requirements for All Post-Approval Changes ................................................................. 49 b. Information Updates ......................................................................................................... 50 c. Change in Corporate Officer ............................................................................................. 50 d. Change in Partnership or Principal Owners ...................................................................... 50 e. “Doing Business As” Names ............................................................................................ 51 f. Relocation to a Different State .......................................................................................... 51 g. Liquid Assets or Net Worth Deficiency............................................................................ 51 h. Operating Loss .................................................................................................................. 51 i. Fidelity Bond .................................................................................................................... 52 j. Errors and Omissions Insurance ....................................................................................... 52 k. Principal Activity Change of Nonsupervised Mortgagee ................................................. 52 l. Servicing for Investing Mortgagees .................................................................................. 52 m. Fiscal Year End Date ........................................................................................................ 52 n. Supervision Change .......................................................................................................... 53 o. Business Form ................................................................................................................... 53 p. Bankruptcy ........................................................................................................................ 53 q. Lending License(s)............................................................................................................ 54 r. Mergers, Acquisitions, and Reorganizations .................................................................... 54 s. Conservatorship, Receivership, or Transfer of Control .................................................... 60 t. Cease Operations .............................................................................................................. 60 u. Unresolved Findings or Sanctions .................................................................................... 61

Annual Recertification ............................................................................................................ 61 a. General Requirements ....................................................................................................... 61 b. Online Certification .......................................................................................................... 62 c. Annual Recertification Fee ............................................................................................... 63 d. Financial Data Submission ............................................................................................... 63 e. Rejection of a Mortgagee’s Recertification Package ........................................................ 64 f. Recertification Extension Requests .................................................................................. 64 g. Failure to Recertify ........................................................................................................... 65

Voluntary Withdrawal of FHA Mortgagee Approval ............................................................. 65 a. Standard ............................................................................................................................ 65 b. Required Documentation .................................................................................................. 65 c. Reapplication .................................................................................................................... 65

B. OTHER PARTICIPANTS ................................................................................................... 65 Appraisers ............................................................................................................................... 65

a. FHA Appraiser Roster ...................................................................................................... 65 b. Application and Approval Process .................................................................................... 66 c. Renewal............................................................................................................................. 67 d. Post-Approval Requirements ............................................................................................ 68

203(k) Consultants .................................................................................................................. 70 a. 203(k) Consultant Roster .................................................................................................. 70 b. Application and Approval Process .................................................................................... 70

Direct Endorsement Underwriters .......................................................................................... 74



Handbook 4000.1 iii Effective Date: 09/14/2015 | Last Revised: 10/24/2019 *Refer to the online version of SF Handbook 4000.1 for specific sections’ effective dates

a. Program Overview ............................................................................................................ 74 b. DE Underwriter Eligibility ............................................................................................... 74 c. Mortgagee’s Approval Process ......................................................................................... 75 d. Post-Approval Requirements ............................................................................................ 75

Nonprofits and Governmental Entities ................................................................................... 75 a. Program Overview ............................................................................................................ 75 b. Application and Approval Process .................................................................................... 79 c. Post-Approval Requirements .......................................................................................... 100

Real Estate Brokers ............................................................................................................... 106 a. Definition ........................................................................................................................ 106 b. Requirements .................................................................................................................. 107 c. Application and Registration Process ............................................................................. 107 d. Annual Recertification .................................................................................................... 107

Closing Agents ...................................................................................................................... 108 a. Requirements .................................................................................................................. 108 b. Application and Approval Process .................................................................................. 108

Additional Other Participants ............................................................................................... 109

II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT ...110 A. TITLE II INSURED HOUSING PROGRAMS FORWARD MORTGAGES ............. 110

Origination/Processing .......................................................................................................... 111 a. Applications and Disclosures .......................................................................................... 111 b. General Mortgage Insurance Eligibility .......................................................................... 134

Allowable Mortgage Parameters........................................................................................... 158 a. Maximum Mortgage Amounts ........................................................................................ 158 b. Loan-to-Value Limits...................................................................................................... 161 c. Required Investment ....................................................................................................... 164 d. Maximum Mortgage Term .............................................................................................. 164 e. Mortgage Insurance Premiums ....................................................................................... 164

Underwriting the Property .................................................................................................... 166 a. Property Acceptability Criteria ....................................................................................... 166 b. Required Documentation for Underwriting the Property ............................................... 181 c. Conditional Commitment Direct Endorsement Statement of Appraised Value ............. 181

Underwriting the Borrower Using the TOTAL Mortgage Scorecard (TOTAL) .................. 182 a. Underwriting with an Automated Underwriting System ................................................ 182 b. Credit Requirements (TOTAL)....................................................................................... 186 c. Income Requirements (TOTAL)..................................................................................... 202 d. Asset Requirements (TOTAL) ........................................................................................ 227 e. Final Underwriting Decision (TOTAL) .......................................................................... 253

Manual Underwriting of the Borrower ................................................................................. 256 a. Credit Requirements (Manual) ....................................................................................... 256 b. Income Requirements (Manual) ..................................................................................... 278 c. Asset Requirements (Manual) ......................................................................................... 302 d. Final Underwriting Decision (Manual) ........................................................................... 329

Closing .................................................................................................................................. 347 a. Mortgagee Closing Requirements ................................................................................... 347



Handbook 4000.1 iv Effective Date: 09/14/2015 | Last Revised: 10/24/2019 *Refer to the online version of SF Handbook 4000.1 for specific sections’ effective dates

b. Mortgage and Note ......................................................................................................... 353 c. Disbursement of Mortgage Proceeds .............................................................................. 354

Post-Closing and Endorsement ............................................................................................. 355 a. Pre-Endorsement Review................................................................................................ 355 b. Mortgagee Pre-Endorsement Review Requirements ...................................................... 355 c. Inspection and Repair Escrow Requirements for Mortgages Pending Closing or

Endorsement in Presidentially-Declared Major Disaster Areas ..................................... 358 d. Procedures for Endorsement ........................................................................................... 360 e. Endorsement and Post-Endorsement .............................................................................. 368

Programs and Products ......................................................................................................... 370 a. 203(k) Rehabilitation Mortgage Insurance Program ...................................................... 370 b. Disasters and 203(h) Mortgage Insurance for Disaster Victims ..................................... 404 c. Energy Efficient Mortgages ............................................................................................ 407 d. Refinances ....................................................................................................................... 413 e. Refinance of Borrowers in Negative Equity Positions Program (Short Refi) [EXPIRED]

......................................................................................................................................... 433 f. Section 251 Adjustable Rate Mortgages ......................................................................... 436 g. Section 248 Mortgages on Indian Land .......................................................................... 439 h. Section 247 Single Family Mortgage Insurance on Hawaiian Home Lands .................. 442 i. New Construction ........................................................................................................... 446 j. Construction to Permanent .............................................................................................. 453 k. Building on Own Land.................................................................................................... 457 l. Weatherization ................................................................................................................ 459 m. Solar and Wind Technologies ......................................................................................... 462 n. Assumptions .................................................................................................................... 466 o. HUD Real Estate Owned Purchasing ............................................................................. 469 p. Condominiums (Effective 10/15/2019) .......................................................................... 477

203(k) Consultant Requirements .......................................................................................... 497 a. Overview ......................................................................................................................... 497 b. Consultant Duties ............................................................................................................ 497 c. Consultant Fee Schedule ................................................................................................. 498 d. Improvements Standards ................................................................................................. 499 e. Consultant 35 Point Checklist ......................................................................................... 500 f. Architectural Exhibit Review ......................................................................................... 505 g. Preparing the Work Write-Up and Cost Estimate........................................................... 506 h. Feasibility Study ............................................................................................................. 506 i. Draw Request Inspection ................................................................................................ 506 j. Change Order .................................................................................................................. 506 k. Additional Required Documentation .............................................................................. 507

B. TITLE II INSURED HOUSING PROGRAMS REVERSE MORTGAGES ................ 509 C. CONDOMINIUM PROJECT APPROVAL (EFFECTIVE 10/15/2019) ....................... 510

Definitions............................................................................................................................. 510 Project Eligibility .................................................................................................................. 510

a. Classifications and Ineligible Characteristics ................................................................. 510 b. Phasing ............................................................................................................................ 511



Handbook 4000.1 v Effective Date: 09/14/2015 | Last Revised: 10/24/2019 *Refer to the online version of SF Handbook 4000.1 for specific sections’ effective dates

c. General Condominium Project Approval Requirements ................................................ 512 d. Construction Types ......................................................................................................... 529 e. Two- to Four-Unit Condominium Project ...................................................................... 532 f. Manufactured Home Condominium Projects ................................................................. 533

Project Approval Submission ............................................................................................... 533 a. Condominium Project Approval ..................................................................................... 533 b. HUD Review and Approval Process............................................................................... 534 c. Direct Endorsement Lender Review and Approval Process ........................................... 536 d. Reconsideration of Rejected or Withdrawn Condominium Projects .............................. 536

D. APPRAISER AND PROPERTY REQUIREMENTS FOR TITLE II FORWARD AND REVERSE MORTGAGES ................................................................................................ 538

Commencement of the Appraisal.......................................................................................... 538 a. Information Required before Commencement of Appraisal .......................................... 538 b. Additional Information Required Before Commencement of an Appraisal on New

Construction .................................................................................................................... 539 General Appraiser Requirements .......................................................................................... 539 Acceptable Appraisal Reporting Forms and Protocols ......................................................... 540

a. Additional Required Documentation for Appraisals of New Construction .................... 541 b. Application of Minimum Property Requirements and Minimum Property Standards by

Construction Status ......................................................................................................... 541 c. Minimum Property Requirements and Minimum Property Standards ........................... 543 d. Gross Living Area ........................................................................................................... 557 e. Appliances....................................................................................................................... 559 f. Swimming Pools ............................................................................................................. 559 g. Utilities – Mechanical Components ................................................................................ 560 h. Roof Covering ................................................................................................................. 562 i. Structural Conditions ...................................................................................................... 562 j. Defective Paint ................................................................................................................ 562 k. Attic Observation Requirements ..................................................................................... 562 l. Foundation ...................................................................................................................... 563 m. Crawl Space Observation Requirements ........................................................................ 563 n. Environmental and Safety Hazards ................................................................................. 564 o. Repair Requirements ....................................................................................................... 565 p. Utility Services................................................................................................................ 567 q. Onsite Sewage Disposal Systems ................................................................................... 571

Valuation and Reporting Protocols ....................................................................................... 571 a. Photograph, Exhibits and Map Requirements ................................................................ 571 b. Intended Use and Intended Users of Appraisal ............................................................... 572 c. Development of the Market Value .................................................................................. 573

Property Acceptability Criteria for Manufactured Housing for Title II Insured Mortgages 585 a. Definitions....................................................................................................................... 585 b. Standard .......................................................................................................................... 585 c. Foundation Systems ........................................................................................................ 586 d. Running Gear .................................................................................................................. 587 e. Perimeter Enclosure ........................................................................................................ 588 f. HUD Certification Label................................................................................................. 588



Handbook 4000.1 vi Effective Date: 09/14/2015 | Last Revised: 10/24/2019 *Refer to the online version of SF Handbook 4000.1 for specific sections’ effective dates

g. Data Plate ........................................................................................................................ 588 h. Flood Zone ...................................................................................................................... 589 i. Additions to Manufactured Housing ............................................................................... 589 j. Measurement Protocols ................................................................................................... 589 k. Sales Comparison Approach for Manufactured Housing ............................................... 589 l. Estimate of Cost New for Manufactured Housing .......................................................... 589

Condominium Projects.......................................................................................................... 590 a. Definition ........................................................................................................................ 590 b. Standard .......................................................................................................................... 590 c. Required Analysis and Reporting ................................................................................... 590 d. Site Condominium .......................................................................................................... 590 e. Manufactured Housing Condominium Projects.............................................................. 591

Valuation of Leasehold Interest ............................................................................................ 591 a. Definition ........................................................................................................................ 591 b. Standard .......................................................................................................................... 591 c. Required Analysis and Reporting ................................................................................... 591

Additional Appraisal Requirements for 223(e) Mortgages .................................................. 592 Unimproved Property Appraisal ........................................................................................... 592

a. Definition ........................................................................................................................ 592 b. Standard .......................................................................................................................... 592 c. Required Analysis and Reporting ................................................................................... 592

Update of Appraisal .............................................................................................................. 593 Market Conditions Addendum, Fannie Mae Form 1004MC/Freddie Mac Form 71, Instructions Applicable to FHA Appraisals .......................................................................... 594 a. Standard .......................................................................................................................... 594 b. Required Analysis and Reporting ................................................................................... 594

Programs and Products ......................................................................................................... 595 a. Section 248 Indian Land Program .................................................................................. 595 b. Section 247 Hawaiian Home Lands Program ................................................................. 598 c. Standard 203(k) and Limited 203(k) Rehabilitation Mortgages ..................................... 598 d. Special Energy-Related Building Components .............................................................. 600 e. HUD Real Estate Owned Properties ............................................................................... 603

Mixed Use One- to Four-Unit Single Family Properties ...................................................... 607 a. Definition ........................................................................................................................ 607 b. Required Analysis and Reporting ................................................................................... 607

E. TITLE I INSURED PROGRAMS .................................................................................... 608 F. APPRAISER AND PROPERTY REQUIREMENTS FOR TITLE I ............................ 608

III. SERVICING AND LOSS MITIGATION ...............................................609 A. TITLE II INSURED HOUSING PROGRAMS FORWARD MORTGAGES ............. 609

Servicing of FHA-Insured Mortgages .................................................................................. 609 a. Servicing in Compliance with Law ................................................................................. 609 b. Responsibility for Servicing Actions .............................................................................. 610 c. Providing Information to HUD ....................................................................................... 612 d. Communication with Borrowers and Authorized Third Parties ..................................... 612



Handbook 4000.1 vii Effective Date: 09/14/2015 | Last Revised: 10/24/2019 *Refer to the online version of SF Handbook 4000.1 for specific sections’ effective dates

e. Payment Administration ................................................................................................. 613 f. Servicing Fees and Charges ............................................................................................ 617 g. Escrow............................................................................................................................. 618 h. Insurance Coverage Administration ............................................................................... 623 i. Mortgage Insurance Premium Remittance...................................................................... 625 j. Post-Endorsement Mortgage Amendments .................................................................... 626 k. Mortgage Insurance Premium Cancellation and Termination ........................................ 631 l. Mortgage Insurance Termination .................................................................................... 634 m. Disclosures ...................................................................................................................... 636 n. Record Retention – Servicing File .................................................................................. 637

Default Servicing .................................................................................................................. 639 a. Mortgages in Delinquency or Default ............................................................................. 639 b. HUD Default Servicing Contact ..................................................................................... 639 c. Reporting to Consumer Reporting Agencies and the IRS .............................................. 639 d. Late Charges ................................................................................................................... 640 e. Partial Payments for Mortgages in Default ..................................................................... 641 f. Lien Status ...................................................................................................................... 642 g. Imminent Default ............................................................................................................ 642 h. Early Default Intervention .............................................................................................. 643 i. Loss Mitigation Review Process ..................................................................................... 657 j. HUD’s Loss Mitigation Program .................................................................................... 665 k. Home Retention Options................................................................................................. 671 l. Home Disposition Options .............................................................................................. 694 m. Loss Mitigation Incentives .............................................................................................. 723 n. Non-Monetary Default .................................................................................................... 723 o. Distressed Asset Stabilization Program .......................................................................... 725 p. Claims Without Conveyance of Title ............................................................................. 725 q. Reinstatement .................................................................................................................. 728 r. Foreclosure ...................................................................................................................... 730 s. Acquiring Possession ...................................................................................................... 743 t. Conveyance of Acquired Properties ............................................................................... 746 u. Deficiency Judgments ..................................................................................................... 775

Programs and Products ......................................................................................................... 776 a. Adjustable Rate Mortgages ............................................................................................. 776 b. Assumptions .................................................................................................................... 782 c. Presidentially-Declared Major Disaster Areas ................................................................ 785 d. Hawaiian Home Land Mortgages (Section 247 Mortgages) .......................................... 791 e. Insured Mortgages on Indian Land (Section 248 Mortgages) ........................................ 794 f. Section 222 Mortgages ................................................................................................... 795 g. Good Neighbor Next Door.............................................................................................. 798 h. HOPE for Homeowners .................................................................................................. 801 i. Nehemiah Housing Opportunity Grants Program........................................................... 804 j. Servicing FHA-Insured Mortgages for Servicemember-Borrowers ............................... 805 k. Section 235 Mortgages ................................................................................................... 808

B. TITLE II INSURED HOUSING PROGRAMS REVERSE MORTGAGES ................ 876 C. TITLE I INSURED PROGRAMS .................................................................................... 876



Handbook 4000.1 viii Effective Date: 09/14/2015 | Last Revised: 10/24/2019 *Refer to the online version of SF Handbook 4000.1 for specific sections’ effective dates

IV. CLAIMS AND DISPOSITION ................................................................877 A. TITLE II CLAIMS ............................................................................................................. 877

Claim Submission Process .................................................................................................... 877 a. Preparation and Submission of Claims ........................................................................... 877 b. Claim Status .................................................................................................................... 883 c. Claim Review File .......................................................................................................... 883

Claim Types .......................................................................................................................... 885 a. Claim Type 01 - Conveyances ........................................................................................ 885 b. Claim Type 02 - Assignment or Single Family Loan Sale Program .............................. 908 c. Claim Type 05 - Supplemental Claims/Remittances ...................................................... 913 d. Claim Type 06 - Claims Without Conveyance of Title .................................................. 919 e. Claim Type 07 - Pre-Foreclosure Sales .......................................................................... 922 f. Claim Type 31 - Special Forbearance ............................................................................. 925 g. Claim Type 32 - Loan Modification ............................................................................... 926 h. Claim Type 32 ** - FHA-HAMP Loan Modification .................................................... 926 i. Claim Type 33 ** - FHA-HAMP Partial Claim ............................................................. 926

Payment of Claims ................................................................................................................ 927 a. Processing of Claim Forms ............................................................................................. 927 b. Method of Payment ......................................................................................................... 928 c. Disbursement of Claim ................................................................................................... 928 d. Negative Claim Amount ................................................................................................. 928 e. Advice of Payment and Title Approval .......................................................................... 928

Withdrawal or Cancellation of Conveyance Claims ............................................................. 929 a. Withdrawal of Application for Insurance Benefits ......................................................... 929 b. Cancellation of Insurance Benefits due to Reconveyance .............................................. 929

Post-Claim Reviews .............................................................................................................. 933 a. Definition ........................................................................................................................ 933 b. Standard .......................................................................................................................... 934 c. Selection of Claims for Review ...................................................................................... 934 d. Frequency of Reviews..................................................................................................... 934 e. Notification to Mortgagee of Claim Review .................................................................. 934 f. HUD’s Initial Report....................................................................................................... 934 g. Mortgagee Response Procedures to HUD’s Initial Report ............................................. 935 h. Findings Based on Mortgagee Response ........................................................................ 935 i. Mortgagee Response Procedures to HUD’s Follow-Up Report ..................................... 935 j. Referral for Collections................................................................................................... 935 k. Referral for Enforcement Review ................................................................................... 935

Debt Collection and Administrative Offset .......................................................................... 935 a. Demand Letter [Text was deleted in this section.] ......................................................... 936 b. Notice of Intent to Collect Administrative Offset........................................................... 936 c. Initiation of Offset Action ............................................................................................... 936

B. TITLE II DISPOSITION ................................................................................................... 937 Management and Marketing Program .................................................................................. 937

a. HUD Contractors ............................................................................................................ 937 b. Nondiscrimination Policy ............................................................................................... 937



Handbook 4000.1 ix Effective Date: 09/14/2015 | Last Revised: 10/24/2019 *Refer to the online version of SF Handbook 4000.1 for specific sections’ effective dates

c. P260 Portal ...................................................................................................................... 937 REO Property Disposition .................................................................................................... 938

a. Property and Sales Condition.......................................................................................... 938 b. List Price ......................................................................................................................... 939 c. Marketing Tools .............................................................................................................. 939 d. Prospective Buyers.......................................................................................................... 941 e. Lead-Based Paint ............................................................................................................ 948 f. Sales Timeline ................................................................................................................. 949 g. Bid Submission ............................................................................................................... 956 h. Bid Acceptance During Competitive Sales Periods........................................................ 957 i. Selection of Winning Bid................................................................................................ 958 j. Inspection Contingency .................................................................................................. 962 k. Closing ............................................................................................................................ 963

C. TITLE I CLAIMS ............................................................................................................... 971 D. TITLE I DISPOSITION..................................................................................................... 971

V. QUALITY CONTROL, OVERSIGHT AND COMPLIANCE ............972 A. QUALITY CONTROL OF LENDERS AND MORTGAGEES .................................... 973

Quality Control Program Overview ...................................................................................... 973 a. Purpose of Quality Control Program .............................................................................. 973 b. Definitions....................................................................................................................... 973 c. Standard .......................................................................................................................... 974 d. Required Documentation ................................................................................................ 975

Institutional Quality Control Program Requirements ........................................................... 975 a. Who May Perform Quality Control ................................................................................ 975 b. Operational Compliance ................................................................................................. 976 c. Identifying Patterns ......................................................................................................... 980 d. Fraud, Misrepresentation, and Other Findings ............................................................... 981

Loan Level Quality Control Program Requirements ............................................................ 983 a. Loan File Selection ......................................................................................................... 983 b. Loan Sample Risk Assessment ....................................................................................... 986 c. Origination and Underwriting Loan File Compliance Review ....................................... 987 d. Quality Control Reviews of Specialized Mortgage Programs ........................................ 991 e. Servicing Loan File Compliance Review ....................................................................... 991 f. Ineligible Participants ..................................................................................................... 992

Data Integrity ........................................................................................................................ 993 a. Standard .......................................................................................................................... 993 b. Required Documentation ................................................................................................ 994

B. QUALITY CONTROL OF OTHER PARTICIPANTS .................................................. 994 Direct Endorsement Underwriter .......................................................................................... 994 Nonprofits and Governmental Entities ................................................................................. 994

a. Quality Control Plan Overview ...................................................................................... 994 b. Quality Control Plan Findings and Corrective Action .................................................... 995 c. Fraud, Misrepresentation, and Other Findings ............................................................... 995



Handbook 4000.1 x Effective Date: 09/14/2015 | Last Revised: 10/24/2019 *Refer to the online version of SF Handbook 4000.1 for specific sections’ effective dates

Real Estate Brokers ............................................................................................................... 996 Closing Agents ...................................................................................................................... 996 Additional Other Participants ............................................................................................... 996

C. MORTGAGEE MONITORING ....................................................................................... 997 Cooperation with HUD Investigations and Reviews ............................................................ 997 Institutional Mortgagee Monitoring ...................................................................................... 997

a. Title I Lender Monitoring Reviews ................................................................................ 997 b. Title II Mortgagee Monitoring Reviews ......................................................................... 997 c. Servicer Tier Ranking System II ..................................................................................... 998 d. DELRAP Mortgagee Monitoring Reviews (Effective 10/15/2019) ............................. 1001

Loan Level Monitoring ....................................................................................................... 1002 a. Title I Loan Reviews ..................................................................................................... 1002 b. Title II Loan Reviews ................................................................................................... 1002

D. MONITORING OF OTHER PARTICIPANTS ............................................................ 1003 Appraisers ........................................................................................................................... 1003 203(k) Consultants .............................................................................................................. 1003 Nonprofits and Governmental Entities ............................................................................... 1003

a. Monitoring of Governmental Entities and HUD-approved Nonprofits ........................ 1003 b. Monitoring of HUD Homes Participants ...................................................................... 1004 c. Monitoring FHA Mortgagor Participants ..................................................................... 1004 d. Monitoring of Secondary Financing Program Participants .......................................... 1004

Real Estate Brokers ............................................................................................................. 1005 Closing Agents .................................................................................................................... 1005 Additional Other Participants ............................................................................................. 1005

E. ENFORCEMENT ............................................................................................................. 1005 Referrals for Non-Compliance ............................................................................................ 1005 Employee Improprieties Attributed to the Mortgagee ........................................................ 1005 Program Office Actions and Sanctions ............................................................................... 1006

a. Actions and Sanctions Against Mortgagees ................................................................. 1006 b. Loan Level Actions and Sanctions ............................................................................... 1014

Mortgagee Review Board Actions and Sanctions .............................................................. 1014 a. Actions and Sanctions ................................................................................................... 1014 b. Procedures ..................................................................................................................... 1018

Actions and Sanctions Against Individuals and Other Program Participants ..................... 1020 a. Limited Denial of Participation .................................................................................... 1020 b. Suspension .................................................................................................................... 1021 c. Debarment ..................................................................................................................... 1022 d. Civil Money Penalties ................................................................................................... 1023 e. Specific Program Participants ....................................................................................... 1023

APPENDIX 1.0 – MORTGAGE INSURANCE PREMIUMS ......................1031 APPENDIX 2.0 – ANALYZING IRS FORMS ...............................................1033



Handbook 4000.1 xi Effective Date: 09/14/2015 | Last Revised: 10/24/2019 *Refer to the online version of SF Handbook 4000.1 for specific sections’ effective dates

APPENDIX 3.0 – POST-ENDORSEMENT FEES AND CHARGES BY HOC (APPLIES TO SERVICING ONLY) .....................................................1036

APPENDIX 4.0 – HUD SCHEDULE OF STANDARD ATTORNEY FEES (APPLIES TO SERVICING ONLY) .....................................................1043

APPENDIX 5.0 - FIRST LEGAL ACTIONS TO INITIATE FORECLOSURE AND REASONABLE DILIGENCE TIME FRAMES (APPLIES TO SERVICING ONLY) ...............................................................................1046

APPENDIX 6.0 - PROPERTY PRESERVATION ALLOWANCES AND SCHEDULES (APPLIES TO SERVICING ONLY) ...........................1049

A. MAXIMUM PROPERTY PRESERVATION ALLOWANCES ................................. 1049 B. WINTERIZATION SCHEDULE.................................................................................... 1052 C. GRASS CUT SCHEDULE ............................................................................................... 1052

INDEX .................................................................................................................1054


I. DOING BUSINESS WITH FHA A. FHA Lenders and Mortgagees

Handbook 4000.1 1 Effective Date: 09/14/2015 | Last Revised: 10/24/2019 *Refer to the online version of SF Handbook 4000.1 for specific sections’ effective dates

I. DOING BUSINESS WITH FHA

A. FHA LENDERS AND MORTGAGEES

The Doing Business with FHA section in this FHA Single Family Housing Policy Handbook (SF Handbook) covers Federal Housing Administration (FHA) approval and eligibility requirements for both Title I lenders and Title II Mortgagees, as well as other FHA program participants. The term “Mortgagee” is used throughout for all types of FHA approval (both Title II Mortgagees and Title I lenders) and the term “Mortgage” is used for all products (both Title II Mortgages and Title I loans), unless otherwise specified.

A Mortgagee must fully comply with all of the following approval and eligibility requirements in order to be approved by FHA to participate in the origination, underwriting, closing, endorsement, servicing, purchasing, holding, or selling of FHA-insured Title I or Title II Mortgages.

The requirements outlined below in subsections 1 through 9 apply to both Single Family (one-to four-units) and Multifamily Mortgagees. If there are any exceptions or program-specific requirements that differ from those set forth below, the exceptions or alternative program requirements are explicitly stated or hyperlinked to the appropriate guidance. Terms and acronyms used in this SF Handbook have their meanings defined in the Glossary and Acronyms and in the specific section of the SF Handbook in which the definitions are located.

http://www.allregs.com/tpl/public/fha_freesite.aspxhttp://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/handbooks/hsgh

I. DOING BUSINESS WITH FHA A. FHA Lenders and Mortgagees 1. Types of Program Approvals


Types of Program Approvals

FHA approves Mortgagees separately for participation in the Title I and Title II programs. FHA approval is conveyed to a specific legal Entity and cannot be shared with or extended to other Entities, such as a parent or subsidiary, or any Affiliates of the Mortgagee.

a. Title I

i. Definition

A Title I Mortgagee is a Mortgagee that (a) holds a valid Title I contract of insurance and is approved by FHA, or (b) held a Title I contract that has been terminated or suspended but remains responsible for servicing or selling the Title I Mortgages that it holds and is authorized to file insurance claims on these Mortgages.

ii. Standard

A Title I Mortgagee may be approved to originate, underwrite, close, endorse, service, purchase, hold, or sell loans under the Property Improvement program and/or the Manufactured Housing program. Unless otherwise specified, Title I Mortgagees must meet the same approval requirements and follow the same procedures as Title II Mortgagees.

b. Title II

i. Definition

A Title II Mortgagee is a Mortgagee that has been approved to participate in Title II and/or Title XI programs under the National Housing Act (12 U.S.C. § 1707 et seq. and 12 U.S.C. § 1749aaa et seq.).

ii. Standard

A Title II Mortgagee may be approved to originate, underwrite, close, endorse, service, purchase, hold, or sell FHA Single Family insured Mortgages or multifamily Mortgages.

Types of Approved Mortgagees

FHA approves Mortgagees as one of the following four types: Supervised, Nonsupervised, Government, or Investing.


I. DOING BUSINESS WITH FHA A. FHA Lenders and Mortgagees 2. Types of Approved Mortgagees


a. Supervised Mortgagee

i. Definitions

Supervised Mortgagee

A Supervised Mortgagee is a financial institution that is a member of the Federal Reserve System (FRS) or whose accounts are insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA) (collectively, “Federal Banking Agencies”).

Large Supervised Mortgagee

A Large Supervised Mortgagee is a Supervised Mortgagee that has consolidated assets greater than or equal to the threshold for audited financial reporting established by the Federal Banking Agency with oversight of the Mortgagee. Thresholds are codified at 12 CFR §§ 363.1(a), 562.4(b)(2) and 715.4(c), and are subject to change.

Small Supervised Mortgagee

A Small Supervised Mortgagee is a Supervised Mortgagee that has consolidated assets below the threshold for audited financial reporting established by the Federal Banking Agency with oversight of the Mortgagee. Thresholds are codified at 12 CFR §§ 363.1(a), 562.4(b)(2), and 715.4(c), and are subject to change.

ii. Standard

A Supervised Mortgagee must meet the general approval requirements set forth below.

iii. Activities Authorized

A Supervised Mortgagee may originate, underwrite, close, endorse, service, purchase, hold, or sell FHA-insured Mortgages.

b. Nonsupervised Mortgagee

i. Definition

A Nonsupervised Mortgagee is a lending institution that has as its principal activity the lending or investing of funds in real estate Mortgages, consumer installment notes or similar advances of credit, the purchase of consumer installment contracts, or from a directly related field. A directly related field is something directly related to the lending or investing of funds in real estate Mortgages, not simply actions relating to real estate in general.

http://www.allregs.com/tpl/public/fha_freesite.aspxhttp://www.ecfr.gov/cgi-bin/ECFR?page=browsehttp://www.ecfr.gov/http://www.ecfr.gov/

I. DOING BUSINESS WITH FHA A. FHA Lenders and Mortgagees 2. Types of Approved Mortgagees


ii. Standard

A Nonsupervised Mortgagee must meet the general approval requirements set forth below and:

• meet FHA’s principal activity requirement by deriving at least 50 percent of its gross revenue from: o its activities in lending or investing of funds in real estate Mortgages; o consumer installment notes or similar advances of credit; o the purchase of consumer installment contracts; or o a directly related field;

• have an acceptable business form; • demonstrate creditworthiness; and • have an acceptable funding program.


A Nonsupervised Mortgagee may originate, underwrite, close, endorse, service, purchase, hold, or sell FHA-insured Mortgages.

c. Government Mortgagee

i. Definition

A Government Mortgagee is a federal, state, or municipal governmental agency, a Federal Reserve Bank, a Federal Home Loan Bank, the Federal Home Loan Mortgage Corporation (FHLMC, or Freddie Mac), or the Federal National Mortgage Association (FNMA, or Fannie Mae).

ii. Standard

A Government Mortgagee must meet the general approval requirements set forth below.


A Government Mortgagee may originate, underwrite, close, endorse, service, purchase, hold, or sell FHA-insured Mortgages.

d. Investing Mortgagee

i. Definition

An Investing Mortgagee is an organization that invests funds under its own control.

ii. Standard

An Investing Mortgagee must meet the general approval requirements set forth below and:


I. DOING BUSINESS WITH FHA A. FHA Lenders and Mortgagees 3. Application and Eligibility Requirements for Approval


• have staff capable of managing the Mortgagee’s activities relating to its FHA-insured Mortgages;

• have an acceptable business form; • demonstrate creditworthiness; and • have an acceptable funding program.


An Investing Mortgagee may purchase, hold, or sell FHA-insured Mortgages. An Investing Mortgagee may only service FHA-insured Mortgages if it receives prior approval.

iv. Activities Not Authorized

An Investing Mortgagee may not originate, underwrite, or close FHA-insured Mortgages in its own name or submit applications for FHA mortgage insurance.

Application and Eligibility Requirements for Approval

a. Title I and Title II Program Applications

An applicant for FHA approval may apply for Title I and Title II approval separately or in the same application.

b. Online Application

An applicant seeking FHA approval must submit an online application containing all information and documentation required to demonstrate eligibility for approval as provided in this section. Applicants must ensure that all information contained in and documentation submitted with the application is true, complete, and up to date as of the date of submission of the application.

i. Application Information

Standard

The applicant must provide the following information as part of a completed application for FHA approval:

• general information (such as the applicant name, date the applicant was established, Taxpayer Identification Number (TIN), Nationwide Mortgage Licensing System and Registry Unique Identifier (NMLS ID), etc.);

• contact information (the primary contact information for all inquiries related to the application);

• addresses (the geographic and mailing addresses for the applicant’s home office);

• Mortgagee type (the type of FHA Mortgagee approval being sought: Supervised, Nonsupervised, Government, or Investing);

http://www.allregs.com/tpl/public/fha_freesite.aspxhttps://www5.hud.gov/FHALender/

I. DOING BUSINESS WITH FHA A. FHA Lenders and Mortgagees 3. Application and Eligibility Requirements for Approval


• Mortgagee function (the functions being sought: originate/underwrite, service, and/or hold);

• FHA program participation (the FHA program participation being sought: Title I, Title II Single Family, and/or Title II Multifamily);

• Corporate Officers (the names, titles, and Social Security Numbers (SSN) for all Corporate Officers who will be directly involved in managing, overseeing, or conducting FHA business and the designated Officer in Charge); and

• Principal Owners (the names, SSN or TIN, and percent ownership).

Required Documentation

The applicant must submit all of the application information in the online application.

ii. Application Documentation

Standard

The applicant must provide supporting documentation to demonstrate that it is eligible for FHA approval.

Required Documentation

The applicant must submit all eligibility documentation listed in the table below that is required for the type of approval being sought. This documentation must be submitted in the online application.

Documents Required for Application

Supe

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Mor

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ee

Non

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Mor

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Gov

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Mor

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Inve

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Fed

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Reg

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Not

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Reg

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Business Formation Documents Commercial Credit Report of Mortgagee Credit Reports of Principal Owners and Corporate Officers