HUD Updates FHA Mortgage Letter and Cracks Down on Lenders

The Dept. of Housing and Urban Development recently released an important FHA Mortgagee Letter that is imperative for mortgage brokers, lenders and finance companies that plan to see FHA loans in their future.  In an effort to protect the public trust and the FHA Insurance Fund, HUD is enforcing that mortgagees are accountable for their lending practices. FHA expects each mortgagee to exercise the same level of care in originating, underwriting and servicing an FHA insured home loan as it would for home financing in which the mortgagee would be entirely dependent on the property as security to protect its investment.  When a mortgagee fails to comply with HUD’s policies and procedures, HUD will take the appropriate action.  For example, brokers or lenders that materially violate FHA program statutes, regulations and handbook requirements may be referred to the Mortgagee Review Board for appropriate sanctions, which may include termination of mortgagee approval.

HUD believes that many lenders have not lived up to the ethic codes and high standards required with FHA underwriting guidelines. HUD believes that many FHA lenders have not lived up to the ethic codes and high standards required with FHA underwriting guidelines.  That could become a problem because home mortgages that do not meet FHA mortgage lending standards to the letter are likely to result in foreclosure or a home loan default that cause FHA insurance to rise. Assistant Secretary for Housing, Brian D. Montgomery recommends that if you have questions regarding this Mortgagee Letter, please call the FHA Resource Center at 1-800-CALL-FHA (1-800-225-5342).  Read the complete FHA lending article > FHA Mortgage Loans Update with New HUD Rules for Lenders.