The interpretations of Mortgagee Letter 2010-20 continue to manifest itself among the mortgage industry. Back in late 2009, the comment period began and a group of nation’s top post-closing quality control companies came together to address this issue through the Mortgage Bankers Association (MBA) with Tamara King acting as liaison between the MBA and the Federal Housing Administration (FHA). At that time, the FHA was not ready to provide clarification to the issue of post-closing quality control, and many of the brokers interpreted the up and coming Mortgagee Letter regarding the new policy between brokers, sponsoring mortgagees, and FHA as a “Get Out of Jail Free” card for the brokers to not have to be accountable for post-closing quality control on FHA loans.
Many account executives have e-mailed or told brokers they will no longer have to perform post-closing quality control audits on FHA loans. Many of these broker clients have relayed this information to me. I have forwarded the e-mails to top executives in the quality control and fraud departments of banks and to mortgage bankers for clarification and they have all, on every occasion, communicated back to me that they have not released such information or authorized its publication.
Karrie Bennett of U.S. Bank was taken aback by the rumors and had indicated that they will still requiring brokers to provide proof of a quality control program. She indicated that they were going to provide clarification of U.S. Bank’s intent regarding post-closing FHA quality control to their marketing department so their account executives would have no question where the company stands on this issue.
I have had a number of conversations with mortgage brokers, as well as National Association Mortgage Brokers Immediate Past President Jim Pair. The conclusion reached by all parties is that the mortgage broker and third-party originators will more likely experience increased supervision in post-closing quality control than what was ever provided by FHA. Mr. Pair agrees and has communicated this publicly.
Ron Miles, president of Transatlantic Mortgage LLC in Reisterstown, Md., concurs with Pair’s assessment and stated that he was going to continue post-closing quality control on his FHA loan as insurance and peace of mind. Ultimately Miles believes this will help with the prevention of repurchases.
Mortgagee Letter 2010-10 states:
“HUD will hold FHA-approved mortgagees responsible for compliance with FHA requirements in all aspects of an FHA loan transaction, whether performed by the approved mortgagee or by its sponsored third-party originator, unless applicable law or regulation governing the violations in question require specific knowledge on the part of the party to be held responsible. HUD expects that FHA-approved mortgagees will pursue sponsoring relationships with responsible originators, and that approved mortgagees will diligently monitor and evaluate the activities and performance of those they sponsor. The Department will continue to carefully review and evaluate FHA-approved mortgagees’ activities and performance, and will take appropriate action to enforce its requirements when violations occur.”
What this means is the sponsoring mortgagee “will diligently monitor and evaluate” and will require the “responsible originator” broker to perform post-closing quality control. The sponsoring mortgagee will have brokers provide evidence of post-closing audits, as well as other quality control items.
Tommy A. Duncan is executive vice president of Quality Mortgage Services LLC. For answers to your QC and FHA questions, please contact Tommy at (615) 591-2528, ext. 124 or e-mail [email protected]