Skip to main content

New HUD Handbook: Pre-Closing Quality Control

Michael G. Barone
Oct 01, 2015

Question: Is it true that the new FHA Guidelines require Pre-Closing Quality Control reviews?

Yes. The U.S. Department of Housing & Urban Development (HUD) issued a new handbook, FHA Single Family Housing Policy Handbook 4000.1, which is effective as of Sept. 14, 2015 (Handbook). Under the Handbook, mortgagees must select FHA-insured mortgages for pre-closing quality control reviews on a monthly basis.  

Mortgages selected must be reviewed after the mortgage is approved by an FHA Directed Endorsement Underwriter and prior to closing. [4000.1 - V.A.3.a.i.(A)]   

As with post-closing reviews, loans selected for pre-closing reviews must consist of both random and discretionary samplings. [4000.1 - V.A.3.a.iv] 

However, unlike post-closing reviews, pre-closing reviews do not require mortgagees to obtain a new credit report or re-verify income, employment, assets and housing expense information. Rather, for pre-closing reviews mortgagees must evaluate all documents supporting employment, income, assets and housing expense information to ensure original documents comply with FHA’s policy requirements and to resolve any discrepancies in the documentation prior to closing. [4000.1 - V.A.3.c]

Mortgagees must also conduct a review of the property appraisal for all FHA-insured mortgages chosen for pre-closing quality control reviews.

At a minimum, the following areas must be reviewed:

►Appraisal data,
►Validity of the comparables,
►Value conclusion (as required by FHA guidance),
►Any changes made by the underwriter, and
►The overall quality of the appraisal. Field reviews are not required for pre-closing reviews. [4000.1 - V.A.3.c]  

Michael Barone is director of legal and regulatory compliance for Lenders Compliance Group. He may be reached by phone at (516) 442-3456.

The New URLA – What’s the Big Deal?

Lenders will need to update their technology stack to comply with the redesigned URLA.

Regulation and Compliance
Jun 14, 2021
Texas State Legislators Looks To Protect Reverse Mortgage Borrowers

A Texas House Bill has been introduced to prevent false, misleading or deceptive advertising by reverse mortgage lenders.

Jun 02, 2021
Could Prudential Standards for Nonbank Mortgage Servicers be Eased?

From The Desk Of The “Om-Bobs-Man”

Regulation and Compliance
May 31, 2021
Get Ready to Duck and Cover

After years of hands-off attitude by regulators, a new wave of mortgage enforcement is building. Expect a tsunami.

Regulation and Compliance
May 13, 2021