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The Federal Housing Administration (FHA) has issued new lender certification requirements related to errors that may occur in the loan process.
The new requirements, which take effect Aug. 1, are designed to clarify actions that would be viewed as minor errors that would not require a federal probe. Under the new requirements, the FHA would only involve the U.S. Department of Justice (DOJ) in a probe in the event that an error results in altering the loan approval decision.
The FHA is also requiring a new lender certification plan that company executives need to sign every year. This certification is a pledge that lenders are not involved in fraudulent or other criminal behavior.
David H. Stevens, president and chief executive officer of the Mortgage Bankers Association, commended the FHA’s actions.
"We appreciate FHA's efforts to increase certainty in the underwriting and processing of FHA-insured mortgages, and on first review this language appears to be an improvement over the previous lender and loan-level certifications,” he said in a statement. “The ability to serve and support sustainable and affordable homeownership has been a core mission of both FHA and lenders across this country. Having the confidence to lend demands clear and reasonable accountability. This has been the goal of all stakeholders. Individual lenders will need to review the new certifications, assess the legal and reputational risks associated with FHA lending, and determine whether the new language provides sufficient protection to allow them to responsibly expand liquidity for FHA lending. Similarly we intend to study these updated requirements and we look forward to continuing to work with FHA and other stakeholders to strengthen the housing market and provide access to sustainable mortgage credit for qualified borrowers."