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FHA Temporarily Shuts Down Loan Review System

David Krechevsky
Apr 12, 2022
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System was experiencing ‘various document errors’

The Federal Housing Administration (FHA) has shut down its digital Loan Review System (LRS) for up to two weeks in an effort to resolve “various document errors” that have occurred recently, the agency said Monday.

According to a news release from FHA, LRS users “have been experiencing various document errors over the last several weeks. Efforts to resolve the errors have had mixed results.”

On Monday, LRS was temporarily shut down while system teams worked to troubleshoot the problem. FHA said the shutdown will minimize the need for lenders to resubmit response documents once the errors are resolved.

FHA said it anticipates that access to the system will be restored no later than Monday, April 25.

LRS is the FHA’s newest technology intended to make it easier for lenders to do business with the agency. According to information on the U.S. Department of Housing and Urban Development’s website, “LRS is an electronic platform that provides a more precise and transparent methodology for FHA loan reviews for Single Family Title II mortgages.”

It continues, “Because it automates many manual processes and consolidates functions previously performed in multiple systems, LRS streamlines quality control processes for both lenders and FHA.”

Lenders use LRS to interact with FHA on the majority of Title II Single Family quality control processes, including:

  • Various post-endorsement loan reviews;
  • Unconditional Direct Endorsement authority test cases; 
  • Lender monitoring reviews, and
  • Lender self-reporting of fraud and other material findings.

FHA said LRS allows it to implement the Single Family Housing Loan Quality Assessment Methodology (Defect Taxonomy), which was posted to HUD.gov in June 2015. The Defect Taxonomy provides a streamlined method of identifying and capturing information about defects revealed through individual loan reviews.

Through LRS, review results will be presented using:

  • Defect categories supported by reason codes that identify the source and cause of the defect, and offer insight into the significance of a given defect within each category.
  • Severity tiers that communicate the severity of the defect. Severity is driven by the size and nature of the deviation from FHA’s requirements and the impact to loan insurability.

FHA said it will reset response due dates and make other “appropriate adjustments,” in order to “ensure that lenders are not adversely impacted by the outage.”

Once LRS access is restored, FHA said, lenders with specific requests should contact its Resource Center. FHA provided the following information about its resource center;

  • To obtain answers to frequently asked questions 24/7, visit www.hud.gov/answers.
  • E-mail [email protected] Emails and phone messages will be responded to during normal hours of operation, 8 a.m. to 8 p.m. (Eastern), Monday through Friday on all non-Federal holidays.
  • Call 1-800-CALLFHA (1-800-225-5342). Persons with hearing or speech impairments may reach this number by calling the Federal Relay Service at 1-800-877-8339.
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