Federal Housing Administration (FHA) lenders with fiscal years ending December 31 are well aware that the Annual Lender Recertification deadline is approaching at the end of March.
FHA substantially eased the required recertification language last year, eliminating overly broad language which made many lenders fear they would inadvertently make a false certification. Although that threat is greatly diminished, one certification requirement still holds: lenders must certify that they have not been subject to any state sanctions that were not reported to FHA. Lenders with unreported state sanctions, or reported sanctions which have not received clearance, must advise HUD that they are unable to certify.
According to the FHA’s recent Mortgagee Review Board (MRB) Administrative Actions report, 22 lenders were sanctioned in the last fiscal year for failing to report, or timely report, state sanctions. Almost a dozen were also cited for making false annual certifications.
“Civil money penalties can double when a failure to report leads to a false certification,” said Megan Bartlett, SitusAMC Managing Consultant. Her team provides expert tactical advice to help lenders do business with FHA and other government residential lending programs, and actionable guidance to understand and respond to credit and compliance risk. Clients include leaders tasked with implementing policy and procedure, maintaining compliance and responding to agency audits and inquiries.
In all, nearly 70 percent of MRB sanctions last year were related to failure to report, or timely report, material events. Lenders are required to timely report not only state sanctions, but operating losses, declines in net worth or liquidity below required thresholds, and acquisitions, mergers, and other corporate changes.
Before submitting those certifications, lenders should ensure they have reported any state sanctions and other material events. It’s a good opportunity to make sure strong protocols are in place to identify, monitor, and timely report all material events.
Need more information about FHA compliance? Contact SitusAMC’s Residential Consulting & Advisory team at firstname.lastname@example.org.