FHA Single Family Housing Policy Handbook 4000.1, Part V — c. Origination and Underwriting Case Binder Compliance Review (05/09/2022)

FHA Single Family Housing Policy Handbook 4000.1, Part V — c. Origination and Underwriting Case Binder Compliance Review (05/09/2022)

c. Origination and Underwriting Case Binder Compliance Review (05/09/2022) i. Minimum Requirements At a minimum, Mortgagees must include the following areas in their QC review to ensure they meet the requirements outlined in the Title II Insured Housing Programs Forward Mortgages section or the Title I Insured Programs - Property Improvement Loan Program or Manufactured Home Loan Program section(s): Requirement TII Pre- closing Review TII Post- closing Review Title I Review Appraisal ✓ ✓ ✓ Mortgage application, eligibility, and underwriting documents ✓ ✓ ✓ Disclosures and legal compliance ✓ ✓ ✓ Mortgage origination documents ✓ ✓ ✓ Handling of mortgage documents ✓ ✓ ✓ Borrower occupancy ✓ ✓* Credit reports ✓ ✓ ✓ Outstanding debt obligations ✓ ✓ ✓ V. QUALITY CONTROL, OVERSIGHT, AND COMPLIANCE A. Quality Control of Lenders and Mortgagees 3. Loan Level Quality Control Program Requirements Handbook 4000.1 1709 Last Revised: 11/26/2025 Requirement TII Pre- closing Review TII Post- closing Review Title I Review Verifications of employment and deposit ✓ ✓ ✓ Self-employed Borrowers ✓ ✓ ✓ Borrower’s source of funds ✓ ✓ ✓ Underwriting accuracy and completeness, including compensating factors ✓ ✓ ✓ Property improvement loan completion certificates and inspections of completed improvements ✓ Form HUD-56002-MH, Placement Certificate for Manufactured Home, and site- of-placement inspection ✓** Property improvement loan proceeds use eligibility ✓ Post-Disbursement inspections on property improvements or manufactured home installation ✓ Property Flipping restrictions ✓ ✓ Prohibited restrictive covenants ✓ ✓ Qualified Mortgage (QM) ✓ ✓ Loan estimate ✓ ✓ ✓ Discrepancies in the case binder ✓ ✓ ✓ Condition clearance ✓ ✓ ✓ Closing procedures and documents ✓ ✓ Closing Disclosure or other similar legal document ✓ ✓ Pre-endorsement review ✓ Timely submission for insurance ✓ ✓ * Applies when the Property is a Manufactured Home (including Manufactured Homes with a Property Improvement Loan) ** Applies only to Manufactured Home Loans ii. Document Review and Reverification A Mortgagee’s QC Plan for origination and underwriting must provide for the review and reverification of the following information on all FHA-insured Mortgages selected for pre-closing and post-closing review, unless otherwise specified below. V. QUALITY CONTROL, OVERSIGHT, AND COMPLIANCE A. Quality Control of Lenders and Mortgagees 3. Loan Level Quality Control Program Requirements Handbook 4000.1 1710 Last Revised: 11/26/2025 (A) Credit Report (1) Standard For all post-closing reviews, the Mortgagee must obtain a new credit report in the same form as the original credit report used to approve the Mortgage, including a Residential Mortgage Credit Report (RMCR), a Tri-Merged Credit Report (TRMCR), or, when appropriate, a business credit report for each Borrower whose FHA-insured Mortgage is selected for review. The new credit report must comply with the credit report standards described in the Credit Report(s) section. The Mortgagee must compare the new credit report obtained with the original credit report used to approve the Mortgage, and determine whether any discrepancies exist between the reports that may adversely affect the Borrower’s eligibility to qualify for an FHA-insured Mortgage. If discrepancies exist between the credit reports that may adversely affect the Borrower’s eligibility to qualify for an FHA-insured Mortgage, then the Mortgagee must obtain a second, full RMCR. (2) Exceptions A new credit report does not have to be obtained for pre-closing reviews, or for non-credit qualifying Streamline Refinances. (3) Required Documentation The Mortgagee must retain a copy of the new credit report(s). (B) Income, Employment, Asset, and Housing Expense Information (1) Reverification (a) Standard For all post-closing reviews, the Mortgagee must analyze the validity and sufficiency of all documents contained in the loan file. The Mortgagee must reverify, in writing or electronically if available, the following: • employment; • income; • assets; • gift funds; • source of funds; and • Mortgage Payments or rental payments. If a written or electronic reverification request is not returned to the Mortgagee, the Mortgagee must attempt a telephone reverification. Reverification is not required for pre-closing reviews. V. QUALITY CONTROL, OVERSIGHT, AND COMPLIANCE A. Quality Control of Lenders and Mortgagees 3. Loan Level Quality Control Program Requirements Handbook 4000.1 1711 Last Revised: 11/26/2025 (b) Required Documentation The Mortgagee must retain evidence of the written, electronic, or telephone verification, and document the due diligence. (2) Discrepancies (a) Standard The Mortgagee must evaluate all discrepancies to ensure that the original documents (except blanket verification releases) were completed before being signed, were as represented, were not handled by Interested Parties, and that all corrections were proper and initialed. All conflicting information in the original documentation must be resolved with the underwriter. Discrepancies in documentation discovered during pre-closing reviews must be resolved prior to closing. (i) Exception for Mortgagees and Third-Party Originators The Mortgagee and TPO are permitted to handle reverifications, provided the Mortgagee or TPO is not the seller, real estate agent, builder, or developer. (b) Required Documentation The Mortgagee must document any discrepancies and retain copies of information used to resolve such discrepancies. (C) Property and Appraisals (1) Standard (a) Property and Appraisal Reviews For all FHA-insured Mortgages selected by the Mortgagee for origination and underwriting QC review, the Mortgagee must evaluate all Property documentation and the appraisal report used to support the Property Value and eligibility for FHA insurance. At a minimum, the Mortgagee must review all Property documentation and the appraisal report for completeness, technical accuracy, and overall quality in compliance with Property Acceptability Criteria and Appraiser and Property Requirements for Title II Forward and Reverse Mortgages. (b) Field Reviews The Mortgagee must obtain appraisal field reviews on at least 10 percent of FHA-insured Mortgages selected for origination and underwriting QC review. V. QUALITY CONTROL, OVERSIGHT, AND COMPLIANCE A. Quality Control of Lenders and Mortgagees 3. Loan Level Quality Control Program Requirements Handbook 4000.1 1712 Last Revised: 11/26/2025 The Mortgagee’s appraisal field review sample must include the following, even if inclusion of these Mortgages results in a field review sample that exceeds 10 percent of FHA-insured Mortgages selected for origination and underwriting QC review: • at least 10 percent of EPDs underwritten by the Mortgagee, which must be randomly selected from the overall EPD population; • all Mortgages selected by the Mortgagee for QC review based on a Property or appraisal-related discretionary sample; • all Mortgages for which the Mortgagee has received a Property complaint from the Borrower(s); and • all Mortgages with unaddressed red flags, discrepancies, inconsistencies, or valuation issues found by the Mortgagee through its QC review of the Property documentation and appraisal report. The Mortgagee may include random sample selections in its appraisal field review sample if necessary to meet the overall 10 percent requirement. Field reviews must be performed by Appraisers listed on the FHA Appraiser Roster and must be reported on the applicable Residential Appraisal Field Review Report form. (2) Exceptions Mortgagees are not required to perform the property and appraisal QC review, including any appraisal field review, for Streamline Refinances where the Mortgagee was not required to order a new appraisal for a Property financed with an FHA-insured Mortgage. Appraisal field reviews are not required for pre-closing property and appraisal QC reviews. (3) Required Documentation The Mortgagee must retain all results from the property and appraisal QC reviews required by this section, including appraisal field reviews. Results include all selection criteria, review documentation, Findings, and actions taken to mitigate Findings. (D) Title I Loan Disbursement (1) Standard For all QC post-closing and Early Payment Default (EPD) reviews of Title I Insured Programs- Manufactured Home Loan Program and Property Improvement Loan Program, the Title I Lender must determine that the Disbursement of loan proceeds was adequately documented in the case binder and the Disbursement was completed in accordance with FHA requirements. The Title Lender must also V. QUALITY CONTROL, OVERSIGHT, AND COMPLIANCE A. Quality Control of Lenders and Mortgagees 3. Loan Level Quality Control Program Requirements Handbook 4000.1 1713 Last Revised: 11/26/2025 determine that Disbursements to a Borrower or Dealer were made in accordance with FHA requirements. (2) Required Documentation The Title Lender must document any discrepancies and retain copies of information used to resolve such discrepancies.

Source: FHA Single Family Housing Policy Handbook 4000.1, Part V — c. Origination and Underwriting Case Binder Compliance Review (05/09/2022) · source URL · snapshot 8c03836f77f317e1