HUD/FHA recently posted two new draft sections of its new Single Family Origination through Post-Closing/Endorsement Handbook (4000.1) to its website. Outlined below are the more significant proposed changes to the existing policies:
Direct Endorsement Underwriters
Since 1996, HUD/FHA has delegated the review and approval of prospective Direct Endorsement (DE) Underwriters to
approved mortgage lenders (refer to ML 96-10).
Upon review of a prospective DE Underwriter’s background, education and experience, those candidates that meet the minimum requirements can be registered by the FHA approved lender and a unique CHUMS number will be generated for them. This “DE Number” will remain with the Underwriter for the remainder of their career even if they change employers.
Currently, there is no testing requirement for DE Underwriters and no re-certification process and the policy is that the DE Underwriter must have “recent experience” reviewing credit applications and one-four unit property appraisals.
In the new Section of the draft 4000.1 Handbook, it is stated that the DE Underwriter must have a minimum of three years “full-time” experience reviewing credit applications and one to four unit property appraisals, within the “past 5 years”. This new criteria is certainly more stringent but it should be noted that FHA is not proposing any testing requirement or re-certification process for current DE Underwriters.
As a result, a current DE Underwriter could take 10 years off and come back to work as a DE Underwriter without any new testing or re-certification process. FHA should re-think this policy change and consider implementing some type of re-certification process for current DE Underwriters.
At the present time, HUD/FHA maintains a Roster of “approved 203(k) Consultants”. These Consultants were placed on HUD’s approved listing after submission of an application package to the jurisdictional Home ownership Center (HOC) – refer to ML 2000-25 for more details on this process. They are subject to periodic field reviews but are only removed from the 203(k) Consultant Roster based on a poor field review and subsequent hearing.
In the new Section of the draft 4000.1 Handbook, it is indicated that Consultants must recertify, every two years showing that “they are still in compliance with all laws, regulations, licensing, certification, registration or other approval requirements that govern their ability to perform as a 203(k) Consultant in the states where they do business”. However, no testing requirement is currently in place or being proposed for 203(k) Consultants.
Due to the complex nature of the 203(k) program and critical role that the Consultant plays in these loan transactions, it is recommended that HUD/FHA consider imposing a testing requirement for 203(k) Consultants at the time of re-certification. An on-line test could be created and the Consultant would need to provide evidence that he/she passed this test. An alternative would be to provide evidence of completion of an inspection-related course from a nationally recognized organization (i.e. National Association of Home Inspectors, American Society of Home Inspectors, etc.)
HUD/FHA has requested feedback from industry groups on these proposed changes. The deadline for submission of this feedback is February 22, 2015. Refer to the www.fha.gov website for more information.