Much publicity has been generated recently on several major lawsuits filed by the Department of Justice (DOJ) based on allegations that certain lenders violated the False Claims Act by knowingly submitting improperly underwritten loans to HUD/FHA for mortgage insurance.
The most recent case involves Quicken Loans who has decided to sue DOJ and HUD after the DOJ demanded that Quicken Loans make public admissions that, in Quicken’s opinion, were blatantly false and for them to pay a large fine or face legal action.
The False Claims Act is the federal government’s primary tool in combating fraud against the government. With respect to the cases involving mortgage lenders, the DOJ is stating that certain lenders falsely certified that the loans in question met HUD/FHA’s underwriting standards when, in fact, they were allegedly improperly underwritten.
A key document in making such certifications is Form HUD-92900-A (HUD/VA Addendum to Uniform Residential Loan Application). Interestingly enough, HUD has recently proposed some substantive changes to the Form HUD-92900-A and these changes were posted in a May 15, 2015 Federal Register Notice.
The most noteworthy changes being proposed for the Form HUD-92900-A are as follows:
Changes in the Lender/Mortgagee Certification
- Part II – Lender/Mortgagee Certification: Separate certifications are listed for the initial and the final Uniform Residential Loan Application (URLA). The certification for the final URLA reads as follows: “The information contained in the final URLA, which was signed by the Borrower at the time of settlement, was obtained by an employee of the undersigned lender/mortgagee or its duly authorized agent is to the best of lender/mortgagee’s knowledge true, complete and accurate as of the date verified by the lender/mortgagee”.
- Two additional certifications are added to the Lender/Mortgagee Certification Section that replace the current certification relative to the firm & its principals not being subject to debarment and suspension sanctions. These new certifications are loan specific (references are made to the parties to the transaction & the lender/mortgagee involved in the transaction). (Both on Page 1)
Changes to the Borrower’s Occupancy Certification
- Borrower’s Certification: A separate certification is listed for HUD/FHA transactions. It states “I, the Borrower or Co-Borrower will occupy the property within 60 days of signing the security instrument, and intend to continue occupancy for at least one year”. (Page 2)
Changes to the Direct Endorsement (DE) Underwriter’s Certification
- For AUS cases rated as “Accept” or “Approve”: A new separate certification is required of the DE underwriter that states that they have “personally reviewed and underwritten the appraisal according to standard FHA requirements”. The DE underwriter’s signature and CHUMS ID number will be required to be provided under this new certification. (Page 3)
- For AUS cases rated as “Refer” and were manually underwritten: A revised certification has been created which greatly expands the scope of the DE underwriter’s review criteria. It states that “I have performed all Specific Underwriter Responsibilities for Underwriters and my underwriting of the borrower’s Credit and Debt, Income, Qualifying Ratios and Compensating Factors, if any, and the borrower’s DTI with Compensating Factors, if any, are within the parameters established by FHA and the borrower has assets to satisfy any required down payment and closing costs of this mortgage”.
An additional certification is also contained in this Section which reads “I have verified the Mortgage Insurance Premium and Mortgage Amount are true and correct and this loan is in an amount that is permitted by FHA for this loan type, property type, and geographical area”. (Page 3)
Changes to the Borrower’s Blanket Certification
- Borrower’s Certification: Additional verbiage is added with respect to the source of funds shown on the settlement statement. The entire certification now reads as follows: “All charges and fees collected from me as shown in the settlement statement have been paid by my own funds, gift funds, or acceptable Down Payment Assistance program funds, and no charges have been or will be paid by me in respect to this transaction”. (Page 4)
Comments on these proposed Rule changes from interested parties are due by July 14, 2015. Probably one of the most troubling changes for lenders will be the requirement to have the DE underwriter execute a separate certification on AUS “Accept” cases relative to their review of the appraisal. At the current time, only a “Mortgagee’s Representative” was required to sign this certification.
To read this Federal Register Notice click on the link below: http://www.gpo.gov/fdsys/pkg/FR-2015-05-15/pdf/2015-11807.pdf
Also, to view a draft sample of the new form: http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/SFH_policy_drafts