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What are the Requirements?
FHA's 2 Page Instruction Memo "How
to Become an FHA Approved Lender" is an excellent, simple resource.
There are 3 major requirements
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For FHA Approved Brokers - a sponsor/investor. For FHA
Approved Lenders - a funding plan.
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Application and
Fee
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Audited Financial
Statement meeting Net Worth
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Quality Control
Plan
FHA's
Title II Starter Kit
Application Forms and Instructions
What are
FHA's Guidelines for
Quality Control Plans? - There are approximately 40 mandatory
components of FHA Quality Control Plans. We take care of the entire
package for you, including your company name, logo, contact information,
company biographical information, audit process and reporting process.
Just print and submit with your package.
"Why should I be FHA approved? There are lenders who will pay me a
referral fee for sending them FHA loans and there is no approval hassle."
FHA refers to mortgage brokers
as "Loan Correspondents" and requires correspondents to be approved
prior to originating any HUD insured applications. Some smaller
lenders have been publishing advertising targeted at non-approved
brokers stating that they will pay for referrals of FHA loans.
Since the FHA correspondent approval process is more like getting a
state license than getting an investor approval, many brokers have opted
to utilize these "questionable" referral arrangements.
FHA does not prohibit brokers
from collecting a fee directly from a borrower for assisting in
submitting an application. You must have a written agreement with
the borrower. You cannot receive a fee from a lender if you are not FHA
approved. In addition, the fee must pass a "reasonableness
test" (commensurate with service) to avoid being considered a "kickback"
under Section 8 of Regulation X (RESPA). This means a broker isn't
going to get 2 or 3 points for referring an FHA loan to a lender.
Read
HUD's Policy
on Non-Approved Mortgagees. Non-compliance could result in
permanent disbarment from ALL Government Programs.
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At the time of
application you have to submit a Quality Control Plan that
describes how you will review closed loans to discover fraud.
We refer to this as a Fraud/Audit
and Compliance Module.
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HUD requests lenders
and correspondents have a quality control plan that prevents
fraudulent loans from entering the pipeline and becoming closed
loans. HUD will request inspection of this plan at the
time of a site inspection. We refer to this as a
broker, banker or wholesaler package.
If you don't have
procedures for quality origination, processing or operations -
including funding and underwriting - you are not in compliance.
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