Two Choices for Quality Control Plans

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

1. For FHA Approved Brokers - a sponsor/investor.  For FHA Approved Lenders - a funding plan.

2. Application and Fee

3. Audited Financial Statement meeting Net Worth

4. 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.

"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.

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.

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.