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Question:

Does HUD require its approved Mortgagees to check its employees against the exclusionary lists after they are hired?

Answer:

Yes.  HUD requires all approved Mortgagees to conduct checks to verify employee eligibility at least semi-annually (as indicated in Chapter V.A.2.b.i.(B) of the HUD Handbook 4000.1).

• Excluded Parties List:
  The Mortgagee must verify employee eligibility for all officers, partners, directors, principals, managers, supervisors, loan processors, loan underwriters, loan originators and all other employees and Affiliates participating in HUD programs for or on behalf of the Mortgagee using the System for Award Management (SAM) Excluded Parties List.
• Limited Denial of Participation:
  The Mortgagee must verify employee eligibility for all officers, partners, directors, principals, managers, supervisors, loan processors, loan underwriters, loan originators, and all other employees and Affiliates participating in HUD programs for or on behalf of the Mortgagee, using the Limited Denial of Participation (LDP) list.
• National Mortgage Licensing System and Registry:
  The Mortgagee must verify that all employees and Affiliates participating in HUD programs for or on behalf of the Mortgagee are registered with the National Mortgage Licensing System and Registry (NMLS), unless excluded from NMLS requirements by law or regulation.
• Required Documentation:
  Mortgagees must maintain documentation that supports each employee’s eligibility.

In addition, HUD requires Affiliate monitoring as indicated in Chapter V.A.2.b.ii of the HUD Handbook 4000.1. HUD defines the term as follows: Affiliates are contractors, agents, vendors, sub-servicers, and sponsored TPOs who participate in FHA programs on behalf of an FHA-approved Mortgagee.

• Affiliate monitoring must include a periodic (semi-annual at a minimum) re-verification of the Affiliate’s compliance with all applicable laws related to licensing, qualification, eligibility, or approval to originate or subservice Mortgages.
• Required Documentation: The Mortgagee must document the methodology used to review Affiliates, the results of each review, and any corrective actions taken as a result of review Findings. The procedures used to review and monitor a Mortgagee’s Affiliates must be included in the Mortgagee’s QC Plan.