Major Changes on the Horizon

Dear Clients, Partners, and Friends:

As part of SQC’s commitment to servicing oversight, SQC will periodically send informative memos to our partners.

In the recent months, SQC employees have attended the Single Family Housing Handbook Forum on July 22, 2015 and the Western Servicing Conference on August 3, 2015. In both cases, SQC focused on the impact that the Single Family Housing Policy Handbook will have to servicing oversight. 

A short description of the Single Family Housing Policy Handbook (4000.1):
HUD is changing the entire structure and layout of the Federal Housing Administration (FHA) origination, servicing, and auditing process. The entire structure is due to be unified and rendered uniform in the “Single Family Housing Policy Handbook.” HUD anticipates that the Handbook will be the single “authoritative” document that all stakeholders can refer to for their FHA business.

What does the Handbook address?:
The majority of the Handbook is devoted to origination. However, HUD has made some changes to the timing of the servicing loan level quality control (4000.1(V)(A)(3)(e)). In addition, HUD has made changes to the selection criteria (4000.1(V)(A)(3)(a)). Currently, SQC is reviewing the changes to the auditing structure as identified in 4000.1(V)(A)(3)(e) and 4000.1(V)(A)(3)(a). SQC will have feedback regarding the changes to the auditing structure within the next few weeks.

FHA Forum
To augment SQC’s understanding of the Handbook, SQC attended the FHA Forum in Cypress, California on July 22, 2015. The primary focus of the Forum was with regard to the origination process of FHA loans. However, a portion of the Forum was dedicated to QC, oversight, and compliance. Some highlights:

• HUD has allotted 60 days from the end of the month in which loans were selected to complete the servicing analysis. An initial findings report must be provided to senior management no later than 30 days from the end of the previous 60-day time allotment. The final report must be issued within 60 days from the date the initial findings were reported.

• HUD expects fraud and material misrepresentations in servicing to be reported immediately.

• HUD describes a “material finding” in servicing as something that has an adverse impact to the property. Conversely, HUD describes a “material finding” in origination as something that impacts eligibility or insurance with FHA.

• The changes to the QC and origination section go into effect September 14, 2015, while the changes to the default servicing portion of the Single Family Housing Policy Handbook will be published in March, 2016.

Western States Servicing Conference
SQC employees attended the Western States Servicing Conference in San Diego, California from August 3-5. Among the featured speakers were representatives from Fannie Mae and the CFPB. The conference was a great opportunity to learn and stay abreast with new developments in mortgage servicing.

Truth-in-Lending Integrated Disclosure (TRID) 
The Truth-in-Lending Integrated Disclosure (TRID) changes have rattled the mortgage industry for several months. By now, most lenders have prepared for the TRID impacts on production. Mortgage servicing will be minimally impacted by TRID today as compared to originations. To that end, SQC will change the document request list to include the Closing Disclosure. Under TRID, the Closing Disclosure replaces the HUD-1. A formal announcement will be sent soon.