By: Holly Spencer Bunting
Mortgagee Letters released by the Federal Housing Administration (“FHA”) appear to no longer be the final word on policy changes made by FHA and HUD related to FHA lending. Although FHA has maintained “FHA Frequently Asked Questions” on its website for some time, it only recently began to publish targeted Frequently Asked Questions in response to specific Mortgagee Letters and questions submitted by industry participants. Generally these FAQs reiterate the guidelines stated in Mortgagee Letters and define practical implications of implementation. However, with FHA’s most recent release of FAQs related to Mortgagee Letter 2011-34 and HUD’s October 25, 2011 Industry Call (“FAQs”), HUD has reversed its position on at least one issue (in lenders’ favor) and offered other guidance that is not clear from the plain language of Mortgagee Letter 2011-34.
Mortgagee Letter 2011-34 made a number of significant changes to FHA lender approval requirements, including the elimination of geographic lending restrictions and branch office facility requirements, the amendment of the definition of “corporate officer,” and the modification of the owners and officers that must be reported to HUD in connection with initial and continuing FHA approval. While HUD touches on these subjects in the FAQs, it also incorporates questions and answers on related issues.
For instance, HUD addresses the question of whether a loan officer may be out-stationed from a registered home or branch office where he or she is an employee. Historically, the answer was “no,” as stated in a Frequently Asked Question on FHA’s website. However, with the issuance of the FAQs, HUD reverses its position from the prior Frequently Asked Question and states: “Loan officers may be physically located elsewhere (outstationed) from their registered home or branch office location where they are employees. This applies to arrangements that provide for telework or telecommuting, as well as arrangements that allow loan officers to take applications elsewhere for the convenience of a borrower.” Accordingly, as long as a registered branch location oversees the activities of the loan officer, the loan officer is directly supervised by that branch’s manager, and the loan officer complies with state laws governing his or her origination activity, FHA now expressly acknowledges that loan officers are not required to work from the registered FHA home or branch office location.
The FAQs also address issues related to the dual employment of a lender’s FHA employees and make clear that a person’s employment in financial planning or with title companies is a “related field” and, thus, prohibited as long as that person is involved in FHA transactions and employed by an FHA-approved lender. Moreover, despite the elimination of geographic lending restrictions on an FHA lender’s home and branch offices, the FAQs emphasize FHA’s intent to continue a separate branch approval process for Direct Lending branches, which have always had nationwide origination authority.
All in all, the FAQs contain a total of 44 questions and answers that could significantly impact an FHA lender’s business. While it is imperative for FHA lenders to be aware of and comply with Mortgagee Letters, it is becoming equally important for lenders to monitor policy changes the FHA announces through answers to Frequently Asked Questions.