FHA Annual Recertification Attestation

By: Phillip L. Schulman

Each year, an FHA-approved mortgagee’s principal, chief executive or in-house general counsel signs an attestation as part of the Federal Housing Administration’s annual certification process that accompanies payment of the mortgagee’s yearly verification fees. Some administrative assistant puts the attestation in front of the mortgagee’s president or executive vice-president and sometimes without thinking, the executive casually attests that the company complies with all HUD-FHA regulations and no state or federal agency lifted its license during the past year. In fact, the attestation is quite expansive and mortgagees have been finding themselves hauled before the HUD Mortgagee Review Board and its executives threatened with debarment proceedings for failing to read the fine print.

What You’re Signing

The Online Annual Recertification Attestation states that the mortgagee “complied with and agrees to comply with HUD regulations, handbooks, Mortgagee Letters, policies … [etc.].” In order to be eligible to participate in FHA programs, neither a mortgagee, its principals, officers, managers and employees shall be subject to “unresolved findings” as a result of a HUD or other government audit, investigation or review. Again, most lenders don’t pay much attention to these words, and naturally presume that “unresolved” means unresolved. For example, take a mortgagee that was fined by a state banking department because a few of its loan officers had failed to obtain their state approved licenses. The lender paid a few thousand dollar fine, and the matter was closed. Therefore, the matter is no longer unresolved, right? Wrong.

Toward the tail end of 2010, HUD issued Mortgagee Letter 2010-38 in which it defined the term “unresolved findings.” The definition is hardly confined to a few words, rather it goes on for 22 lines and contains more commas and semi-colons than the national debt. The definition includes, as you would expect, unresolved lawsuits resulting from government investigations at the state and federal level as well as allegations of ongoing patterns and practices of violations or findings of discrimination. But the definition also includes open issues on any audit, investigation or review, and any imposition of fines, settlement agreements or other monetary sanctions by a state or local entity “or any other action by a government agency.” So, if you failed to notify HUD that you paid a $2,000 fine to a state because two loan officers originated a few loans earlier in the year without first obtaining a state license, then your company’s principal may have signed a false certification when he or she executed the FHA Online Annual Recertification Attestation. Moreover, while you may not consider a routine annual state audit that is presently ongoing to be an “unresolved finding,” HUD, based on its overly broad definition of unresolved findings, would beg to differ.


Take a look at recent HUD Mortgagee Review Board proceedings and you will find a disproportionate number of actions were taken against lenders who signed a “clean” annual certification, thinking there were no unresolved findings since that matter with the state banking department was resolved through a Consent Order and was even reported to the world on the National Mortgage Lenders System site; or, because the lender did not consider a routine state or federal audit an unresolved matter. The result, those mortgagees were subject to civil money penalties by HUD’s Mortgagee Review Board and had their cases reported to the public in the Federal Register. To add insult to injury, HUD has issued notices of proposed debarment to the mortgagee’s principals (usually, owners, presidents, EVPs and general counsels) who signed the inaccurate annual certifications.

What To Do

First, within 10 days of signing a Consent Order or other agreement with a state or federal agency (including HUD), report the matter in writing to the Director of HUD’s Approval and Recertification Division. Second, if your company is the subject of ANY ongoing state or federal audit, investigation or review DO NOT SIGN a certification that implies the company has no “unresolved findings.” A lender should inform HUD that it is “unable to certify” and explain why. Because so many lenders have recently had to state “unable to certify,” HUD has formed a committee to review the information – and in nearly every case, the Department approves the mortgagee for participation. HUD may ask for a copy of the Consent Order or information on the status of the ongoing audit, but in the end, the company is approved.

Failure to take these steps can result in civil money penalties, public notice of the company’s transgressions in the Federal Register, and proposed debarment for the company’s executives.

Bottom line, take time to read that Online Annual Recertification Attestation before you put pen to paper. If you have questions about the annual recertification process, please give us a call.

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