NATNews Blog > March 2016 > ​FHA’s New Lender Certifications Welcomed by Industry, Consumer group

    ​FHA’s New Lender Certifications Welcomed by Industry, Consumer group

    3/16/2016 10:25:49 AM
    Industry organizations as well as consumer groups posted generally favorable comments in response to the Federal Housing Administration’s (FHA) updated lender and loan certification requirements issued this week.
    In September, the FHA proposed the new certifications that lenders must attest to when making an FHA-backed loan. During the comment period, many lender organizations expressed concern over potential liability issues. But the FHA softened the language to make it easier for banks to avoid liability for some errors, in the hope that lenders would be more open to lending to less creditworthy borrowers.
    “In this final loan-level certification, FHA is clearly identifying [that] lenders will be held accountable for only those mistakes that would have altered the decision to approve the loan,” said FHA head Ed Golding. “This important move makes it very clear that minor mistakes that do not affect the decision to approve a loan are not the focus of our compliance efforts.”
    The American Bankers Association (ABA) noted on their website that the revised certifications also clarify that lenders are certifying only to the best of their knowledge and do not hold lenders responsible for third-party errors they would have no reason to be aware of.
    “As ABA also urged, the FHA removed references to its pre-endorsement review requirement,” the ABA noted.
    The Mortgage Bankers Association (MBA) welcomed the revisions.
    “We appreciate FHA’s efforts to increase certainty in the underwriting and processing of FHA-insured mortgages, and on first review this language appears to be an improvement over the previous lender and loan-level certifications,” said David H. Stevens, CMB, MBA president & CEO. “The ability to serve and support sustainable and affordable homeownership has been a core mission of both FHA and lenders across this country. Having the confidence to lend demands clear and reasonable accountability. This has been the goal of all stakeholders.”
    Consumer groups also weighed in on the new certifications.  Sarah Edelman, Director of Housing Policy at the Center for American Progress, said the FHA appeared to have “struck the right balance” with the changes it released this week.
    “The new language will help provide clarity to the mortgage industry without reducing the FHA’s ability to hold lenders accountable for irresponsible underwriting practices,” Edelman said. “The FHA is a critical source of mortgage credit for America’s families, particularly first-time homebuyers and buyers of color, and this announcement should pave the way for more lender participation in the FHA insurance program.”
    Stevens did caution that lenders will still need to assess the legal and reputational risks associated with FHA lending and determine whether the new language provides sufficient protection to allow them to responsibly expand liquidity for FHA lending.
    “Similarly, we intend to study these updated requirements and we look forward to continuing to work with FHA and other stakeholders to strengthen the housing market and provide access to sustainable mortgage credit for qualified borrowers,” he concluded.