FHA Issues FAQs on Reporting Unresolved Findings

FHA recently issued FAQs addressing what constitutes an “Unresolved Finding” and what triggers a “Notice of Material Event” for FHA reporting purposes.  These FAQs relate to the requirement in the Single Family Housing Policy Handbook 4000.1 that a mortgagee must report an Unresolved Finding to HUD as a Notice of Material Event. 

The Handbook defines an “Unresolved Finding” as “a material, adverse written finding…contained in a lawsuit or report produced in connection with an investigation, audit, or review conducted by HUD, another federal, state, or local governmental agency, or by any other regulatory or oversight Entity with jurisdiction over the Mortgagee or its officers, partners, directors, principals, managers, supervisors, loan processors, loan underwriters, or loan originators, that has not yet been resolved through final agency or judicial action.”

In turn, “Material Finding” is defined as follows: “In the context of mortgage origination and underwriting, a finding is Material if disclosure of the Finding would have altered the Mortgagee’s decision to approve the Mortgage or to endorse or seek endorsement from FHA for insurance of the Mortgage.  In the context of mortgage servicing, a Finding is Material if it has an adverse impact on the property and/or FHA.”

In the new FAQ, FHA states that it considers “any adverse written finding issued by a regulatory or oversight Entity to be material, regardless of whether it meets the definition of Material Finding in [the Handbook].” (emphasis added). This seeks to clarify what HUD considers to be a reportable Unresolved Finding.

The other newly-issued FAQ clarifies what kinds of events require mortgagees to submit Notices of Material Event to FHA, and the timing for such submissions.

WBK regularly assists clients located throughout the country with federal and state reporting requirements.