HUD Announces Incorporation of Defect Taxonomy into Handbook 4000.1

The September 22, 2020, release of HUD Mortgagee Letter 2020-31 announced the incorporation of the FHA Defect Taxonomy as Appendix 7.0 to the Single Family Housing Policy Handbook 4000.1, effective immediately.  The use and maintenance of the Defect Taxonomy in any previous format is discontinued for all FHA Title II Single Family mortgage programs.

FHA will continue to document the results of each loan review in the Loan Review System.  Documented instances of non-compliance with Title II Insured Housing Program requirements will be identified under the Defect Taxonomy; any unacceptable findings must be resolved by Mortgagee submission of a response and remedy.