FHA Revises Handbook 4000.1

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In the latest Handbook 4000.1 Transmittal, FHA announced multiple updates that include, but are not limited to, the following highlights:

Section I: 

  • Clarifying Mortgagee approval policies and aligning Handbook policy language with applicable regulations; and
  • Updating case binder submission requirements for the Test Case Phase of Title II DE authority.

Section II:   

  • Updating required documentation and calculation of monthly obligation requirements for student loans per ML 2021-13 and adding an exception for student loans in COVID-19 related forbearance;
  • Incorporating an exception granted through Handbook waiver that allows individual unit owners and the condominium association to obtain and maintain insurance coverage as required by the governing documents for certain Condominium Project types; and
  • Updating protocols regarding transfer of control from developer or builder to unit owners.

Section III: 

  • Updating the effective date of Section III Appendix 4.0 and 5.0, by extending the implementation date contained in ML 2021-14;
  • Revising guidance for voluntary termination of mortgage insurance;
  • Updating guidance for COVID-19 related forbearance and advance loan modification per ML 2021-15;
  • Requiring Requests for Exceeding Maximum Property Preservation Allowances be submitted at least five days prior to conveyance. 

Section IV:

  • Clarifying alternative documentation HUD will accept as proof of tax payment for Claims Review. 

Section V:

  • Updating guidance on the number of Early Payment Defaults that require an appraisal review and clarifying property appraisal Quality Control review requirements to align with Property Acceptability Criteria and Appraiser and Property Requirements for Title II Forward and Reverse Mortgages, per ML 2021-17
  • Adding language to require Mortgagees not approved for eCaseBinder submission through FHA Connection to use the FHA Catalyst: Case Binder Module to submit both Single Family forward and reverse (HECM) case binders requested through the Loan Review System for post-endorsement technical review; and
  • Clarifying existing policy to demonstrate required documents are dated to demonstrate compliance with retention and reporting timeframes.

Changes identified in Section II.A of Handbook 4000.1 may be implemented immediately, but must be implemented for Mortgages with case numbers assigned on or after September 20, 2021. Unless otherwise noted, all other changes may be implemented immediately, but must be implemented no later than September 20, 2021.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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