HUD Handbook 4000.1, FHA Single Family Housing Policy Handbook

FHA Single Family Housing Policy Handbook Table of Contents

FHA Single Family Housing Policy Handbook TABLE OF CONTENTS

I. DOING BUSINESS WITH FHA .................................................................1

A. FHA LENDERS AND MORTGAGEES .............................................................................. 1

Types of Program Approvals .................................................................................................... 2 a. Title I................................................................................................................................... 2 b. Title II ................................................................................................................................. 2 Types of Approved Mortgagees................................................................................................ 2 a. Supervised Mortgagee ........................................................................................................ 3 b. Nonsupervised Mortgagee .................................................................................................. 3 c. Government Mortgagee ...................................................................................................... 4 d. Investing Mortgagee ........................................................................................................... 4 Application and Eligibility Requirements for Approval........................................................... 5 a. Title I and Title II Program Applications ........................................................................... 5 b. Online Application.............................................................................................................. 5 c. Eligibility Requirements ..................................................................................................... 8 d. Processing of Applications ............................................................................................... 25 e. Application Approval........................................................................................................ 25 f. Application Denial ............................................................................................................ 25 Branch Offices ........................................................................................................................ 25 a. Registration ....................................................................................................................... 25 b. Single Family Lending Area ............................................................................................. 26 c. Managers........................................................................................................................... 26 d. Net Branching Prohibition ................................................................................................ 27 Supplemental Mortgagee Authorities ..................................................................................... 27 a. Title II Direct Endorsement Authority.............................................................................. 27 b. Title II Single Family Lender Insurance Authority .......................................................... 34 c. Title I Manufactured Housing Loan Direct Endorsement Authority................................ 37 d. Title II Multifamily Accelerated Processing Authority .................................................... 37 e. Title II Direct Endorsement Lender Condominium Project Review and Approval Process

Authority (Effective 10/15/2019) ..................................................................................... 37 Post-Approval Operations....................................................................................................... 42 a. Operating Requirements and Restrictions ........................................................................ 42 b. Providing Information to FHA.......................................................................................... 42 c. Compliance with Law ....................................................................................................... 43 d. Servicing of FHA-Insured Mortgages .............................................................................. 43 e. Employee Compensation .................................................................................................. 44 f. Conflicts of Interest........................................................................................................... 44 g. Payment of Operating Expenses ....................................................................................... 44 h. Prohibited Payments ......................................................................................................... 44 i. Staffing.............................................................................................................................. 45 j. Use of Contractors ............................................................................................................ 45 k. Affiliates ........................................................................................................................... 46 l. Branch Office Requirements............................................................................................. 46

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Effective Date: 09/14/2015 | Last Revised: 10/24/2019

*Refer to the online version of SF Handbook 4000.1 for specific sections' effective dates

FHA Single Family Housing Policy Handbook Table of Contents

m. Fair Housing Notice .......................................................................................................... 47 n. Advertising........................................................................................................................ 47 Post-Approval Changes .......................................................................................................... 49 a. Requirements for All Post-Approval Changes ................................................................. 49 b. Information Updates ......................................................................................................... 50 c. Change in Corporate Officer............................................................................................. 50 d. Change in Partnership or Principal Owners...................................................................... 50 e. "Doing Business As" Names ............................................................................................ 51 f. Relocation to a Different State.......................................................................................... 51 g. Liquid Assets or Net Worth Deficiency............................................................................ 51 h. Operating Loss .................................................................................................................. 51 i. Fidelity Bond .................................................................................................................... 52 j. Errors and Omissions Insurance ....................................................................................... 52 k. Principal Activity Change of Nonsupervised Mortgagee ................................................. 52 l. Servicing for Investing Mortgagees.................................................................................. 52 m. Fiscal Year End Date ........................................................................................................ 52 n. Supervision Change .......................................................................................................... 53 o. Business Form................................................................................................................... 53 p. Bankruptcy ........................................................................................................................ 53 q. Lending License(s)............................................................................................................ 54 r. Mergers, Acquisitions, and Reorganizations .................................................................... 54 s. Conservatorship, Receivership, or Transfer of Control .................................................... 60 t. Cease Operations .............................................................................................................. 60 u. Unresolved Findings or Sanctions .................................................................................... 61 Annual Recertification ............................................................................................................ 61 a. General Requirements....................................................................................................... 61 b. Online Certification .......................................................................................................... 62 c. Annual Recertification Fee ............................................................................................... 63 d. Financial Data Submission ............................................................................................... 63 e. Rejection of a Mortgagee's Recertification Package........................................................ 64 f. Recertification Extension Requests .................................................................................. 64 g. Failure to Recertify ........................................................................................................... 65 Voluntary Withdrawal of FHA Mortgagee Approval............................................................. 65 a. Standard ............................................................................................................................ 65 b. Required Documentation .................................................................................................. 65 c. Reapplication .................................................................................................................... 65

B. OTHER PARTICIPANTS ................................................................................................... 65

Appraisers ............................................................................................................................... 65

a. FHA Appraiser Roster ...................................................................................................... 65 b. Application and Approval Process.................................................................................... 66 c. Renewal............................................................................................................................. 67

d. Post-Approval Requirements ............................................................................................ 68 203(k) Consultants .................................................................................................................. 70

a. 203(k) Consultant Roster .................................................................................................. 70

b. Application and Approval Process.................................................................................... 70 Direct Endorsement Underwriters .......................................................................................... 74

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Effective Date: 09/14/2015 | Last Revised: 10/24/2019

*Refer to the online version of SF Handbook 4000.1 for specific sections' effective dates

FHA Single Family Housing Policy Handbook Table of Contents

a. Program Overview ............................................................................................................ 74 b. DE Underwriter Eligibility ............................................................................................... 74 c. Mortgagee's Approval Process ......................................................................................... 75 d. Post-Approval Requirements ............................................................................................ 75 Nonprofits and Governmental Entities ................................................................................... 75 a. Program Overview ............................................................................................................ 75 b. Application and Approval Process.................................................................................... 79 c. Post-Approval Requirements .......................................................................................... 100 Real Estate Brokers............................................................................................................... 106 a. Definition ........................................................................................................................ 106 b. Requirements .................................................................................................................. 107 c. Application and Registration Process ............................................................................. 107 d. Annual Recertification .................................................................................................... 107 Closing Agents...................................................................................................................... 108 a. Requirements .................................................................................................................. 108 b. Application and Approval Process.................................................................................. 108 Additional Other Participants ............................................................................................... 109

II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT ...110

A. TITLE II INSURED HOUSING PROGRAMS FORWARD MORTGAGES ............. 110

Origination/Processing.......................................................................................................... 111 a. Applications and Disclosures.......................................................................................... 111 b. General Mortgage Insurance Eligibility.......................................................................... 134 Allowable Mortgage Parameters........................................................................................... 158 a. Maximum Mortgage Amounts........................................................................................ 158 b. Loan-to-Value Limits...................................................................................................... 161 c. Required Investment ....................................................................................................... 164 d. Maximum Mortgage Term.............................................................................................. 164 e. Mortgage Insurance Premiums ....................................................................................... 164 Underwriting the Property .................................................................................................... 166 a. Property Acceptability Criteria ....................................................................................... 166 b. Required Documentation for Underwriting the Property ............................................... 181 c. Conditional Commitment Direct Endorsement Statement of Appraised Value ............. 181 Underwriting the Borrower Using the TOTAL Mortgage Scorecard (TOTAL) .................. 182 a. Underwriting with an Automated Underwriting System ................................................ 182 b. Credit Requirements (TOTAL)....................................................................................... 186 c. Income Requirements (TOTAL)..................................................................................... 202 d. Asset Requirements (TOTAL)........................................................................................ 227 e. Final Underwriting Decision (TOTAL).......................................................................... 253 Manual Underwriting of the Borrower ................................................................................. 256 a. Credit Requirements (Manual) ....................................................................................... 256 b. Income Requirements (Manual) ..................................................................................... 278 c. Asset Requirements (Manual)......................................................................................... 302 d. Final Underwriting Decision (Manual)........................................................................... 329 Closing .................................................................................................................................. 347 a. Mortgagee Closing Requirements................................................................................... 347

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Effective Date: 09/14/2015 | Last Revised: 10/24/2019

*Refer to the online version of SF Handbook 4000.1 for specific sections' effective dates

FHA Single Family Housing Policy Handbook Table of Contents

b. Mortgage and Note ......................................................................................................... 353 c. Disbursement of Mortgage Proceeds .............................................................................. 354 Post-Closing and Endorsement ............................................................................................. 355 a. Pre-Endorsement Review................................................................................................ 355 b. Mortgagee Pre-Endorsement Review Requirements ...................................................... 355 c. Inspection and Repair Escrow Requirements for Mortgages Pending Closing or

Endorsement in Presidentially-Declared Major Disaster Areas ..................................... 358 d. Procedures for Endorsement ........................................................................................... 360 e. Endorsement and Post-Endorsement .............................................................................. 368 Programs and Products ......................................................................................................... 370 a. 203(k) Rehabilitation Mortgage Insurance Program ...................................................... 370 b. Disasters and 203(h) Mortgage Insurance for Disaster Victims ..................................... 404 c. Energy Efficient Mortgages ............................................................................................ 407 d. Refinances....................................................................................................................... 413 e. Refinance of Borrowers in Negative Equity Positions Program (Short Refi) [EXPIRED]

......................................................................................................................................... 433 f. Section 251 Adjustable Rate Mortgages......................................................................... 436 g. Section 248 Mortgages on Indian Land .......................................................................... 439 h. Section 247 Single Family Mortgage Insurance on Hawaiian Home Lands .................. 442 i. New Construction ........................................................................................................... 446 j. Construction to Permanent.............................................................................................. 453 k. Building on Own Land.................................................................................................... 457 l. Weatherization ................................................................................................................ 459 m. Solar and Wind Technologies ......................................................................................... 462 n. Assumptions.................................................................................................................... 466 o. HUD Real Estate Owned Purchasing ............................................................................. 469 p. Condominiums (Effective 10/15/2019) .......................................................................... 477 203(k) Consultant Requirements .......................................................................................... 497 a. Overview......................................................................................................................... 497 b. Consultant Duties............................................................................................................ 497 c. Consultant Fee Schedule................................................................................................. 498 d. Improvements Standards................................................................................................. 499 e. Consultant 35 Point Checklist......................................................................................... 500 f. Architectural Exhibit Review ......................................................................................... 505 g. Preparing the Work Write-Up and Cost Estimate........................................................... 506 h. Feasibility Study ............................................................................................................. 506 i. Draw Request Inspection ................................................................................................ 506 j. Change Order .................................................................................................................. 506 k. Additional Required Documentation .............................................................................. 507

B. TITLE II INSURED HOUSING PROGRAMS REVERSE MORTGAGES................ 509

C. CONDOMINIUM PROJECT APPROVAL (EFFECTIVE 10/15/2019)....................... 510

Definitions............................................................................................................................. 510 Project Eligibility .................................................................................................................. 510 a. Classifications and Ineligible Characteristics ................................................................. 510 b. Phasing ............................................................................................................................ 511

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Effective Date: 09/14/2015 | Last Revised: 10/24/2019

*Refer to the online version of SF Handbook 4000.1 for specific sections' effective dates

FHA Single Family Housing Policy Handbook Table of Contents

c. General Condominium Project Approval Requirements ................................................ 512 d. Construction Types ......................................................................................................... 529 e. Two- to Four-Unit Condominium Project ...................................................................... 532 f. Manufactured Home Condominium Projects ................................................................. 533 Project Approval Submission ............................................................................................... 533 a. Condominium Project Approval ..................................................................................... 533 b. HUD Review and Approval Process............................................................................... 534 c. Direct Endorsement Lender Review and Approval Process........................................... 536 d. Reconsideration of Rejected or Withdrawn Condominium Projects .............................. 536

D. APPRAISER AND PROPERTY REQUIREMENTS FOR TITLE II FORWARD AND REVERSE MORTGAGES ................................................................................................ 538

Commencement of the Appraisal.......................................................................................... 538 a. Information Required before Commencement of Appraisal .......................................... 538

b. Additional Information Required Before Commencement of an Appraisal on New

Construction .................................................................................................................... 539 General Appraiser Requirements .......................................................................................... 539

Acceptable Appraisal Reporting Forms and Protocols......................................................... 540

a. Additional Required Documentation for Appraisals of New Construction.................... 541 b. Application of Minimum Property Requirements and Minimum Property Standards by

Construction Status ......................................................................................................... 541

c. Minimum Property Requirements and Minimum Property Standards ........................... 543

d. Gross Living Area........................................................................................................... 557 e. Appliances....................................................................................................................... 559

f. Swimming Pools ............................................................................................................. 559

g. Utilities ? Mechanical Components................................................................................ 560 h. Roof Covering................................................................................................................. 562 i. Structural Conditions ...................................................................................................... 562

j. Defective Paint................................................................................................................ 562

k. Attic Observation Requirements..................................................................................... 562 l. Foundation ...................................................................................................................... 563

m. Crawl Space Observation Requirements ........................................................................ 563

n. Environmental and Safety Hazards................................................................................. 564 o. Repair Requirements....................................................................................................... 565

p. Utility Services................................................................................................................ 567

q. Onsite Sewage Disposal Systems ................................................................................... 571 Valuation and Reporting Protocols ....................................................................................... 571

a. Photograph, Exhibits and Map Requirements ................................................................ 571

b. Intended Use and Intended Users of Appraisal............................................................... 572 c. Development of the Market Value.................................................................................. 573 Property Acceptability Criteria for Manufactured Housing for Title II Insured Mortgages 585

a. Definitions....................................................................................................................... 585

b. Standard .......................................................................................................................... 585 c. Foundation Systems ........................................................................................................ 586

d. Running Gear .................................................................................................................. 587

e. Perimeter Enclosure ........................................................................................................ 588 f. HUD Certification Label................................................................................................. 588

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Effective Date: 09/14/2015 | Last Revised: 10/24/2019

*Refer to the online version of SF Handbook 4000.1 for specific sections' effective dates

FHA Single Family Housing Policy Handbook Table of Contents

g. Data Plate ........................................................................................................................ 588 h. Flood Zone ...................................................................................................................... 589 i. Additions to Manufactured Housing............................................................................... 589 j. Measurement Protocols................................................................................................... 589 k. Sales Comparison Approach for Manufactured Housing ............................................... 589 l. Estimate of Cost New for Manufactured Housing.......................................................... 589 Condominium Projects.......................................................................................................... 590 a. Definition ........................................................................................................................ 590 b. Standard .......................................................................................................................... 590 c. Required Analysis and Reporting ................................................................................... 590 d. Site Condominium .......................................................................................................... 590 e. Manufactured Housing Condominium Projects.............................................................. 591 Valuation of Leasehold Interest ............................................................................................ 591 a. Definition ........................................................................................................................ 591 b. Standard .......................................................................................................................... 591 c. Required Analysis and Reporting ................................................................................... 591 Additional Appraisal Requirements for 223(e) Mortgages .................................................. 592 Unimproved Property Appraisal ........................................................................................... 592 a. Definition ........................................................................................................................ 592 b. Standard .......................................................................................................................... 592 c. Required Analysis and Reporting ................................................................................... 592 Update of Appraisal .............................................................................................................. 593 Market Conditions Addendum, Fannie Mae Form 1004MC/Freddie Mac Form 71, Instructions Applicable to FHA Appraisals .......................................................................... 594 a. Standard .......................................................................................................................... 594 b. Required Analysis and Reporting ................................................................................... 594 Programs and Products ......................................................................................................... 595 a. Section 248 Indian Land Program .................................................................................. 595 b. Section 247 Hawaiian Home Lands Program ................................................................. 598 c. Standard 203(k) and Limited 203(k) Rehabilitation Mortgages..................................... 598 d. Special Energy-Related Building Components .............................................................. 600 e. HUD Real Estate Owned Properties ............................................................................... 603 Mixed Use One- to Four-Unit Single Family Properties ...................................................... 607 a. Definition ........................................................................................................................ 607 b. Required Analysis and Reporting ................................................................................... 607

E. TITLE I INSURED PROGRAMS .................................................................................... 608

F. APPRAISER AND PROPERTY REQUIREMENTS FOR TITLE I............................ 608

III. SERVICING AND LOSS MITIGATION...............................................609

A. TITLE II INSURED HOUSING PROGRAMS FORWARD MORTGAGES ............. 609

Servicing of FHA-Insured Mortgages .................................................................................. 609 a. Servicing in Compliance with Law................................................................................. 609 b. Responsibility for Servicing Actions .............................................................................. 610 c. Providing Information to HUD ....................................................................................... 612 d. Communication with Borrowers and Authorized Third Parties ..................................... 612

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Effective Date: 09/14/2015 | Last Revised: 10/24/2019

*Refer to the online version of SF Handbook 4000.1 for specific sections' effective dates

FHA Single Family Housing Policy Handbook Table of Contents

e. Payment Administration ................................................................................................. 613 f. Servicing Fees and Charges ............................................................................................ 617 g. Escrow............................................................................................................................. 618 h. Insurance Coverage Administration ............................................................................... 623 i. Mortgage Insurance Premium Remittance...................................................................... 625 j. Post-Endorsement Mortgage Amendments .................................................................... 626 k. Mortgage Insurance Premium Cancellation and Termination ........................................ 631 l. Mortgage Insurance Termination.................................................................................... 634 m. Disclosures ...................................................................................................................... 636 n. Record Retention ? Servicing File .................................................................................. 637 Default Servicing .................................................................................................................. 639 a. Mortgages in Delinquency or Default............................................................................. 639 b. HUD Default Servicing Contact ..................................................................................... 639 c. Reporting to Consumer Reporting Agencies and the IRS .............................................. 639 d. Late Charges ................................................................................................................... 640 e. Partial Payments for Mortgages in Default..................................................................... 641 f. Lien Status ...................................................................................................................... 642 g. Imminent Default ............................................................................................................ 642 h. Early Default Intervention .............................................................................................. 643 i. Loss Mitigation Review Process..................................................................................... 657 j. HUD's Loss Mitigation Program.................................................................................... 665 k. Home Retention Options................................................................................................. 671 l. Home Disposition Options.............................................................................................. 694 m. Loss Mitigation Incentives.............................................................................................. 723 n. Non-Monetary Default.................................................................................................... 723 o. Distressed Asset Stabilization Program .......................................................................... 725 p. Claims Without Conveyance of Title ............................................................................. 725 q. Reinstatement.................................................................................................................. 728 r. Foreclosure...................................................................................................................... 730 s. Acquiring Possession ...................................................................................................... 743 t. Conveyance of Acquired Properties ............................................................................... 746 u. Deficiency Judgments ..................................................................................................... 775 Programs and Products ......................................................................................................... 776 a. Adjustable Rate Mortgages............................................................................................. 776 b. Assumptions.................................................................................................................... 782 c. Presidentially-Declared Major Disaster Areas................................................................ 785 d. Hawaiian Home Land Mortgages (Section 247 Mortgages) .......................................... 791 e. Insured Mortgages on Indian Land (Section 248 Mortgages) ........................................ 794 f. Section 222 Mortgages ................................................................................................... 795 g. Good Neighbor Next Door.............................................................................................. 798 h. HOPE for Homeowners .................................................................................................. 801 i. Nehemiah Housing Opportunity Grants Program........................................................... 804 j. Servicing FHA-Insured Mortgages for Servicemember-Borrowers............................... 805 k. Section 235 Mortgages ................................................................................................... 808

B. TITLE II INSURED HOUSING PROGRAMS REVERSE MORTGAGES................ 876

C. TITLE I INSURED PROGRAMS .................................................................................... 876

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Effective Date: 09/14/2015 | Last Revised: 10/24/2019

*Refer to the online version of SF Handbook 4000.1 for specific sections' effective dates

FHA Single Family Housing Policy Handbook Table of Contents

IV. CLAIMS AND DISPOSITION ................................................................877

A. TITLE II CLAIMS ............................................................................................................. 877

Claim Submission Process .................................................................................................... 877 a. Preparation and Submission of Claims ........................................................................... 877 b. Claim Status .................................................................................................................... 883 c. Claim Review File .......................................................................................................... 883 Claim Types .......................................................................................................................... 885 a. Claim Type 01 - Conveyances ........................................................................................ 885 b. Claim Type 02 - Assignment or Single Family Loan Sale Program .............................. 908 c. Claim Type 05 - Supplemental Claims/Remittances ...................................................... 913 d. Claim Type 06 - Claims Without Conveyance of Title .................................................. 919 e. Claim Type 07 - Pre-Foreclosure Sales .......................................................................... 922 f. Claim Type 31 - Special Forbearance............................................................................. 925 g. Claim Type 32 - Loan Modification ............................................................................... 926 h. Claim Type 32 ** - FHA-HAMP Loan Modification .................................................... 926 i. Claim Type 33 ** - FHA-HAMP Partial Claim ............................................................. 926 Payment of Claims ................................................................................................................ 927 a. Processing of Claim Forms ............................................................................................. 927 b. Method of Payment......................................................................................................... 928 c. Disbursement of Claim ................................................................................................... 928 d. Negative Claim Amount ................................................................................................. 928 e. Advice of Payment and Title Approval .......................................................................... 928 Withdrawal or Cancellation of Conveyance Claims............................................................. 929 a. Withdrawal of Application for Insurance Benefits ......................................................... 929 b. Cancellation of Insurance Benefits due to Reconveyance .............................................. 929 Post-Claim Reviews.............................................................................................................. 933 a. Definition ........................................................................................................................ 933 b. Standard .......................................................................................................................... 934 c. Selection of Claims for Review ...................................................................................... 934 d. Frequency of Reviews..................................................................................................... 934 e. Notification to Mortgagee of Claim Review .................................................................. 934 f. HUD's Initial Report....................................................................................................... 934 g. Mortgagee Response Procedures to HUD's Initial Report ............................................. 935 h. Findings Based on Mortgagee Response ........................................................................ 935 i. Mortgagee Response Procedures to HUD's Follow-Up Report ..................................... 935 j. Referral for Collections................................................................................................... 935 k. Referral for Enforcement Review ................................................................................... 935 Debt Collection and Administrative Offset .......................................................................... 935 a. Demand Letter [Text was deleted in this section.] ......................................................... 936 b. Notice of Intent to Collect Administrative Offset........................................................... 936 c. Initiation of Offset Action............................................................................................... 936

B. TITLE II DISPOSITION ................................................................................................... 937

Management and Marketing Program .................................................................................. 937

a. HUD Contractors ............................................................................................................ 937

b. Nondiscrimination Policy ............................................................................................... 937

Handbook 4000.1

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Effective Date: 09/14/2015 | Last Revised: 10/24/2019

*Refer to the online version of SF Handbook 4000.1 for specific sections' effective dates

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