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10 FHA CLARIFIES BANK LIABILITY FOR MORTGAGE ERRORS e Federal Housing Administration (FHA) Head and Principal Deputy Assistant for Housing, Ed Golding, announced the latest loan-level and annual lender-level certifications on Wednesday. e FHA hopes this added clarity will appease banks and large lenders that have pulled out of the FHA loan program or implemented harsher credit standards fearing lawsuits and penalties over troubled loans. "ese certifications are key tools that help to ensure lenders comply with our policies, including those that are designed to protect borrowers and ensure quality lending practices," Golding said. "We recognize the important role these particular certifications play for the industry, and believe we have achieved the clarity that we and the industry sought while maintaining accountability." Annually, lenders are required to submit certification that it and its officers are qualified to originate FHA-backed loans. In addition, they must also certify that the loan meets FHA standards, according to the Scotsman Guide. Now, lenders are speaking up to say that the wording in these certifications is "overly vague and exposes them to buyback demands and other penalties if the loans default." Golding noted in his release that the FHA identifies what lenders will be held accountable for only those mistakes that would have altered the decision to approve the loan. Minor mistakes that do not affect the loan decision will not be the focus of their compliance efforts. e new language reinforces FHA's longstanding position that lenders should not be penalized for minor mistakes. "Clarifying that we are interested only in errors that would have altered a decision to approve the loan should put to rest any confusion regarding FHA compliance policy," Golding said. Golding also pointed out two additional changes to the certifications: Changes that clarify the lender is certifying to what they know to be true to the best of their knowledge. e certification is not intended to hold lenders responsible for mistakes or fraud committed by a third party that the lender did not or could not have had reason to know of. Our goal is to make sure that lenders make every effort to obtain accurate information and to validate that information but also recognize that due to the complexity of putting a home loan together, minor errors in information may occur from time to time. Additionally, we have removed references to the pre-endorsement review requirement and have made the certification consistent with the policies in our updated FHA Handbook. "Revising the lender-level certification in this manner responds to concerns that changes made to the loan-level certification had the unintended impact of weakening HUD's enforcement authority," Golding explained. :at is not, nor has it ever been, our intention. None of the changes to either of the certifications hinders or undermines our ability to take action against any bad actors in the industry." He continued, "Overall, these certifications increase clarity and protect FHA, taxpayers and lenders. We also believe that improved clarity makes compliance easier for lenders and strengthens our ability to hold them accountable. We are confident that the proposed revisions to the loan-level and lender-level certifications reflect a significant step forward for the FHA program and responsiveness to industry concern." LAWMAKERS LOBBY FOR CFPB TO EXEMPT CREDIT UNIONS FROM RULEMAKING A bipartisan group of 329 members of the U.S. House of Representatives wrote a letter to Consumer Financial Protection Bureau (CFPB) Director Richard Cordray urging the director to use the CFPB's authority granted by the Dodd-Frank Act to exempt credit unions from certain regulations set forth by the Bureau. e relationship between the regulator for credit unions, the Credit Union National Association (CUNA), and the CFPB has been a rocky one since the Bureau's formation nearly five years ago, with CUNA claiming that credit unions should not fall under the CFPB's oversight because they did not play a role in the 2008 financial crisis. Cordray may have fanned the flames in February when he defended the Bureau's oversight of credit unions and several of the Bureau's mortgage-related regulatory changes, namely the Qualified Mortgage rule and the new servicing rules, in a public speech at CUNA. Reps. Adam Schiff (D-California) and Steve Stivers (R-Ohio) led the bipartisan group of House members in writing the letter, which praised credit unions and community banks for the "safe and sound" lending opportunities they provide for their customers. e lawmakers also noted in their letter that the CFPB routinely does not distinguish credit unions and community banks from the largest lenders for which their regulations were intended. e CFPB "may unintentionally burden community-based financial institutions and limit the choice and availability of consumer credit," according to the letter. e letter cited a recent report by the Government Accountability Office on the regulatory impact of some of the provisions set forth by Dodd-Frank, and "the study found that there are a number of cases where financial services have been limited or discontinued by community-based financial institutions due to new requirements." e lawmakers pointed out that Section 1022(b)(3)(a) of the Dodd-Frank Act gives the CFPB authority to exempt "any class" of entity from its rulemakings and regulations. "As you undertake rulemakings, we urge you to consider the benefits credit unions and community banks provide and ensure that regulations do not have the unintended consequence of limiting services or increasing costs for credit union members or community bank customers," the House members wrote. e National Association of Federal Credit Unions (NAFCU) praised the lawmakers' efforts. "We thank Representatives Schiff and Stivers for their leadership on this issue, as well as all of the members of Congress that signed the letter for their recognition of the overwhelming regulatory burden facing today's credit unions," NAFCU Vice President of Legislative Affairs Brad aler said.

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