The Federal Housing Administration has proposed to update its Defect Taxonomy guidelines to include fraud or material misrepresentation involving a Third-Party Originator (TPO) as a Tier 1 severity defect.
What’s next: FHA posted a draft Mortgagee Letter to its Drafting Table to obtain public feedback. NRMLA has formed a working group to review the Draft ML and provide input by the June 24 submission deadline.
Why it matters: Mortgagees are responsible for the actions of their TPOs under 24 CFR § 202.8(a)(3) and Handbook 4000.1 Section I.A.5.a.v. FHA is proposing these changes to align the Defect Taxonomy with these requirements better and mitigate risk to the Mutual Mortgage Insurance Fund.
- The provisions of this Draft ML apply to all FHA Title II Single Family mortgage programs, including HECM.
