HUD Removes Registration Requirement for Lender Branch Offices to Provide FHA Loans
Written By: Joel Palmer, Op-Ed Writer
The U.S. Housing and Urban Development (HUD) Department has released a final rule removing the requirement that mortgage lenders register all branch offices where they conduct FHA business.
HUD said in the publication of the final rule in the Federal Register that it was adopted without changes to a proposed rule published March 1, 2023. The new rule takes effect March 4, 2024.
HUD said this change enables lenders and mortgagees to select which offices to register and maintain as branch offices with HUD, and make fees applicable to each branch office that a lender or mortgagee registers with HUD. Lenders will no longer have to apply fees to each branch office where they are authorized to originate Title I or Title II loans.
HUD said it recommended eliminating the old rule based on “the mortgage industry's evolution over time, the advancement of technology, and due to no longer needing to maintain several branch offices to conduct FHA business nationwide.”
The change is intended to reduce the administrative burden and eliminate barriers for entities interested in FHA programs. HUD said it should also encourage more lenders and mortgagees to originate FHA-insured mortgages.
Commenters on the proposed rule published last year noted that the COVID-19 pandemic forced the industry to conduct more business remotely and virtually. Under the old rule, home-based processors and underwriters could be considered separate branch offices that would need to register with HUD.
HUD added that the former requirement is somewhat redundant as branch offices still need to be licensed by the state according to the Secure and Fair Enforcement for Mortgage Licensing Act of 2008.
Supporters of the rule change are also hopeful that altering fee applicability to apply to only branch offices registered with HUD will lower lenders' overhead costs and maintain low FHA origination costs. HUD wrote that the rule may also incentivize small lenders, mortgagees, banks, and credit unions to offer FHA programs in branch offices in which they did not previously register with HUD. This could expand the availability and access of FHA programs to underserved urban and rural communities.
There were concerns about the change expressed during the public comment period.
One commenter warned of the potential for lenders to become lax in complying with regulations without having to register branch offices. Branch employees no longer subject to branch inspections may become less accountable. HUD responded that lenders continue to be responsible for managing risk, complying with regulations and carrying out defined risk management processes. HUD will continue to monitor the performance of lenders and mortgagees and has processes and procedures to address noncompliance.
Another commenter suggested that HUD limit the activities of unregistered branch offices. HUD disagreed with this claim for the reasons already stated.
In other regulatory news, Freddie Mac released an industry letter to sellers and servicers reminding them of their obligation to maintain an effective information security program and to report incidents.
The letter was issued as a result of record cybersecurity incidents affecting sellers and servicers in 2023.
Sellers and servicers must review and update their cybersecurity programs annually. Freddie also encourages the industry to accelerate program reviews based on the volume and sophistication of recent attacks.
Lastly, sellers and servicers must report incidents as soon as possible, but no more than 48 hours after discovery. Companies are also obligated to respond to Freddie Mac inquiries related to a cybersecurity incident and provide information regarding its scope, its containment and the resolution of vulnerabilities to Freddie Mac’s satisfaction.
About the Author
As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
