PERSON OF THE WEEK: Bill Canfield is compliance consulting specialist with Wolters Kluwer, a firm that provides software solutions and expertise to help tax, accounting and audit professionals research and navigate complex regulations, comply with legislation, manage their businesses, and advise clients with speed, accuracy and efficiency. The firm plays a major role in helping mortgage lenders and servicers comply with an ever-increasing array of complex regulations.
MortgageOrb recently interviewed Canfield to learn more about how the recent changes to the Federal Housing Administration’s (FHA) Single Family Housing Policy Handbook (SF Handbook) will impact FHA servicers’ operations.
Q: What types of changes did the FHA implement into the SF Handbook?
Canfield: The new SF Handbook has consolidated hundreds of FHA Handbooks, Mortgagee Letters, Housing Notices and other policy documents into a single source, eliminating the need for servicers to search through multiple stand-alone policy documents to find current policy information. In a nutshell, the changes were really around the format, structure and tone of the SF Handbook rather than actual policy changes. As an example of a change in “tone,” previously, the FHA would state that its guidance “might be something to consider,” whereas now, the language is more direct, so servicers more clearly understand expectations and how to adhere to the FHA’s quality control (QC) policies.
Q: During your career, you’ve spent more than 24 years in loan servicing and origination. Based on your experience, what would you tell your colleagues about the recent changes to the SF Handbook?
Canfield: FHA lending continues to be about interpreting the changes and working with investors, such as the FHA, Fannie Mae or Freddie Mac, to ensure we are all on the same page. Although the SF Handbook was designed to simplify things, the updated version contains approximately 900 pages of guidance. This means there is a steep learning curve for servicers. And, with the U.S. Department of Housing and Urban Development (HUD) ramping up its monitoring of FHA servicing and more aggressively enforcing monetary penalties for non-compliance, it’s more important than ever to stay on top of these requirements.
Q: How will the FHA make changes to the new SF Handbook going forward?
Canfield: HUD will regularly update the new SF Handbook over time as it has done with other policy guides in the past. In most cases, a servicer will be notified of any handbook changes by some form of announcement, such as the Mortgagee Letters HUD has used in the past. The handbook itself will be marked with color-coded notations whenever an update or addition is made.
Q: What factors should servicers consider when it comes to their quality assurance? How can Wolters Kluwer help servicers with their QC plans?
Canfield: With regulators scrutinizing servicing practices, servicers need to review their QC plans to ensure compliance with FHA requirements. An effective QC plan should confirm to servicers that they are operating effectively and following the correct policies and procedures and allow them to pinpoint and correct any issues before costly penalties are incurred.
A QC plan must be in writing and periodically reviewed. Staff should also be well trained in FHA loan administration and the QC process. Additionally, the SF Handbook requires monthly loan reviews and should include samplings from all branch offices and loan servicing functional areas, with any findings reported to HUD within the required time frame. Wolters Kluwer can help organizations conduct gap analysis between the new FHA standards and a bank’s existing QC processes to identify any areas that need improvement and quickly get their QC plans in compliance with the new SF Handbook provisions.
Q: Are servicers looking to lessen or completely get out of servicing FHA loans as the regulatory environment grows more challenging?
Canfield: For many large banks, FHA lending is viewed as risky business, especially with more stringent regulations being imposed, as well as significant penalties for non-compliance. Larger banks are either pricing FHA loans much higher to absorb the costs associated with managing myriad federal, state and local requirements or leaving FHA lending altogether. Lenders including Wells Fargo, Quicken and Bank of America have all established their own low down payment programs to offer customers a viable replacement for FHA lending. Conversely, many of the smaller independent mortgage lenders have now seized the opportunity to originate more FHA loans and capture market share.
