What Quality Control review findings must mortgagees report to FHA through the Loan Review System (LRS)?

Effective May 15, 2017, Mortgagees must report to FHA the following through the Loan Review System (LRS): 

  • all findings of fraud and material misrepresentation immediately
  • any material findings concerning the origination, underwriting, or servicing of a mortgage that the Mortgagee is unable to mitigate no later than 90 days after the completion of the initial findings report.

Findings that do not involve fraud or material misrepresentation and were already mitigated by the Mortgagee do not have to be reported to FHA.  For all findings that must be reported, the Mortgagee must identify what actions have been taken to attempt to mitigate each finding, and report any planned or pending follow-up activities. 
FHA may request supporting documentation, including the endorsement case binder, the Quality Control (QC) report, and any other documentation necessary to fully evaluate the finding. 
The Mortgagee must retain all QC review results, including all selection criteria, review documentation, findings, and actions taken to mitigate findings, for a period of two years from the initial QC review, or from the last action taken to mitigate findings, whichever is later. 
As of the LRS implementation date, May 15, 2017, Mortgagees will no longer be able to submit lender reports through Neighborhood Watch.
Mortgagees will still be able to view/edit lender reports submitted prior to May 15, 2017, by clicking on the “View Previously Saved Lender Reports” or “Edit Previously Saved Lender Reports” links in Neighborhood Watch.
On May 15, 2017, Mortgagees can access the instructions for submitting a lender report in the Lender's LRS User Manual which will be posted as a link on the Loan Review System (LRS) information page at:
For additional information see:




All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.

Topic Number: KA-01092