What are the consequences when an FHA lender does not comply with FHA policies and procedures?

FHA’s Office of Single Family Housing is authorized to take the following enforcement actions against lenders that do not comply with FHA requirements:

• Probation of Direct Endorsement Authority
• Withdrawal of Direct Endorsement Authority
• Credit Watch Termination 
• Suspension or Termination of Lender Insurance Authority 

FHA also has the authority to pursue loan level remedies such as indemnification or principal reductions for material violations of FHA’s origination, underwriting and servicing requirements.  The Mortgagee Review Board (MRB) is authorized to impose civil money penalties and take administrative action against any FHA-approved lender that does not comply with HUD or FHA’s statutory, regulatory, or Handbook requirements, the Real Estate Settlement Procedures Act (RESPA), or the non-discrimination requirements of the Equal Credit Opportunity Act (ECOA), the Fair Housing Act, or Executive Order 11063 on Equal Opportunity in Housing.  The following actions and sanctions may be imposed by the MRB:

• A letter of reprimand;
• Probation;
• Suspension;
• Withdrawal of FHA approval; and
• Civil money penalties. 

The MRB may also enter into settlement agreements with non-complying lenders. 

For additional information see Handbook 4000.1 V.E. at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh

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-01816