What are FHA's Quality Control requirements for reviewing rejected mortgage applications?

The Mortgagee must review a random statistical sample of rejected applications within 90 Days from the end of the month in which the decision was made. Reviews must be conducted on a monthly basis and ensure that:
  • the reasons given for rejection were valid;
  • each rejection has the concurrence of an officer, senior staff person, or underwriter with sufficient approval authority, or a committee chaired by an officer, senior staff person, or underwriter with sufficient approval authority;
  • the requirements of the Equal Credit Opportunity Act (ECOA) are met and documented in each file; and
  • no civil rights violations were committed in the rejection of the application.
Where possible discrimination is noted, the Mortgagee must take immediate corrective action to ensure its operations comply with applicable state and federal fair lending laws.
The Mortgagee must document the methodology used to review rejected applications, the results of each review, and any corrective actions taken as a result of the review Findings. 
For additional information see Handbook 4000.1 V.A.2.b.iii(A) 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-02110