What are the employee requirements of an FHA-approved Mortgagee?

Employees are individuals under the direct supervision and control of the Mortgagee.  The Mortgagee must not employ any individual who will participate in FHA transactions if the individual is suspended, debarred, under a Limited Denial of Participation (LDP), or otherwise excluded from participation in FHA programs.
The Mortgagee must not compensate employees who perform underwriting or Quality Control (QC) activities on a commission basis.  The Mortgagee must report all employee compensation in accordance with Internal Revenue Service (IRS) requirements.
SAFE Act Compliance:
The Mortgagee and its employees must comply with the requirements of the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act), including the licensing and registration of its employees in the Nationwide Mortgage Licensing System (NMLS).
Dual Employment:
The Mortgagee must require its employees to be its employees exclusively, unless determined that the employee’s other outside employment, including any self-employment, does not create a prohibited conflict of interest.
Conflicts of Interest:
Employees are prohibited from having multiple roles in a single FHA-insured transaction and are prohibited from having multiple sources of compensation, either directly or indirectly, from a single FHA- insured transaction.
The Mortgagee must ensure that its underwriters are not managed by and do not report to any individual who performs mortgage origination activities.  Underwriters must:

  • meet basic eligibility requirements; and
  • perform the underwriting function in a manner consistent with FHA guidelines.
HECM Originators:
The Mortgagee and any other party that participates in the origination of a Home Equity Conversion Mortgage (HECM) transaction must not participate in, be associated with, or employ any party that participates in, or is associated with, any other financial or insurance activity, unless the Mortgagee demonstrates that it or any other party maintains firewalls and other safeguards designed to ensure that: 
  • individuals participating in the origination of the HECM must have no involvement with, or incentive to provide the Borrower with, any other financial or insurance product; and
  • the Borrower must not be required, directly or indirectly, as a condition of obtaining a HECM, to purchase any other financial or insurance product.

For additional information see Handbook 4000.1 I.A.3.c.iv(B)(3) available 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-05110