Look Before You LEAP - This Year's FHA Annual Recertification Process

It’s that time of year again. No, not spring break; the Federal Housing Administration’s ("FHA") annual recertification deadline is upon us (or, more specifically, FHA program participants). The good news is that, this year, mortgagees with a December 31st fiscal year end will have some extra time to complete their recertifications because of system changes that the U.S. Department of Housing and Urban Development ("HUD") is implementing. The bad news is that many institutions are questioning how they can certify at all. In fact, as more institutions realize that the risks associated with the annual certification process have never been higher, lenders and servicers are increasingly finding that they are "unable to certify." And, while selecting "unable to certify" does not mean an institution will be denied re-approval, the process does require more preparation than simply checking a box, including thoughtful consideration of the reasons why the institution cannot attest to particular certification statements.

With these considerations in mind, this year’s extension is a great opportunity for FHA mortgagees to ensure that they know all the facts — and the risks — that apply to their organization prior to completing the recertification process. Failure to do so could result in FHA penalties or program approval issues, or even worse, high-stakes litigation under the False Claims Act ("FCA").

Originally published in BNA's Banking Report; reprinted with permission.