source:
  type: regulation
  id: hud-4000-1-ii-a-4
  authority: "HUD Handbook 4000.1 Part II.A.4 — Underwriting the Borrower Using the TOTAL Mortgage Scorecard"
  description: "HUD Handbook 4000.1 Part II.A.4 covers FHA's automated-underwriting\nregime via the TOTAL Mortgage Scorecard — the AUS rules, downgrade\ntriggers to manual underwriting, rescore obligations, and the\nfoundational credit-report requirements that underpin every TOTAL\ndecision. Fills part of the FHA-origination library gap (HUD 4000.1\nPart II) identified in the 2026-05-25 coverage audit.\n"
obligations:
- id: hud-4000-1-ii-a-4-downgrade-and-manually-underwrite
  canonical_id: hud-4000-1-ii-a-4-downgrade-and-manually-underwrite
  section: "HUD Handbook 4000.1 II.A.4.a — Risk classifications requiring a downgrade to Manual Underwriting"
  description: "[LENDER] (Mortgagee) must downgrade and manually underwrite any\nMortgage that received an Accept recommendation from TOTAL when\nany of the enumerated risk-classification triggers is present —\nincluding: information that cannot be entered into TOTAL, additional\nAUS-uncaptured information affecting insurability, $1,000+ Disputed\nDerogatory Credit Accounts, bankruptcy discharge within 2 years of\ncase-number assignment, pre-foreclosure sale / foreclosure / DIL\nwithin 3 years of case-number assignment, Mortgage Payment history\ndowngrades, Undisclosed Mortgage Debt, or business income decline\n>20% over the analysis period.\n"
  type: do
  audit_question: For every FHA Mortgage where any II.A.4 trigger is present, can [LENDER] evidence that the Mortgage was downgraded from TOTAL Accept to Manual Underwriting and that the manual-underwriting requirements were applied?
  workflow_phase: loan_origination
  owner_role: underwriting_manager
  secondary_owner_role: compliance_officer
  cadence: per-loan-application
  consequence: Indemnification exposure under HUD lender-monitoring; potential FHA case-number cancellation; reps-and-warranties breach.
  tags:
  - round-d
  - regulator-direct
  - fha
  - hud-4000-1
  - underwriting
  - total-mortgage-scorecard
  - manual-underwriting-downgrade
  - promoted
  primary_source:
    tier: 1
    authority: "HUD Handbook 4000.1 II.A.4 — Risk Classifications Requiring a Downgrade to Manual Underwriting (TOTAL)"
    source_class: hud-handbook-4000-1
    source_url: https://www.hud.gov/sites/dfiles/OCHCO/documents/40001HSGH.pdf
    snapshot_id: 3bf33edadcf6461d
    fetched_at: '2026-05-25T14:10:11Z'
    content_hash: sha256:e1c2dc1c75ddb0ee32fe5c2fb7c9bb19f1c93b48a3e26e6d63dc6e7f37c92ec0
    paragraph_quote: 'The Mortgagee must downgrade and manually underwrite any Mortgage that received an

      '
    drafter_attestation: 'Copied verbatim from snapshot 3bf33edadcf6461d (HUD Handbook 4000.1

      Update 17). II.A.4 downgrade-trigger chapeau; the 11+ enumerated

      triggers are paraphrased in description.

      '
  promoted_at: '2026-05-25T17:48:38+00:00'
  promoted_from: hud-4000-1-ii-a-4-roundd-v1.yaml
  auditor_minimum_evidence:
    derivation: snapshot_extract
    derivation_source:
      snapshot_id: 3bf33edadcf6461d
      paragraph_quote: "The Mortgagee must downgrade and manually underwrite any Mortgage that received an"
      page_or_section: "HUD Handbook 4000.1 II.A.4"
      fetched_at: '2026-05-25T14:10:11Z'
    pathway_selection_kind: mutually_exclusive_by_facts
    pathways:
    - pathway_id: csh-amep-hud-ii-a-4-no-downgrade-required
      name: "No downgrade triggered — AUS Accept/Approve stands, no II.A.4(c) downgrade-required conditions present"
      evidence_items:
      - evidence_id: csh-ev-hud-ii-a-4-aus-accept-no-trigger
        kind: record
        description: "Underwriter review record confirming no II.A.4(c) downgrade-triggering conditions present (no $1k+ disputed derogatory tradeline excluded from AUS, no recent foreclosure/short sale/Chapter 7 BK, no AUS data discrepancies vs verified file, no late mortgage payments not reported to credit, etc.)."
        retention_rule_ref: hud-4000-1-iii-a-1
        examiner_question_ref: "HUD Office of Inspector General / Mortgagee Review Board — FHA Title II oversight"
        cite_verified: true
    - pathway_id: csh-amep-hud-ii-a-4-downgrade-to-manual
      name: "Downgrade triggered — loan manually underwritten per II.A.5"
      evidence_items:
      - evidence_id: csh-ev-hud-ii-a-4-downgrade-trigger-record
        kind: record
        description: "Documented downgrade trigger — specific II.A.4(c) condition (mortgage delinquency, BK/foreclosure timing, AUS data mismatch, etc.) with citation."
        retention_rule_ref: hud-4000-1-iii-a-1
        examiner_question_ref: "HUD Office of Inspector General / Mortgagee Review Board — FHA Title II oversight"
        cite_verified: true
      - evidence_id: csh-ev-hud-ii-a-4-cease-aus-attestation
        kind: record
        description: "Attestation that AUS use was ceased post-downgrade and loan was manually underwritten per II.A.5 with full creditworthiness analysis."
        retention_rule_ref: hud-4000-1-iii-a-1
        examiner_question_ref: "HUD Office of Inspector General / Mortgagee Review Board — FHA Title II oversight"
        cite_verified: true
      - evidence_id: csh-ev-hud-ii-a-4-manual-uw-decision-record
        kind: document
        description: "Manual underwriting decision record per II.A.5 with creditworthiness/capacity/capital analysis and compensating factors documented."
        retention_rule_ref: hud-4000-1-iii-a-1
        examiner_question_ref: "HUD Office of Inspector General / Mortgagee Review Board — FHA Title II oversight"
        cite_verified: true
    pathway_selection_logic: |
      Two pathways selected by downgrade-trigger facts: A — TOTAL Accept stands, no downgrade-required condition present; B — at least one II.A.4(c) condition triggered, loan downgraded and manually underwritten per II.A.5. Failure to downgrade when required is among the most common FHA QC defects.
  program_review: Do the P&Ps ensure any TOTAL Accept is downgraded to Manual Underwriting when ANY enumerated trigger is present (uncapturable info, AUS-uncaptured insurability info, $1,000+ disputed derogatory, bankruptcy discharge within 2 years, PFS/foreclosure/DIL within 3 years, mortgage-payment-history downgrade, undisclosed mortgage debt, business income decline >20%)?
  file_review: Pull TOTAL-Accept files exhibiting a trigger; confirm the downgrade to Manual Underwriting occurred and manual requirements were applied.
  judgment: false
  feeds:
  - hud-4000-1-ii-a-4-cease-aus-on-downgrade
  - hud-4000-1-ii-a-5-manually-underwrite-refer-or-downgrade
- id: hud-4000-1-ii-a-4-cease-aus-on-downgrade
  canonical_id: hud-4000-1-ii-a-4-cease-aus-on-downgrade
  section: "HUD Handbook 4000.1 II.A.4.a.vi — Cease AUS use on downgrade to manual underwriting"
  description: "Once [LENDER] (Mortgagee) determines that a Mortgage must be\ndowngraded to manual underwriting (per any II.A.4 trigger), [LENDER]\nshall cease use of the AUS and comply with ALL requirements for\nmanual underwriting when underwriting the downgraded Mortgage —\ni.e., not selectively rely on the prior TOTAL Accept recommendation\nfor any compensating-factor or layered-risk evaluation.\n"
  type: do
  audit_question: For every Mortgage downgraded to manual underwriting, can [LENDER] evidence that the AUS was no longer relied on and that all manual-underwriting requirements (compensating factors, income-stability documentation, residual-income analysis where applicable) were independently applied?
  workflow_phase: loan_origination
  owner_role: underwriting_manager
  secondary_owner_role: compliance_officer
  cadence: per-downgraded-loan
  consequence: FHA insurance ineligibility on improperly-underwritten Mortgages; indemnification under lender-monitoring.
  tags:
  - round-d
  - regulator-direct
  - fha
  - hud-4000-1
  - underwriting
  - manual-underwriting
  - aus-cease
  - promoted
  primary_source:
    tier: 1
    authority: "HUD Handbook 4000.1 II.A.4.a.vi — Applicability of Automated Underwriting System Rules (TOTAL)"
    source_class: hud-handbook-4000-1
    source_url: https://www.hud.gov/sites/dfiles/OCHCO/documents/40001HSGH.pdf
    snapshot_id: 3bf33edadcf6461d
    fetched_at: '2026-05-25T14:10:11Z'
    content_hash: sha256:e1c2dc1c75ddb0ee32fe5c2fb7c9bb19f1c93b48a3e26e6d63dc6e7f37c92ec0
    paragraph_quote: 'the Mortgagee must cease its use of the AUS and comply with all requirements for manual underwriting when underwriting a downgraded Mortgage.

      '
    drafter_attestation: 'Copied verbatim from snapshot 3bf33edadcf6461d. II.A.4.vi

      cease-AUS-on-downgrade operative clause.

      '
  promoted_at: '2026-05-25T17:48:38+00:00'
  promoted_from: hud-4000-1-ii-a-4-roundd-v1.yaml
  program_review: Do the P&Ps ensure that once a Mortgage is downgraded, the AUS is no longer relied on and ALL manual-underwriting requirements are independently applied (no selective reliance on the prior TOTAL Accept)?
  file_review: Pull downgraded files; confirm the AUS recommendation was not relied on and full manual-underwriting requirements (compensating factors, income-stability docs, residual income where applicable) were independently applied.
  judgment: false
- id: hud-4000-1-ii-a-4-rescore-on-data-change
  canonical_id: hud-4000-1-ii-a-4-rescore-on-data-change
  section: "HUD Handbook 4000.1 II.A.4.a.vii — TOTAL Mortgage Scorecard rescore on data change"
  description: '[LENDER] (Mortgagee) shall rescore a Mortgage when any data element

    of the Mortgage changes and/or new Borrower information becomes

    available, subject to narrow Cash-Reserves (>10% delta), Income

    (>5% delta), or Tax-and-Insurance-Escrow (>2% PTI delta) tolerance

    levels under which rescoring is not required. Tolerance-window

    determinations must be documented.

    '
  type: do
  audit_question: For every TOTAL-scored Mortgage where any data element changed prior to closing, can [LENDER] evidence that a rescore occurred or that the change fit within the documented Cash Reserves / Income / Tax-and-Insurance Escrow tolerance window?
  workflow_phase: loan_origination
  owner_role: underwriting_manager
  secondary_owner_role: compliance_officer
  cadence: per-data-change-event
  consequence: Stale TOTAL score may invalidate the recommendation; FHA case ineligibility.
  tags:
  - round-d
  - regulator-direct
  - fha
  - hud-4000-1
  - underwriting
  - total-mortgage-scorecard
  - rescore
  - promoted
  primary_source:
    tier: 1
    authority: "HUD Handbook 4000.1 II.A.4.a.vii — TOTAL Mortgage Scorecard Tolerance Levels for Rescoring"
    source_class: hud-handbook-4000-1
    source_url: https://www.hud.gov/sites/dfiles/OCHCO/documents/40001HSGH.pdf
    snapshot_id: 3bf33edadcf6461d
    fetched_at: '2026-05-25T14:10:11Z'
    content_hash: sha256:e1c2dc1c75ddb0ee32fe5c2fb7c9bb19f1c93b48a3e26e6d63dc6e7f37c92ec0
    paragraph_quote: 'The Mortgagee must rescore a Mortgage when any data element of the Mortgage change and/or new Borrower information becomes available.

      '
    drafter_attestation: 'Copied verbatim from snapshot 3bf33edadcf6461d. II.A.4.vii

      rescore-on-data-change operative clause. Tolerance levels

      (Cash Reserves 10%, Income 5%, Tax-and-Insurance 2% PTI)

      paraphrased in description from the immediately following table.

      '
  promoted_at: '2026-05-25T17:48:38+00:00'
  promoted_from: hud-4000-1-ii-a-4-roundd-v1.yaml
  program_review: Do the P&Ps ensure a rescore when any data element changes or new Borrower info arises, while accounting for the documented Cash-Reserves (>10%), Income (>5%), and Tax-and-Insurance-Escrow (>2% PTI) tolerance windows under which rescore is not required?
  file_review: Pull TOTAL-scored files with a pre-closing data change; confirm a rescore occurred or the change fit a documented tolerance window.
  judgment: false
- id: hud-4000-1-ii-a-4-credit-report-each-borrower
  canonical_id: hud-4000-1-ii-a-4-credit-report-each-borrower
  section: "HUD Handbook 4000.1 II.A.4.b.i — Credit report for each Borrower obligated on the Note"
  description: '[LENDER] (Mortgagee) shall obtain a credit report for each Borrower

    who will be obligated on the mortgage Note. [LENDER] may obtain a

    joint report for individuals with joint accounts.

    '
  type: do
  audit_question: For every FHA loan application, can [LENDER] evidence that a credit report was obtained for each Borrower obligated on the Note?
  workflow_phase: loan_origination
  owner_role: loan_processor
  secondary_owner_role: underwriting_manager
  cadence: per-loan-application
  consequence: Incomplete credit-review documentation; FHA underwriting deficiency on QC review.
  tags:
  - round-d
  - regulator-direct
  - fha
  - hud-4000-1
  - credit-report
  - per-borrower
  - promoted
  primary_source:
    tier: 1
    authority: "HUD Handbook 4000.1 II.A.4.b.i — General Credit Review Requirements (TOTAL)"
    source_class: hud-handbook-4000-1
    source_url: https://www.hud.gov/sites/dfiles/OCHCO/documents/40001HSGH.pdf
    snapshot_id: 3bf33edadcf6461d
    fetched_at: '2026-05-25T14:10:11Z'
    content_hash: sha256:e1c2dc1c75ddb0ee32fe5c2fb7c9bb19f1c93b48a3e26e6d63dc6e7f37c92ec0
    paragraph_quote: 'The Mortgagee must obtain a credit report for each Borrower who will be obligated on the mortgage Note.

      '
    drafter_attestation: 'Copied verbatim from snapshot 3bf33edadcf6461d. II.A.4.b.i

      per-Borrower credit-report requirement.

      '
  promoted_at: '2026-05-25T17:48:38+00:00'
  promoted_from: hud-4000-1-ii-a-4-roundd-v1.yaml
  program_review: Do the P&Ps ensure a credit report is obtained for each Borrower obligated on the Note (a joint report permitted for joint accounts)?
  file_review: Pull files; confirm a credit report for each Note-obligated Borrower.
  judgment: false
- id: hud-4000-1-ii-a-4-non-borrowing-spouse-community-property
  canonical_id: hud-4000-1-ii-a-4-non-borrowing-spouse-community-property
  section: "HUD Handbook 4000.1 II.A.4.b.i — Non-borrowing spouse credit report in community property states"
  description: "[LENDER] (Mortgagee) shall ALSO obtain a credit report for a\nnon-borrowing spouse if the Borrower resides in a community\nproperty state OR if the subject Property is located in a\ncommunity property state — except when excluded by state law.\nThe non-borrowing spouse's credit report must include an SSN\nmatch against the SSA or, where an SSN does not exist, the\nspouse's full name, date of birth, and previous addresses for\nthe last two years.\n"
  type: do
  audit_question: For every FHA loan application involving a Borrower in (or Property in) a community property state, can [LENDER] evidence that a credit report was obtained for the non-borrowing spouse (with SSN match or, absent SSN, the alternative-identifier set), unless state-law exclusion applies?
  workflow_phase: loan_origination
  owner_role: loan_processor
  secondary_owner_role: underwriting_manager
  cadence: per-loan-application-community-property
  consequence: Missing non-borrowing-spouse credit pull is a known FHA QC defect; can trigger indemnification.
  tags:
  - round-d
  - regulator-direct
  - fha
  - hud-4000-1
  - credit-report
  - non-borrowing-spouse
  - community-property
  - promoted
  primary_source:
    tier: 1
    authority: "HUD Handbook 4000.1 II.A.4.b.i — General Credit Review Requirements (TOTAL)"
    source_class: hud-handbook-4000-1
    source_url: https://www.hud.gov/sites/dfiles/OCHCO/documents/40001HSGH.pdf
    snapshot_id: 3bf33edadcf6461d
    fetched_at: '2026-05-25T14:10:11Z'
    content_hash: sha256:e1c2dc1c75ddb0ee32fe5c2fb7c9bb19f1c93b48a3e26e6d63dc6e7f37c92ec0
    paragraph_quote: 'The Mortgagee must also obtain a credit report for a non-borrowing spouse if the Borrower resides in a community property state, or if the subject Property is located in a community property state, except when excluded by state law.

      '
    drafter_attestation: 'Copied verbatim from snapshot 3bf33edadcf6461d. II.A.4.b.i

      non-borrowing-spouse community-property credit-report requirement.

      SSN-match / alternative-identifier details paraphrased in description.

      '
  promoted_at: '2026-05-25T17:48:39+00:00'
  promoted_from: hud-4000-1-ii-a-4-roundd-v1.yaml
  program_review: Does the program account for the community-property condition — obtaining a non-borrowing-spouse credit report when the Borrower resides in, or the Property is in, a community property state (with SSN match, or the name/DOB/2-yr-address alternative absent an SSN), except where excluded by state law?
  file_review: Spot-check community-property-state files; confirm the non-borrowing-spouse credit report (with SSN match or the alternative-identifier set), unless a state-law exclusion applies.
  judgment: false
_promotion_history:
- promoted_at: '2026-05-25T17:48:39+00:00'
  candidate_path: obligations\_remediation\round-d-investor-guides\hud-4000-1-ii-a-4-roundd-v1.yaml
  candidates_promoted: 5
  candidates_skipped_existing: 0
