source:
  type: guide
  id: hud-4000-1-v-a-loan-file-selection
  authority: FHA Single Family Housing Policy Handbook 4000.1, Part V — a. Loan File
    Selection (05/09/2022)
  description: FHA Single Family Housing Policy Handbook 4000.1, Part V — a. Loan
    File Selection (05/09/2022).
  coverage_tier: operative
obligations:
- id: hud-4000-1-v-a-loan-file-selection-full
  canonical_id: hud-4000-1-v-a-loan-file-selection-full
  section: FHA Single Family Housing Policy Handbook 4000.1, Part V — a. Loan File
    Selection (05/09/2022)
  type: do
  tags:
  - regulator-direct
  - fha
  - hud-handbook
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: FHA Single Family Housing Policy Handbook 4000.1, Part V — a. Loan
      File Selection (05/09/2022)
    source_class: hud-handbook
    source_url: https://www.hud.gov/hud-partners/single-family-handbook-4000-1
    snapshot_id: 8c03836f77f317e1
    fetched_at: '2026-05-23T00:28:40Z'
    content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
    paragraph_quote: 'a. Loan File Selection (05/09/2022) i. Time Frame for Selection
      and Review (A) Pre-closing Reviews Mortgagees must select Mortgages for pre-closing
      reviews during each month. Mortgages selected for pre-closing review must be
      reviewed after the Mortgage is approved by an FHA Direct Endorsement (DE) underwriter,
      and prior to closing. (B) Post-closing Reviews Mortgagees must select Mortgages
      for post-closing reviews on a monthly basis. The selection must be comprised
      of loans closed in the prior one-month period. Mortgages selected must be reviewed
      within 60 Days from the end of the prior one-month period. (C) Early Payment
      Default Reviews Mortgagees must select Early Payment Defaults (EPD) for review
      on a monthly basis. EPDs selected must be reviewed within 60 Days from the end
      of the month in which the loan was selected. (D) Servicing Reviews Mortgagees
      must select Mortgages for servicing reviews on a monthly basis. Mortgages selected
      for servicing reviews must be reviewed within 60 Days from the end of the month
      in which the loan was selected. ii. Scope The Mortgagee’s QC Plan must provide
      for the thorough evaluation of all Loan Administration functions for which the
      Mortgagee is responsible. The Mortgagee must expand the scope of the QC review
      as appropriate when fraud or patterns of deficiencies are uncovered. iii. Sample
      Size Standard The Mortgagee’s QC Plan must provide for a combination of both
      pre-closing and post- closing reviews. The Mortgagee’s QC Plan must provide
      for review of an appropriately sized, statistically valid sample that complies
      with the following. The Mortgagee must calculate its FHA QC sample size separately
      for FHA-insured Mortgages it originates/underwrites versus services. V. QUALITY
      CONTROL, OVERSIGHT, AND COMPLIANCE A. Quality Control of Lenders and Mortgagees
      3. Loan Level Quality Control Program Requirements Handbook 4000.1 1706 Last
      Revised: 11/26/2025 (A) 3,500 or Fewer FHA-Insured Mortgages per Year Mortgagees
      that originate/underwrite or service 3,500 or fewer FHA-insured Mortgages per
      year must review a minimum of 10 percent of the FHA-insured Mortgages the Mortgagee
      originates/underwrites or services. (B) More Than 3,500 FHA-Insured Mortgages
      per Year Mortgagees that originate/underwrite or service more than 3,500 FHA
      Mortgages per year must review either 10 percent of the FHA-insured Mortgages
      the Mortgagee originates/underwrites or services, or a stratified random sample
      that is of sufficient size to ensure a 95 percent confidence level with a confidence
      interval not to exceed 2 percent on an annual basis, based on the defect rates
      for FHA-insured Mortgages recently reviewed by the Mortgagee. For origination
      and underwriting reviews, the stratification should be based on mortgage product
      type and the source of origination. For servicing reviews, the stratification
      should be based on servicing functions in the following categories: general
      servicing; default management and loss mitigation; escrow administration; foreclosure
      administration; and claims. (C) Percent of Pre- and Post-closing Reviews The
      Mortgagee’s required FHA QC sample size must comply with the following balance
      of pre- and post-closing reviews: Type of Review % of FHA QC Sample Size Pre-closing
      Review 10% or less Post-closing Review 90% or more (D) Exception Mortgagees
      that close nine or fewer loans during the prior one-month period must select
      a minimum of one loan each month for pre-closing review. iv. Sample Composition
      Standard The Mortgagee’s QC Plan must contain provisions to select FHA-insured
      Mortgages for review via random, EPDs, and discretionary sample selection methods
      that meet the following conditions. Only random and discretionary samples may
      be included in the sample size standard. (A) Random The Mortgagee must select
      FHA-insured Mortgages through the use of statistical sampling such that each
      of the Mortgagee’s FHA-insured Mortgages has an equal V. QUALITY CONTROL, OVERSIGHT,
      AND COMPLIANCE A. Quality Control of Lenders and Mortgagees 3. Loan Level Quality
      Control Program Requirements Handbook 4000.1 1707 Last Revised: 11/26/2025 chance
      of being selected. The random sample must be drawn from all of the Mortgagee’s
      FHA-insured Mortgages, regardless of origination source or program type. (B)
      Early Payment Defaults (1) Definition Early Payment Defaults (EPD) are all Mortgages
      that become 60 Days delinquent within the first six payments. (2) Standard The
      Mortgagee must review all EPDs underwritten by the Mortgagee, regardless of
      which Mortgagee services the Mortgage. Title II Mortgagees may use Neighborhood
      Watch to assist with identifying EPDs. (C) Discretionary The Mortgagee must
      focus discretionary samples on programs, participants, or sources that represent
      a high level of risk, which may include disproportionate loan volume, default
      rates, new relationships, or concentration in soft market areas. v. Required
      Documentation The Mortgagee must document how the sample size and selections
      were determined.'
  judgment: false
