source:
  type: guide
  id: hud-4000-1-v-b-operational-compliance
  authority: FHA Single Family Housing Policy Handbook 4000.1, Part V — b. Operational
    Compliance (12/02/2024)
  description: FHA Single Family Housing Policy Handbook 4000.1, Part V — b. Operational
    Compliance (12/02/2024).
  coverage_tier: operative
obligations:
- id: hud-4000-1-v-b-operational-compliance-full
  canonical_id: hud-4000-1-v-b-operational-compliance-full
  section: FHA Single Family Housing Policy Handbook 4000.1, Part V — b. Operational
    Compliance (12/02/2024)
  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 — b. Operational
      Compliance (12/02/2024)
    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: 'b. Operational Compliance (12/02/2024) The Mortgagee must ensure
      that its QC Plan provides for the following required reviews. i. Personnel (A)
      Training (1) Loan Administration and Quality Control Processes (a) Standard
      The Mortgagee must train all staff involved in FHA Loan Administration and QC
      processes to ensure that staff know all current FHA requirements for the FHA
      Loan Administration practices for which the Mortgagee is responsible. V. QUALITY
      CONTROL, OVERSIGHT, AND COMPLIANCE A. Quality Control of Lenders and Mortgagees
      2. Institutional Quality Control Program Requirements Handbook 4000.1 1696 Last
      Revised: 11/26/2025 (b) Required Documentation The Mortgagee must maintain a
      list of all training provided to staff. For each training, the Mortgagee must
      include a summary of the content covered. (2) Access to FHA Guidance (a) Standard
      The Mortgagee must provide all Loan Administration and QC staff with access
      to current FHA guidance including Handbooks, Mortgagee Letters (ML), Title I
      Letters (TI), Frequently Asked Questions (FAQ), and other guidance issued by
      FHA. (b) Required Documentation The Mortgagee must confirm that all Loan Administration
      and QC staff have access to the internet or to hard copies of current FHA guidance.
      (B) Restricted Participation (1) Standard The Mortgagee must confirm it verified,
      through each of the following systems, that the designated employees and/or
      Affiliates listed below were permitted to participate in FHA programs. If any
      of the designated employees and/or Affiliates are found to be ineligible, they
      are restricted from participating in FHA programs. Checks to verify employee
      eligibility must be conducted at least semiannually. (a) Excluded Parties List
      The Mortgagee must verify employee eligibility for all officers, partners, directors,
      principals, managers, supervisors, loan processors, loan underwriters, loan
      originators, and all other employees and Affiliates participating in U.S. Department
      of Housing and Urban Development (HUD) programs for or on behalf of the Mortgagee,
      using the System for Award Management (SAM) Excluded Parties List. (b) Limited
      Denial of Participation The Mortgagee must verify employee eligibility for all
      officers, partners, directors, principals, managers, supervisors, loan processors,
      loan underwriters, loan originators, and all other employees and Affiliates
      participating in HUD programs for or on behalf of the Mortgagee, using the Limited
      Denial of Participation (LDP) List. V. QUALITY CONTROL, OVERSIGHT, AND COMPLIANCE
      A. Quality Control of Lenders and Mortgagees 2. Institutional Quality Control
      Program Requirements Handbook 4000.1 1697 Last Revised: 11/26/2025 (c) National
      Mortgage Licensing System and Registry The Mortgagee must verify that all employees
      and Affiliates participating in HUD programs for or on behalf of the Mortgagee
      are registered with the National Mortgage Licensing System and Registry (NMLS),
      unless excluded from NMLS requirements by law or regulation. (2) Required Documentation
      Mortgagees must maintain documentation that supports each employee’s eligibility.
      ii. Affiliate Quality Control Reviews (A) Standard The Mortgagee must perform
      QC reviews of its Affiliates in the same manner and under the same conditions
      as required for the Mortgagee’s own operations. At a minimum, Affiliate monitoring
      must include a periodic (semiannual at a minimum) reverification of the Affiliate’s
      compliance with all applicable laws related to licensing, qualification, eligibility,
      or approval to originate or subservice Mortgages. (B) Required Documentation
      The Mortgagee must document the methodology used to review Affiliates, the results
      of each review, and any corrective actions taken as a result of review Findings.
      The procedures used to review and monitor a Mortgagee’s Affiliates must be included
      in the Mortgagee’s QC Plan. iii. Fair Housing and Fair Lending The Mortgagee
      must verify that its operations comply with applicable state and federal fair
      lending laws, including the following: • Fair Housing Act (42 U.S.C. § 3601
      et seq.) • ECOA (15 U.S.C § 1691 et seq.) • Federal Truth in Lending Act (15
      U.S.C. § 1601 et seq.) (A) Denied Mortgage Applications (1) Standard The Mortgagee
      must review a random statistical sample of denied 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 denial were valid;
      • each denial has the concurrence of an officer, senior staff person, or underwriter
      with sufficient approval authority, or a committee chaired by V. QUALITY CONTROL,
      OVERSIGHT, AND COMPLIANCE A. Quality Control of Lenders and Mortgagees 2. Institutional
      Quality Control Program Requirements Handbook 4000.1 1698 Last Revised: 11/26/2025
      an officer, senior staff person, or underwriter with sufficient approval authority;
      • the requirements of the ECOA are met and documented in each file; and • no
      civil rights violations were committed in the denial 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. (2) Required Documentation The Mortgagee must document the methodology
      used to review denied applications, the results of each review, and any corrective
      actions taken as a result of review Findings. The procedures used to review
      denied applications must be included in the Mortgagee’s QC Plan. (B) Fair Housing
      Poster and Equal Housing Opportunity Logo (1) Standard The Mortgagee must verify
      that a fair housing poster is prominently displayed in the Mortgagee’s home
      office and any branch offices that deal with Borrowers and the general public.
      The Mortgagee must verify that the equal housing opportunity logo is prominently
      displayed on all documents, including both hard copy and electronic documents,
      distributed by the Mortgagee to the public. (2) Required Documentation The Mortgagee
      must confirm that a fair housing poster is prominently displayed in the Mortgagee’s
      offices. The Mortgagee must be able to demonstrate that all documents distributed
      by the Mortgagee to the public contain the equal housing opportunity logo. (C)
      Fair Housing or Discrimination Violations (1) Standard Potential fair housing
      violations or instances of discrimination must be reported to HUD’s Office of
      Fair Housing and Equal Opportunity (FHEO) immediately. (2) Required Documentation
      Fair housing violations and complaints may be reported online using the HUD
      Form 903 Online Complaint, contacting HUD’s local FHEO Regional Office or by
      calling the Fair Housing Complaint Hotline at 1-800-669-9777. V. QUALITY CONTROL,
      OVERSIGHT, AND COMPLIANCE A. Quality Control of Lenders and Mortgagees 2. Institutional
      Quality Control Program Requirements Handbook 4000.1 1699 Last Revised: 11/26/2025
      iv. Escrow Funds (A) Standard The Mortgagee must verify that escrow funds received
      from Borrowers were used only for the purpose for which they were received,
      and are in compliance with all Consumer Financial Protection Bureau (CFPB) escrow
      requirements. (B) Required Documentation The Mortgagee must retain the results
      of each review and any corrective actions taken as a result of review Findings.
      v. Mortgage Insurance Premiums (A) Standard The Mortgagee must verify that FHA
      Mortgage Insurance Premiums (MIP) were remitted to FHA within the required time
      period or, if not, that the remittance included Late Charges and interest penalties.
      Mortgagees must address any pattern of late submissions and promptly take corrective
      measures. (B) Required Documentation The Mortgagee must retain the results of
      each review and any corrective actions taken as a result of review Findings.
      vi. Timely and Accurate Submission for Insurance (A) Standard The Mortgagee
      must verify that Mortgages are being submitted to FHA for insurance within the
      required time frames. See Case Binder Submission – Direct Endorsement Non-lender
      Insurance, Post-closing and Insurance for Property Improvement Loan Program
      and Post-closing and Endorsement for Manufactured Home Loan Program. (B) Required
      Documentation The Mortgagee must retain the results of each review and any corrective
      actions taken as a result of review Findings. vii. Advertising (A) Standard
      The Mortgagee must review all advertisements generated by the Mortgagee or on
      its behalf to verify compliance with HUD/FHA advertising requirements. See V.
      QUALITY CONTROL, OVERSIGHT, AND COMPLIANCE A. Quality Control of Lenders and
      Mortgagees 2. Institutional Quality Control Program Requirements Handbook 4000.1
      1700 Last Revised: 11/26/2025 Advertising. The Mortgagee must take prompt corrective
      action upon discovering any violation of advertising requirements described
      in this Handbook 4000.1. (B) Required Documentation The Mortgagee must retain
      copies of any Advertising Device the Mortgagee produces, or that is produced
      on the Mortgagee’s behalf, that is related to FHA programs. The Mortgagee must
      retain samples of the advertising reviewed, the results of each review, and
      any corrective actions taken as a result of review Findings. viii. Reportable
      Cyber Incident (A) Definition A Cyber Incident is an occurrence that results
      in actual harm to the confidentiality, integrity, or availability of an information
      system or the information that the system processes, stores, or transmits. A
      Reportable Cyber Incident is a Cyber Incident that has materially disrupted
      or degraded, or is reasonably likely to materially disrupt or degrade, the FHA-approved
      Mortgagee’s ability to meet its operational obligations for originating or servicing
      FHA-insured Mortgages. (B) Standard An FHA-approved Mortgagee that has experienced
      a Reportable Cyber Incident must report the Cyber Incident to HUD’s FHA Resource
      Center at answers@hud.gov and HUD’s Security Operations Center at cirt@hud.gov
      as soon as possible and no later than 36 hours after the Mortgagee has determined
      that a Reportable Cyber Incident has occurred. (C) Required Documentation Cyber
      Incidents reported to HUD’s FHA Resource center at answers@hud.gov and HUD’s
      Security Operations Center at cirt@hud.gov must include the following information:
      (1) Mortgagee Name (2) Mortgagee ID (3) name, email address, and phone number
      of the Mortgagee’s point of contact for coordinating follow-up activities (4)
      description of the Cyber Incident, including the following, if known: • date
      of Cyber Incident • cause of Cyber Incident • impact to Personally Identifiable
      Information • impact to login credentials • impact to Information Technology
      (IT) system architecture • list of any impacted subsidiary or parent companies
      V. QUALITY CONTROL, OVERSIGHT, AND COMPLIANCE A. Quality Control of Lenders
      and Mortgagees 2. Institutional Quality Control Program Requirements Handbook
      4000.1 1701 Last Revised: 11/26/2025 (5) description of the current status of
      the Mortgagee’s Cyber Incident response, including whether law enforcement has
      been notified.'
  judgment: false
