ABA, HPC and MBA Letter to FHA on Single Family Housing Policy Update

Lopa Kolluri, Principal Deputy Assistant Secretary for Housing
Office of Housing / Federal Housing Administration
US Department of Housing and Urban Development
451 7th Street S.W.
Washington, DC 20410

Dear Ms. Kolluri: 

The American Bankers Association (ABA), the Housing Policy Council (HPC), and the Mortgage Bankers Association3 (the Associations) appreciate the opportunity to submit joint comments on the proposed changes to the Defect Taxonomy for Servicing Loan Reviews (Servicing Defect Taxonomy) section of the Federal Housing Administration (FHA) Single-Family Housing Policy Handbook. The Associations commend the steps that FHA and the Department of Housing and Urban Development (HUD) have taken to update its servicing and loss mitigation policies and appreciate that FHA has chosen to utilize the Drafting Table to receive feedback on the Servicing Defect Taxonomy. 

Summary of Comments

The Associations appreciate FHA’s efforts to develop a Servicing Defect Taxonomy that will enhance fairness and predictability, reduce FHA servicing costs, promote retention of existing FHA servicers, and encourage new lenders and servicers to participate in the FHA program. However, the proposed Taxonomy will not achieve these goals without critical clarifications and revisions. The draft proposal lacks sufficient detail or clarity regarding defects that could result in enforcement action, severity tiers, and appropriate remedies.

The proposed Servicing Defect Taxonomy is simply too important for the long-range success of the FHA program to rush. A detailed, balanced, and holistic Servicing Defect Taxonomy that presents clear and unambiguous guidance will best achieve FHA’s goals of achieving certainty and clarity for program participants. Thus, we urge FHA to consider the development of the Servicing Defect Taxonomy as a long-term project during which it will continually work with stakeholders in the same iterative process that FHA used to develop the Originations Defect Taxonomy.

Download the comment letter to read the full text.