Provide annual training to its staff and management on HUD requirements for lender QC programs and provide proof of training to HUD.
Publication Report
2025-NY-1003 | June 20, 2025
Flat Branch Mortgage, Inc. Did Not Have a Sufficient Quality Control Program for FHA-Insured Loans
We audited Flat Branch Mortgage, Inc., to evaluate its quality control (QC) program for originating and underwriting Single Family FHA-insured loans. Our audit covered the period October 2020 through September 2022. We selected Flat Branch… moreRelated Recommendations
Housing
- Status2025-NY-1003-001-AOpenClosed
Update its QC plan and related processes and procedures to align with requirements for loan selection, including maintaining data and documenting how sample sizes and loan selections were determined.
- Status2025-NY-1003-001-BOpenClosed
Update its QC plan and related processes and procedures to align with requirements for (1) loan file reviews, including requirements to obtain new credit reports, reverify borrower information, and obtain appraisal field reviews; (2) documenting review results, including maintaining data on findings; (3) assessment of findings; (4) mitigation of findings; (5) reporting findings internally to lender management; and (6) reporting findings to HUD when required.
- Status2025-NY-1003-001-DOpenClosed
Review the six EPD loans not previously selected for review and submit the results to HUD, including all findings of fraud or material misrepresentation, along with any other material findings that it is unable to mitigate. If required, Flat Branch should execute indemnification agreements or reimburse claims paid to help protect the FHA insurance fund from unacceptable risk.
- Status2025-NY-1003-001-EOpenClosed
Obtain credit reports and reverify borrower information for up to 279 EPD reviews performed and evaluate the risk of both new findings identified and existing findings contained in its QC files to confirm whether it self-reported to HUD all findings of fraud or material misrepresentation, along with any other material findings that its records did not show have been acceptably mitigated. If required, Flat Branch should execute indemnification agreements or reimburse claims paid to help protect the FHA insurance fund from unacceptable risk.
- Status2025-NY-1003-001-FOpenClosed
Evaluate its QC files for the 29 post-closing QC reviews in which it identified material findings to confirm whether it self-reported to HUD all findings of fraud or material misrepresentation, along with any other material findings that its records did not show have been acceptably mitigated. If required, Flat Branch should execute indemnification agreements or reimburse claims paid to help protect the FHA insurance fund from unacceptable risk.
- Status2025-NY-1003-001-GOpenClosed$228,793.00Funds Put to Better Use
Recommendations that funds be put to better use estimate funds that could be used more efficiently. For example, recommendations that funds be put to better use could result in reductions in spending, deobligation of funds, or avoidance of unnecessary spending.
Provide indemnification agreements or documentation to support the two loans in which it missed material deficiencies and the three loans in which it identified material findings that it did not acceptably mitigate or self-report to HUD. Implementation of this recommendation will protect the FHA insurance fund from an estimated loss of $228,793.