HUD Handbook 4000.1 Part II.A.4 — Underwriting the Borrower Using the TOTAL Mortgage Scorecard

hud-4000-1-ii-a-4

HUD Handbook 4000.1 Part II.A.4 covers FHA's automated-underwriting regime via the TOTAL Mortgage Scorecard — the AUS rules, downgrade triggers to manual underwriting, rescore obligations, and the foundational credit-report requirements that underpin every TOTAL decision. Fills part of the FHA-origination library gap (HUD 4000.1 Part II) identified in the 2026-05-25 coverage audit.

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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
    regime via the TOTAL Mortgage Scorecard — the AUS rules, downgrade
    triggers to manual underwriting, rescore obligations, and the
    foundational credit-report requirements that underpin every TOTAL
    decision. Fills part of the FHA-origination library gap (HUD 4000.1
    Part II) identified in the 2026-05-25 coverage audit.
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
      Mortgage that received an Accept recommendation from TOTAL when
      any of the enumerated risk-classification triggers is present —
      including: information that cannot be entered into TOTAL, additional
      AUS-uncaptured information affecting insurability, $1,000+ Disputed
      Derogatory Credit Accounts, bankruptcy discharge within 2 years of
      case-number assignment, pre-foreclosure sale / foreclosure / DIL
      within 3 years of case-number assignment, Mortgage Payment history
      downgrades, Undisclosed Mortgage Debt, or business income decline
      >20% over the analysis period.
    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?
    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
    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.
    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.
    promoted_at: '2026-05-25T17:48:38+00:00'
    promoted_from: hud-4000-1-ii-a-4-roundd-v1.yaml
  - 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
      downgraded to manual underwriting (per any II.A.4 trigger), [LENDER]
      shall cease use of the AUS and comply with ALL requirements for
      manual underwriting when underwriting the downgraded Mortgage —
      i.e., not selectively rely on the prior TOTAL Accept recommendation
      for any compensating-factor or layered-risk evaluation.
    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?
    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
    feeds: []
    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
  - 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?
    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
    feeds: []
    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
  - 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?
    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
    feeds: []
    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
  - 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
      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.
      The non-borrowing spouse's credit report must include an SSN
      match against the SSA or, where an SSN does not exist, the
      spouse's full name, date of birth, and previous addresses for
      the last two years.
    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?
    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
    feeds: []
    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
_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

Verbatim regulatory text (5)

Verbatim provisions from HUD Handbook 4000.1 Part II.A.4 — Underwriting the Borrower Using the TOTAL Mortgage Scorecard — each quote is a verified substring of the regulator-published source snapshot, not retyped. Quoted for reference; this is not legal advice. The operational layer (P&P updates, prompts) lives in the regulation update kits.

HUD Handbook 4000.1 II.A.4.a — Risk classifications requiring a downgrade to Manual Underwriting

The Mortgagee must downgrade and manually underwrite any Mortgage that received an

Source: HUD Handbook 4000.1 II.A.4 — Risk Classifications Requiring a Downgrade to Manual Underwriting (TOTAL) · source URL · snapshot 3bf33edadcf6461d

HUD Handbook 4000.1 II.A.4.a.vi — Cease AUS use on downgrade to manual underwriting

the Mortgagee must cease its use of the AUS and comply with all requirements for manual underwriting when underwriting a downgraded Mortgage.

Source: HUD Handbook 4000.1 II.A.4.a.vi — Applicability of Automated Underwriting System Rules (TOTAL) · source URL · snapshot 3bf33edadcf6461d

HUD Handbook 4000.1 II.A.4.a.vii — TOTAL Mortgage Scorecard rescore on data change

The Mortgagee must rescore a Mortgage when any data element of the Mortgage change and/or new Borrower information becomes available.

Source: HUD Handbook 4000.1 II.A.4.a.vii — TOTAL Mortgage Scorecard Tolerance Levels for Rescoring · source URL · snapshot 3bf33edadcf6461d

HUD Handbook 4000.1 II.A.4.b.i — Credit report for each Borrower obligated on the Note

The Mortgagee must obtain a credit report for each Borrower who will be obligated on the mortgage Note.

Source: HUD Handbook 4000.1 II.A.4.b.i — General Credit Review Requirements (TOTAL) · source URL · snapshot 3bf33edadcf6461d

HUD Handbook 4000.1 II.A.4.b.i — Non-borrowing spouse credit report in community property states

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.

Source: HUD Handbook 4000.1 II.A.4.b.i — General Credit Review Requirements (TOTAL) · source URL · snapshot 3bf33edadcf6461d