HUD Handbook 4000.1 Part II.A.5 — Manual Underwriting of the Borrower

hud-4000-1-ii-a-5

HUD Handbook 4000.1 Part II.A.5 governs FHA manual underwriting — when AUS issues Refer / when TOTAL Accept was downgraded / when HUD employees are involved. Covers required credit reports (Tri-Merged or RMCR), per-Borrower credit pulls, non-borrowing-spouse community- property treatment, traditional-vs-nontraditional credit development, and the duty to submit downgraded HUD-employee Mortgages to FHA for final underwriting approval.

Get this register: .xlsx .csv More bundles →

source:
  type: regulation
  id: hud-4000-1-ii-a-5
  authority: HUD Handbook 4000.1 Part II.A.5 — Manual Underwriting of the Borrower
  description: |
    HUD Handbook 4000.1 Part II.A.5 governs FHA manual underwriting —
    when AUS issues Refer / when TOTAL Accept was downgraded / when HUD
    employees are involved. Covers required credit reports (Tri-Merged
    or RMCR), per-Borrower credit pulls, non-borrowing-spouse community-
    property treatment, traditional-vs-nontraditional credit
    development, and the duty to submit downgraded HUD-employee
    Mortgages to FHA for final underwriting approval.
obligations:
  - id: hud-4000-1-ii-a-5-manually-underwrite-refer-or-downgrade
    canonical_id: hud-4000-1-ii-a-5-manually-underwrite-refer-or-downgrade
    section: HUD Handbook 4000.1 II.A.5 — Manual underwrite on AUS Refer or downgrade
    description: |
      [LENDER] (Mortgagee) must manually underwrite any application where
      the AUS issues a Refer recommendation OR which was downgraded to a
      manual underwrite (under any II.A.4 trigger). The manual review
      must apply FHA's general credit policy and the specific manual-
      underwriting requirements at II.A.5.
    type: do
    audit_question: For every FHA loan application receiving an AUS Refer or that was downgraded to manual underwriting, can [LENDER] evidence that manual underwriting was performed per HUD 4000.1 II.A.5 (credit policy + manual-specific evaluation), not just the AUS-Accept-style review?
    program_review: Do the P&Ps ensure any AUS-Refer or downgraded application is manually underwritten under FHA's general credit policy and the II.A.5 manual-specific requirements?
    file_review: Pull Refer/downgraded files; confirm manual underwriting per II.A.5 (credit policy + manual-specific evaluation) rather than an AUS-Accept-style review.
    judgment: false
    feeds: []
    workflow_phase: loan_origination
    owner_role: underwriting_manager
    secondary_owner_role: compliance_officer
    cadence: per-refer-or-downgrade
    consequence: FHA insurance ineligibility; indemnification exposure on QC review.
    tags:
      - round-d
      - regulator-direct
      - fha
      - hud-4000-1
      - manual-underwriting
      - promoted
    primary_source:
      tier: 1
      authority: HUD Handbook 4000.1 II.A.5 — Manual Underwriting of the Borrower
      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 manually underwrite those applications where the AUS issues a Refer or applications which were downgraded to a manual underwrite.
      drafter_attestation: |
        Copied verbatim from snapshot 3bf33edadcf6461d. II.A.5 manual-
        underwrite-on-Refer-or-downgrade operative clause.
    promoted_at: '2026-05-25T17:53:02+00:00'
    promoted_from: hud-4000-1-ii-a-5-roundd-v1.yaml
  - id: hud-4000-1-ii-a-5-hud-employee-fha-final-approval
    canonical_id: hud-4000-1-ii-a-5-hud-employee-fha-final-approval
    section: HUD Handbook 4000.1 II.A.5 — HUD-employee Mortgage requires FHA final approval
    description: |
      If a Mortgage receiving an AUS Refer or downgrade to manual
      processing involves a HUD employee, [LENDER] (Mortgagee) must
      underwrite the transaction per HUD 4000.1 Manual Underwriting
      guidance AND submit the underwritten mortgage application to FHA
      for final underwriting approval. [LENDER] may not close the
      Mortgage without FHA's final approval in this scenario.
    type: do
    audit_question: For every FHA loan application where the Borrower is a HUD employee AND received a Refer or downgrade, can [LENDER] produce evidence of submission to FHA for final underwriting approval AND FHA's approval response prior to closing?
    program_review: Does the program account for the HUD-employee condition — on a Refer/downgrade involving a HUD employee, requiring submission to FHA for final underwriting approval and prohibiting closing without it?
    file_review: Spot-check HUD-employee Refer/downgrade files; confirm submission to FHA and FHA's approval response prior to closing.
    judgment: false
    feeds: []
    workflow_phase: loan_origination
    owner_role: underwriting_manager
    secondary_owner_role: compliance_officer
    cadence: per-hud-employee-loan
    consequence: FHA insurance void if closed without final FHA approval on HUD-employee Mortgage.
    tags:
      - round-d
      - regulator-direct
      - fha
      - hud-4000-1
      - hud-employee
      - fha-final-approval
      - promoted
    primary_source:
      tier: 1
      authority: HUD Handbook 4000.1 II.A.5 — HUD-Employee Manual Underwriting
      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 submit the underwritten mortgage application to FHA for final underwriting approval.
      drafter_attestation: |
        Copied verbatim from snapshot 3bf33edadcf6461d. II.A.5 HUD-employee
        FHA-final-approval operative clause.
    promoted_at: '2026-05-25T17:53:02+00:00'
    promoted_from: hud-4000-1-ii-a-5-roundd-v1.yaml
  - id: hud-4000-1-ii-a-5-credit-report-trmcr-or-rmcr
    canonical_id: hud-4000-1-ii-a-5-credit-report-trmcr-or-rmcr
    section: HUD Handbook 4000.1 II.A.5.a.i — Required credit report type (Manual)
    description: |
      [LENDER] (Mortgagee) must obtain EITHER a Tri-Merged Credit Report
      (TRMCR) OR a Residential Mortgage Credit Report (RMCR) from an
      independent consumer reporting agency for manual underwriting.
      [LENDER] must use the same credit report and credit scores that
      were sent to TOTAL when scoring the application.
    type: do
    audit_question: For every manually underwritten FHA loan, can [LENDER] evidence (a) a TRMCR or RMCR from an independent CRA, and (b) that the same report + scores used for TOTAL were used in the manual underwriting?
    program_review: Do the P&Ps ensure manual underwriting uses a TRMCR or RMCR from an independent CRA, and the same report + scores that were sent to TOTAL?
    file_review: Pull manually underwritten files; confirm a TRMCR/RMCR from an independent CRA and that the same report and scores used for TOTAL were used.
    judgment: false
    feeds: []
    workflow_phase: loan_origination
    owner_role: loan_processor
    secondary_owner_role: underwriting_manager
    cadence: per-manual-underwriting-application
    consequence: Incomplete documentation; FHA QC defect; potential indemnification.
    tags:
      - round-d
      - regulator-direct
      - fha
      - hud-4000-1
      - credit-report
      - trmcr
      - rmcr
      - promoted
    primary_source:
      tier: 1
      authority: HUD Handbook 4000.1 II.A.5.a.i — General Credit Requirements (Manual)
      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 either obtain a Tri-Merged Credit Report (TRMCR) or a Residential Mortgage Credit Report (RMCR) from an independent consumer reporting agency.
      drafter_attestation: |
        Copied verbatim from snapshot 3bf33edadcf6461d. II.A.5.a.i credit-
        report-type operative requirement. The "must use the same credit
        report sent to TOTAL" follow-on sentence paraphrased in description.
    promoted_at: '2026-05-25T17:53:02+00:00'
    promoted_from: hud-4000-1-ii-a-5-roundd-v1.yaml
  - id: hud-4000-1-ii-a-5-traditional-credit-first
    canonical_id: hud-4000-1-ii-a-5-traditional-credit-first
    section: HUD Handbook 4000.1 II.A.5.a.ii — Traditional credit before non-traditional
    description: |
      If a traditional credit report is available, [LENDER] (Mortgagee)
      must use a traditional credit report. Only when a traditional
      credit report is NOT available may [LENDER] develop the Borrower's
      credit using non-traditional credit history methodology per
      II.A.5.a.iii.
    type: do
    audit_question: For every manually underwritten FHA loan where non-traditional credit history was developed, can [LENDER] evidence that a traditional credit report was not available before resorting to non-traditional methods?
    program_review: Do the P&Ps ensure a traditional credit report is used when available, with non-traditional credit history developed only when traditional is unavailable?
    file_review: Pull files where non-traditional credit was developed; confirm a traditional report was not available before non-traditional methods were used.
    judgment: false
    feeds: []
    workflow_phase: loan_origination
    owner_role: underwriting_manager
    secondary_owner_role: compliance_officer
    cadence: per-non-traditional-credit-case
    consequence: FHA QC review will flag inappropriate non-traditional credit reliance.
    tags:
      - round-d
      - regulator-direct
      - fha
      - hud-4000-1
      - traditional-credit
      - non-traditional-credit
      - promoted
    primary_source:
      tier: 1
      authority: HUD Handbook 4000.1 II.A.5.a.ii — Types of Credit History (Manual)
      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: |
        If a traditional credit report is available, the Mortgagee must use a traditional credit report.
      drafter_attestation: |
        Copied verbatim from snapshot 3bf33edadcf6461d. II.A.5.a.ii
        traditional-credit-first operative clause.
    promoted_at: '2026-05-25T17:53:03+00:00'
    promoted_from: hud-4000-1-ii-a-5-roundd-v1.yaml
  - id: hud-4000-1-ii-a-5-streamline-refi-no-credit-report
    canonical_id: hud-4000-1-ii-a-5-streamline-refi-no-credit-report
    section: HUD Handbook 4000.1 II.A.5.a.i — Streamline refinance credit-report exception
    description: |
      [LENDER] (Mortgagee) is NOT required to obtain a credit report for
      non-credit-qualifying Streamline Refinance transactions. This is a
      narrow exception to the otherwise-mandatory per-Borrower credit
      report requirement at II.A.4.b.i and II.A.5.a.i.
    type: do
    audit_question: For non-credit-qualifying Streamline Refinance transactions where no credit report was obtained, can [LENDER] document that the loan met the non-credit-qualifying Streamline classification per HUD 4000.1?
    program_review: Does the program account for the non-credit-qualifying Streamline Refinance exception — permitting no credit report only where the loan properly meets that classification?
    file_review: Spot-check no-credit-report Streamline files; confirm the loan met the non-credit-qualifying Streamline classification per Handbook 4000.1.
    judgment: false
    feeds: []
    workflow_phase: loan_origination
    owner_role: underwriting_manager
    secondary_owner_role: compliance_officer
    cadence: per-streamline-refi
    consequence: Misclassified Streamline refi without credit report could create indemnification exposure if loan should have been credit-qualifying.
    tags:
      - round-d
      - regulator-direct
      - fha
      - hud-4000-1
      - streamline-refinance
      - credit-report-exception
      - promoted
    primary_source:
      tier: 1
      authority: HUD Handbook 4000.1 II.A.5.a.i — General Credit Requirements (Manual)
      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 is not required to obtain a credit report for non-credit qualifying Streamline Refinance transactions.
      drafter_attestation: |
        Copied verbatim from snapshot 3bf33edadcf6461d. II.A.5.a.i
        Streamline refinance credit-report exception.
    promoted_at: '2026-05-25T17:53:03+00:00'
    promoted_from: hud-4000-1-ii-a-5-roundd-v1.yaml
_promotion_history:
  - promoted_at: '2026-05-25T17:53:03+00:00'
    candidate_path: obligations\_remediation\round-d-investor-guides\hud-4000-1-ii-a-5-roundd-v1.yaml
    candidates_promoted: 5
    candidates_skipped_existing: 0

Verbatim regulatory text (5)

Verbatim provisions from HUD Handbook 4000.1 Part II.A.5 — Manual Underwriting of the Borrower — 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.5 — Manual underwrite on AUS Refer or downgrade

The Mortgagee must manually underwrite those applications where the AUS issues a Refer or applications which were downgraded to a manual underwrite.

Source: HUD Handbook 4000.1 II.A.5 — Manual Underwriting of the Borrower · source URL · snapshot 3bf33edadcf6461d

HUD Handbook 4000.1 II.A.5 — HUD-employee Mortgage requires FHA final approval

The Mortgagee must submit the underwritten mortgage application to FHA for final underwriting approval.

Source: HUD Handbook 4000.1 II.A.5 — HUD-Employee Manual Underwriting · source URL · snapshot 3bf33edadcf6461d

HUD Handbook 4000.1 II.A.5.a.i — Required credit report type (Manual)

The Mortgagee must either obtain a Tri-Merged Credit Report (TRMCR) or a Residential Mortgage Credit Report (RMCR) from an independent consumer reporting agency.

Source: HUD Handbook 4000.1 II.A.5.a.i — General Credit Requirements (Manual) · source URL · snapshot 3bf33edadcf6461d

HUD Handbook 4000.1 II.A.5.a.ii — Traditional credit before non-traditional

If a traditional credit report is available, the Mortgagee must use a traditional credit report.

Source: HUD Handbook 4000.1 II.A.5.a.ii — Types of Credit History (Manual) · source URL · snapshot 3bf33edadcf6461d

HUD Handbook 4000.1 II.A.5.a.i — Streamline refinance credit-report exception

The Mortgagee is not required to obtain a credit report for non-credit qualifying Streamline Refinance transactions.

Source: HUD Handbook 4000.1 II.A.5.a.i — General Credit Requirements (Manual) · source URL · snapshot 3bf33edadcf6461d