FHA Single Family Housing Policy Handbook 4000.1, V. QUALITY CONTROL, OVERSIGHT, AND COMPLIANCE > A. Quality Control of Lenders and Mortgagees > 2. Institutional Quality Control Program Requirements — c. Fraud, Misrepresentation, and Other Findings

c. Fraud, Misrepresentation, and Other Findings (11/10/2026)

i. Definitions (A) Finding A Finding is a determination of defect by the Mortgagee. (B) Material Finding In the context of mortgage origination and underwriting, a Finding is Material if disclosure of the Finding would have altered the Mortgagee’s decision to approve the Mortgage or to endorse or seek endorsement from FHA for insurance of the Mortgage. In the context of mortgage servicing, a Finding is Material if it has an adverse impact on the Property and/or FHA. (C) Mitigated Finding In the context of mortgage origination and underwriting, a Finding has been Mitigated if the Mortgagee has adequately addressed the deficiencies underlying the Finding, and such deficiencies have been remedied so that the Mortgagee’s decision to approve the Mortgage or to endorse or seek endorsement from FHA for insurance of the Mortgage is acceptable to FHA. In the context of mortgage servicing, a Finding has been Mitigated if the Mortgagee has adequately addressed the deficiencies underlying the Finding, and such deficiencies have been remedied through mortgage servicing actions taken by the Mortgagee so there is no longer an adverse impact on the Property and/or FHA.

ii. Standard The Mortgagee must monitor all FHA-insured Mortgages it originates, underwrites, services, or purchases, including those Mortgages originated by sponsored Third-Party Originators (TPO), for potential fraud, material misrepresentations, or other Material Findings. Suspected instances of fraud, material misrepresentations, and other Material Findings must be investigated and documented by the Mortgagee’s QC team, who must determine whether or not fraud or material misrepresentation actually occurred, or whether Material Findings exist.

iii. Internal Reporting to Senior Management The Mortgagee’s written QC Plan must contain a process for QC staff to report Findings identified through the QC process to senior management that complies with the following requirements. (A) Time Frame for Reporting For all Mortgages selected, Mortgagees must complete the initial Findings report within 60 Days of the date of selection. Initial review Findings must be reported to the Mortgagee’s senior management within 30 Days of completion of the initial Findings report. The Mortgagee’s final Findings report must be issued within 60 Days of the date the initial review Findings were reported to senior management. (B) Corrective Action Plan Mortgagee senior management must review and respond to each instance of fraud, material misrepresentation, or other Material Finding. The Mortgagee’s final report must identify the corrective and curative actions being taken, the timetable for completion, and any planned follow-up activities. (C) Follow Up The Mortgagee must discuss all Findings with the responsible party(ies) in order to ensure corrective action and to prevent similar Findings from occurring in the future.

v. Required Documentation The Mortgagee must retain all QC review results, including all selection criteria, review documentation, Findings, and actions taken to mitigate Findings. 3. Loan Level Quality Control Program Requirements Mortgagees must perform QC reviews of FHA-insured Mortgages the Mortgagee and its Affiliates originate, underwrite, or service.