Changes to FHA Dual Employment Restrictions
On December 15, 2022, HUD released Mortgagee Letter 2022-22 which revises FHA policy regarding conflicts of interest and dual employment. Under the revised policy, participants that have a direct impact on the mortgage approval decision are prohibited from having multiple roles or sources of compensation (directly or indirectly) from a single FHA-insured transactions. Participants deemed to have a “direct impact on the mortgage approval decision” are underwriters, appraisers, inspectors and engineers.
The revised policy also clarifies that indirect compensation includes any compensation resulting from the same FHA-insured transaction. Examples of indirect compensation are (a) compensation resulting from an ownership interest in any other business that is party to the FHA-insured transaction; and (b) compensation earned by a spouse, domestic partner or other family member that has a direct role in the same FHA-insured transaction.
Under the revised policy, participants that do not have a direct impact on the mortgage approval decision may have multiple roles and/or sources of compensation for services actually performed and permitted by HUD, provided the FHA-insured transaction complies with all applicable law. This change may allow loan originators to have multiple roles or sources of compensation in FHA transactions (such as also acting as a real estate professional). However, there are other reasons why this practice may be risky. Please feel free to contact us with any questions as to how this change may impact your operations and other issues to consider.