Requirements on the utilization of contract employees by Federal Housing Administration mortgagees is being relaxed for some functions.
Up to this point, FHA mortgagees have not been allowed in some cases to engage in contractual arrangements with professional employer organizations.
The prohibition applied to human
resources-related services like payroll processing, payment of employment taxes and employee benefits administration.
But HUD is changing its position.
“Based on an analysis of relevant policies and potential risks, HUD believes that mortgagees should be allowed to engage in contractual arrangements of this type, but only in cases where the mortgagee retains full responsibility and legal liability for the actions of covered employees with respect to HUD regulations and requirements,” the agency explained in Mortgagee Letter 2016-18.
Among the permissible uses of contract support are clerical assistance and mortgage processing
including typing mortgage documents, mailing and collecting verification forms, ordering credit reports and preparing for endorsement and shipping mortgages to the purchasing mortgagee.
Contract employees can also perform
ministerial servicing tasks like foreclosure processing, preservation and protection, and tax services.
In addition, they can handle legal functions, quality control and human resources services.
Mortgagees can’t contract with entities or people who are excluded from participation in FHA transactions. They also can’t contract out management or underwriting functions.
The letter indicated that employees who perform underwriting Quality Control or mortgage servicing cannot be compensated on a commission basis. Employee compensation must be reported by the mortgagee or its contractor on a W-2 form.
The change is immediately effective.
