FHA Single Family Housing Policy Handbook 4000.1, I. > DOING BUSINESS WITH FHA > A. FHA Lenders and Mortgagees (09/20/2021) > 6. Post-approval Operations — j. Use of Contractors

FHA Single Family Housing Policy Handbook 4000.1, Part I — j. Use of Contractors (09/26/2022)

Effective 2022-09-26 · publisher's stamp for this provision

j. Use of Contractors (09/26/2022) i. Permissible Use The Mortgagee may use contract support for administrative, human resources, and clerical functions that include: • clerical assistance; • mortgage processing (typing of mortgage documents, mailing and collecting verification forms, ordering credit reports, and/or preparing for endorsement and shipping Mortgages to the Purchasing Mortgagee); • ministerial tasks in mortgage servicing (processing of a foreclosure action, preservation and protection, and/or tax services); • legal functions; • Third Party Verification; • Quality Control; and • human resources services (payroll processing, payment of employment taxes and the provision of employee benefits) provided by a professional employer organization or a similar entity. A Supervised, Nonsupervised, or Government Title I Lender may use an agent to service Title I Loans for which it is the holder. Third Party Verification (TPV) refers to a process through which a Mortgagee may use a third party vendor to independently verify information in a loan application or otherwise required for loan approval. TPV can be used to verify employment, income, assets, credit, and occupancy. ii. Impermissible Use The Mortgagee may not contract with any entity or person that is suspended, debarred, under a Limited Denial of Participation (LDP), or who is otherwise excluded from participation in FHA transactions. A Mortgagee must not contract out management or underwriting functions. iii. Standard The Mortgagee must ensure that the contracting out of certain functions does not and will not materially affect underwriting or servicing decisions or otherwise increase financial risk to FHA. The Mortgagee remains responsible for the quality of its FHA-insured Mortgages and must ensure that its contractors fully comply with all applicable laws and FHA requirements. The Mortgagee may own or have an ownership interest in a separate business entity that offers such contract services. Employees covered by a contract for human resources services described above must remain under the direct supervision and control of the Mortgagee. FHA considers the Mortgagee, the employer with respect to all activities related to FHA business, and the Mortgagee retains full responsibility and legal liability for the actions of employees covered by a contract for human resources services with regard to all HUD regulations and requirements. iv. Required Documentation The Mortgagee and its contractor must have a valid contractual agreement in place that specifies the roles and responsibilities of each party.

Source: FHA Single Family Housing Policy Handbook 4000.1, Update 18 (issued 2026-08-12) · source URL · snapshot e1bca3432cf19e09