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Question: We recently received a consent order as a result of a routine state examination.  Do we need to report this to HUD?

Answer:

Yes.  HUD requires the timely notification of state sanctions. HUD’s Mortgagee Review Board took numerous administrative actions against mortgagees in recent years for a failure to notify HUD of state sanctions.  Note, reporting is required even if the state sanction is publicly set forth on the NMLS Consumer Access website.  The current version of the HUD’s Handbook 4000.1 indicates:

A Mortgagee must submit a Notice of Material Event to FHA and provide relevant documentation if it or any officer, partner, director, principal, manager, supervisor, loan processor, loan underwriter, or loan originator employed or retained by the Mortgagee is subject to any Unresolved Findings or Sanctions.  A Mortgagee must submit a Notice of Material Event to FHA of a change of status in any Unresolved Finding or Sanction previously reported. 4000.1.I.A.7.u. 

Recent updates to the Handbook 4000.1, effective August 19, 2024, define Unresolved Findings and Sanctions as follows:

• Unresolved Finding = a material, adverse written finding, to include fair lending violations of the Fair Housing Act or Equal Credit Opportunity Act, contained in a lawsuit or report produced in connection with an investigation, audit, or review conducted by HUD, another federal, state, or local governmental agency, or by any other regulatory or oversight entity with jurisdiction over the Mortgagee or its officers, partners, directors, principals, managers, supervisors, loan processors, loan underwriters, or loan originators, that has not yet been resolved through final agency or judicial action.
• Sanction = any penalty, punitive, or restrictive measure taken either for a failure to comply with or an alleged failure to comply with a court order, federal, state, or local government law, rule, or regulation.