FHA Lender Performance
The following page contain information and collateral materials that provide lenders with clarity and transparency into key aspects of FHA's oversight.
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Neighborhood Watch
The Neighborhood Watch Early Warning System (Neighborhood Watch) is a secure web-based application designed to provide comprehensive data querying, reporting and analysis capabilities for tracking the performance of loans originated, underwritten, and serviced by FHA-approved lending institutions. Neighborhood Watch is used by FHA employees, lending institutions and the general public to monitor the performance of insured mortgage loans by highlighting instances of high defaults and claims among lending institutions by geographic area, loan characteristic, and other factors. This is accomplished by developing compare ratios to identify lenders within various geographic areas (from zip code up to the national level) that exhibit a higher level of risk to the FHA insurance fund than other institutions due to excessive default and claim rates on endorsed loans with a beginning date of amortization within the previous 12 or 24 months from analysis.
Neighborhood Watch provides a critical component for FHA's risk management strategy by allowing for in-depth analysis to be performed on lending institutions based on observed trends in the number of defaults and claims over time, among geographic areas, and across product types. Neighborhood Watch also allows for analysis to be carried out on the nature of the delinquencies that are reported to FHA by its servicers, the period of the mortgage lifecycle in which those delinquencies took place, and the success rate of loss mitigation actions in bringing borrowers current.
Neighborhood Watch has an extensive Help menu which provides detailed instructions on using the system features. Please review the help menu before attempting to operate the system.
There are two ways to access Neighborhood Watch. First, through the Public Site, which provides general information accessible by anyone in the general public. It does not provide access to loan-level data. Second, you can access the lender view through FHA Connection or by clicking the following link, Neighborhood Watch Lender View. Because this option provides access to granular data at a loan level, access to this option is limited to employees of the querying lending institution and requires an FHA Connection user ID and password.
Loan Review System
The Loan Review System (LRS) is the electronic platform for most Federal Housing Administration (FHA) Title II Single Family quality assurance review processes, including:
- Various Post-Endorsement Loan Reviews
- Unconditional Direct Endorsement Authority Test Cases
- Lender Monitoring Reviews
- Lender Self-Reporting of Fraud and Other Material Findings
Functions and Features
- Communicates findings using FHA's Defect Taxonomy
- Consolidates most quality assurance functions into one system
- Automates various manual processes and communications
- Organizes and prioritizes requests for lender responses
- Streamlines submission of required documents
- Enhances loan quality reporting and analytics
- LRS User Manual - Updated January 1, 2020
FHA Defect Taxonomy
The Defect Taxonomy is FHA's method of identifying defects at the loan-level. It provides clarity and transparency into existing FHA quality assurance processes and is used to describe findings through the Loan Review System (LRS) based on HUD policy requirements. The FHA Defect Taxonomy provides useful data and feedback through structured categorization of defects and their sources, causes, and severities. For more predictable review outcomes, potential remedies that align with severity tiers are listed in each defect area.
Appendix 8.0 – FHA Defect Taxonomy includes the content implemented with version 2 of the Defect Taxonomy, effective for loan reviews as of January 1, 2020. It supersedes the originally published version which was implemented through LRS in 2017 and applicable for loan reviews through December 31, 2019. Appendix 8.0 – FHA Defect Taxonomy is part of the FHA Single Family Housing Policy Handbook 4000.1.
User Roles
Lenders use LRS to interact with FHA on the majority of Title II Single Family quality assurance processes. All users access LRS through FHA Connection (FHAC) via the "Loan Review System" link on FHAC's Single Family FHA Business Areas screen. For any FHAC user ID that requires access to LRS, the organization's FHAC Application Coordinator must grant specific LRS authorizations in the "Loan Review System" section of the FHAC ID Administration screen. For more information on registering new users in FHAC, please reference the online FHA Connection Guide.
LRS has three user roles that may be assigned to users, each with different access levels and authority to perform specific functions:
- Read Only: Provides access to the Active Reviews, Completed Reviews, and Reports menu items. Users with this role can view detailed review results, but they cannot edit or submit responses, upload documents, manage binder requests or create self-reports.
- Response Submission: Provides access to the Active Reviews, Binder Request, Create Self-Report, Completed Reviews, and Reports menu items. Users with this role can view detailed review results, edit and submit responses to review findings, upload documents, and/or create self-reports.
- Indemnification Submission: Provides access to all functions included in the Response Submission role, and allows the user to electronically sign and submit indemnification agreements in response to unacceptable findings. Users with this role must have the authority to legally bind the institution.
Other Important User Roles
Onboarding to LRS requires lenders to perform certain functions in other FHA systems:
- Designate or update the Administrative Contact in the Lender Electronic Assessment Portal (LEAP). Each lender's designated Administrative Contact, as recorded in LEAP, will be the individual that receives daily email notifications summarizing any new LRS response requests.
- Assign or update FHAC user IDs through the FHAC Application Coordinator. Users will be able to access FHAC within one day of the FHAC Application Coordinator assigning or reactivating an FHAC user ID.
Loan Review Resources
Quality Assurance Webinars
Take advantage of FHA's online webinar offerings to stay up-to-date on quarterly quality assurance results, most common findings, and additional guidance for lenders related to quality assurance processes.
Quarterly Loan Review Summary
We are pleased to present FHA's Quarterly Loan Review Summary. This report provides a quarter-by-quarter snapshot of FHA's Loan Review System (LRS) review outcomes. It includes loans selected for all reasons other than lender self-reports and FHA's own internal quality control processes.
Each cohort includes reviews completed in that calendar quarter. Gross Defects represent initial review outcomes; Net Defects represent final outcomes after lenders have had opportunities to mitigate or remediate findings.
Lenders with access to LRS can generate a similar report based on their own review data for comparison to national outcomes. Data Downloads are also available for more detailed analysis. More information can be found in the LRS User Manual.
Tier Ranking System II (TRSII)
HUD’s Tier Ranking System II (TRSII) delinquent servicing scoring model was created to accomplish the following:
- Quantify servicer compliance with HUD/FHA delinquent servicing guidelines.
- Protect borrowers from servicer non-compliance with HUD/FHA delinquent servicing guidelines and requirements.
- Alert HUD to potential servicer-specific or industry-wide delinquent servicing issues.
TRSII utilizes four scoring elements to achieve this, which are Foreclosure Prevention, Redefaults, SFDMS Reporting, and Loss Mitigation Engagement.
For detailed information about the TRSII scoring model, see the Servicer Narrative. This narrative details the calculations for the scoring elements, why and how we look at these elements, when and from which sources the data comes and more.
Where can Servicers Find Their Scores?
Scores as well as case level data can be found in the Single Family – Data Analysis & Reporting Tool (SF-DART). This system is a self-service, one-stop-shop for FHA-approved servicers to access their TRSII related data. To request access to this system, select SF-DART, click on Agree and Proceed, click HUD SF-DART, click Sign-Up, choose the appropriate form, and follow the instructions from there.
Benefits of Being a Tier 1 Mortgagee
Servicers earning a Tier 1 for a fiscal year end score will receive the following during the next calendar year:
- An additional $100 payment for each Special Forbearance Agreement executed between January 1 and December 31;
- An automatic extension of two additional months to continue marketing properties being sold via Preforeclosure Sale for a total of six months with approvals to participate issued between January 1 and December 31; and
- An increase in the reimbursement of foreclosure costs from two-thirds to 75 percent for Part B claims received by HUD between January 1 and December 31 for loans endorsed on or after February 1, 1998.
Publication of Scores
TRSII measures compliance with HUD/FHA delinquent servicing guidelines and requirements in the areas of early delinquency intervention, loss mitigation engagement quantity and quality, and Single Family Default Monitoring System (SFDMS) reporting.
View the documents below for a summary of the number of servicers evaluated by round and by tier.
Round 12 Evaluation Period: 10/1/2023 – 9/30/2024
Round 11 Evaluation Period: 10/1/2022 – 9/30/2023
Round 10 Evaluation Period: 10/1/2021 – 9/30/2022
Round 9 Evaluation Period: 10/1/2020 – 9/30/2021
Round 8 Evaluation Period: 10/1/2019 – 9/30/2020
Round 7 Evaluation Period: 10/1/2018 – 9/30/2019
Round 6 Evaluation Period: 10/1/2017 – 9/30/2018
Round 5 Evaluation Period: 10/1/2016 – 9/30/2017
Round 4 Evaluation Period: 10/1/2015 – 9/30/2014
Round 3 Evaluation Period: 10/1/2014 – 9/30/2015
Round 2 Evaluation Period: 10/1/2013 – 9/30/2014
Questions and Answers
Contact the FHA Resource Center with questions about FHA loan products, processing topics, mortgage credit guidelines, property analysis guidelines, and more. Call (800) 225-5342, email answers@hud.gov, or search frequently asked questions. The FHA Resource Center is prepared to accept calls from persons who are deaf or hard of hearing, as well as individuals with speech or communication disabilities. Information on how to make an accessible phone call is available at https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs.