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HUD No. 24-173
HUD Public Affairs
(202) 708-0685
July 10, 2024

HUD Releases Revised Servicing Defect Taxonomy Proposal for Stakeholder Feedback

Revised proposal is designed to provide greater clarity and certainty for servicers of FHA-insured single-family mortgages

WASHINGTON - Today, the U.S. Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA), is posting for stakeholder feedback a revised version of its proposed FHA Defect Taxonomy for Servicing Loan Reviews (the “Servicing Defect Taxonomy”). When final, the Servicing Defect Taxonomy will provide clear guidance to mortgage servicers regarding FHA’s servicing loan review process, FHA’s assessment of the severity of errors or non-compliance with its mortgage servicing policies, and the actions FHA may take in instances of servicer error or non-compliance.

“HUD’s programs rely on the work of private partners, including mortgage servicers. We aim to provide clarity and transparency to these important business partners so that they can effectively use our programs to expand opportunities for sustainable homeownership,” said HUD Acting Secretary Adrianne Todman. “Today, we’re releasing a revised proposal to provide additional clarity and certainty for mortgage servicers, and we invite stakeholders to provide input to ensure that the taxonomy is as useful as possible.”

“This latest draft takes into account the valuable feedback we’ve received from mortgage servicers, consumer advocates, and other stakeholders,” said Federal Housing Commissioner Julia Gordon. “The feedback has been instrumental in our formulation of a proposal that we believe offers the clarity and consistency long sought by mortgage servicers.”

When finalized, the Servicing Defect Taxonomy will be incorporated into FHA’s Single Family Housing Policy Handbook 4000.1 and will be part of FHA's system for identifying and correcting servicing defects at the loan level. The taxonomy includes a structured categorization of discrete policy errors or violations by source, cause, and severity, ranked by tiers.

“Posting this newly updated draft Servicing Defect Taxonomy is an important step in our ongoing work to increase transparency and certainty for FHA’s Single Family programs,” said Deputy Assistant Secretary for Single Family Housing Sarah Edelman. “FHA and lenders have had a positive experience using our origination defect taxonomy, and we expect this new tool will provide similar benefits for our mortgage servicing partners.”

FHA encourages industry participants to view the draft posted today on its Single Family Drafting Table web page and to provide feedback by the August 26, 2024, deadline.


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