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Loan file review

Sep 23, 2016 08:02AM MDT

I have a two questions on sampling of lender loan files for compliance.

1. The HUD audit guide is not clear on selection, i.e. should we select samples from only FHA insured loans or from the lender's entire portfolio of underwritten loans for the year?

2. If we should select samples from the entire pool of loans underwritten during the year, are there specific samples sizes for FHA underwritten loans and conventional?

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Mike Olsen AHACPA Sep 28, 2016

The HUD Audit Guide only applies to FHA insured loans. Therefore, your sample should be selected from FHA insured loans. That being said, because of CFPB and the Yellow Book I believe you also are a responsibility to test some non FHA insured loans.

For your second question, here is a copy of a our FHA Lender training that should help answer you question.

Appropriate for populations of greater > 250

Significance of Control and Inherent Risk
of Compliance Requirement Minimum Sample
0 deviations expected: Size

Very significant and higher inherent risk 60
Very significant and limited inherent risk 40


Moderately significant and higher inherent risk
Moderately significant and limited inherent risk 25

Based on the above chart, chances are 25 may not be enough for your testing.


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