Subject Clarification of Conflict of Interest and Dual Employment Policy for Most
Title II Single Family FHA-Insured Mortgage Transactions
Purpose This Mortgagee Letter revises Federal Housing Administration (FHA)
conflict of interest and dual employment policy to clarify when individuals
may perform multiple roles in a single FHA-insured transaction.
Effective Date This guidance is effective immediately for case numbers assigned on or after
the date of this Mortgagee Letter.
All policy updates will be incorporated into a forthcoming revision of the
Department of Housing and Urban Development (HUD) Single Family
Housing Policy Handbook 4000.1 (Handbook 4000.1).
Public
Feedback
HUD welcomes feedback from interested parties for a period of 30 calendar
days from the date of issuance. To provide feedback on this policy document,
please send feedback to the FHA Resource Center at answers@hud.gov.
HUD will consider the feedback in determining the need for future updates.
Affected
Programs
This guidance applies to all FHA Title II Single Family programs unless
otherwise specified in program requirements.
Mortgagee Letter 2022-22, Continued
2
Background FHA continues to receive requests to clarify its conflict of interest and dual
employment guidance regarding Mortgagee employees and other individuals
that may wish to perform multiple roles in a single FHA-insured transaction.
Most questions relate to indirect compensation, including ownership interest
in a business that is participating in the same FHA-insured transaction or a
family relationship between two participants in an FHA-insured transaction.
With this Mortgagee Letter, FHA is consolidating various conflict of interest
and dual employment subsections of Handbook 4000.1 and clarifying its
general conflict of interest policy by prohibiting individuals that have a direct
impact on the mortgage approval decision from having multiple roles or
sources of compensation from a single FHA-insured transaction while
permitting all other individuals to have multiple compensated roles for
services actually performed and permitted by HUD, provided that the FHAinsured transaction complies with all applicable federal, state and local laws,
rules, and requirements.
Summary of
Changes
This Mortgagee Letter:
• Deletes Section I.A.3.c.iv(B)(3)(b)(iv) – Dual Employment and
renumbers subsequent sections.
• Revises Section I.A.3.c.iv(B)(3)(b)(v) – Conflicts of Interest.
• Revises Section I.A.6.f – Conflicts of Interest.
Single Family
Housing Policy
Handbook
4000.1
The policy changes will be incorporated into Handbook 4000.1 as follows:
Employees (I.A.3.c.iv(B)(3))
(b) Standard [Text was deleted in this section.]
(i) Eligibility of Employees
The Mortgagee must not employ any individual who will participate in
FHA transactions if the individual is suspended, debarred, under a
Limited Denial of Participation (LDP), or otherwise excluded from
participation in FHA programs (see Restricted Participation
(V.A.2.b.i(B))).
Mortgagee Letter 2022-22, Continued
3
Single Family
Housing Policy
Handbook
4000.1, cont’d
(ii) Compensation
The Mortgagee must not compensate employees who perform
underwriting or Quality Control (QC) activities on a commission basis.
The Mortgagee must report all employee compensation in accordance
with IRS requirements.
(iii) SAFE Act Compliance
The Mortgagee must ensure that it and its employees comply with the
requirements of the Secure and Fair Enforcement for Mortgage Licensing
Act of 2008 (SAFE Act) (12 U.S.C. § 1501 et seq.), including the
licensing and registration of its employees in the Nationwide Mortgage
Licensing System (NMLS).
(iv) Conflicts of Interest
The Mortgagee’s employees will be subject to FHA’s Conflict of Interest
policy.
(v) Underwriters
The Mortgagee must ensure that its underwriters are not managed by and
do not report to any individual who performs mortgage origination
activities.
The Mortgagee must ensure that its underwriters:
• meet basic eligibility requirements (I.B.3.b); and
• perform the underwriting function in a manner consistent with
FHA guidelines.
(vi) HECM Originators
The Mortgagee and any other party that participates in the origination of
a HECM transaction must not participate in, be associated with, or
employ any party that participates in or is associated with any other
financial or insurance activity, unless the Mortgagee demonstrates that it
or any other party maintains firewalls and other safeguards designed to
ensure that:
• individuals participating in the origination of the HECM must
have no involvement with, or incentive to provide the Borrower
with, any other financial or insurance product; and
• the Borrower must not be required, directly or indirectly, as a
condition of obtaining a HECM, to purchase any other financial or
insurance product.
Mortgagee Letter 2022-22, Continued
4
Single Family
Housing Policy
Handbook
4000.1, cont’d
Post-approval Operations (I.A.6)
f. Conflicts of Interest
This policy applies to all FHA-insured transactions unless otherwise
specified in program requirements.
Participants that have a direct impact on the mortgage approval decision are
prohibited from having multiple roles or sources of compensation, either
directly or indirectly, from a single FHA-insured transaction. These
participants are:
• underwriters
• Appraisers
• inspectors
• engineers
Indirect compensation includes any compensation resulting from the same
FHA-insured transaction, other than for services performed in a direct role.
Examples include, but are not limited to:
• Compensation resulting from an ownership interest in any other
business that is a party to the same FHA-insured transaction; or
• Compensation earned by a spouse, domestic partner, or other Family
Member that has a direct role in the same FHA-insured transaction.
The Mortgagee must ensure that participants with a direct impact on the
mortgage approval decision do not have multiple roles or sources of
compensation from the same FHA-insured transaction.
Participants that do not have a direct impact on the mortgage approval
decision may have multiple roles and/or sources of compensation for services
actually performed and permitted by HUD, provided that the FHA-insured
transaction complies with all applicable federal, state, and local laws, rules,
and requirements.
Questions Any questions regarding this ML may be directed to the FHA Resource
Center at 1-800-CALL-FHA, answers@hud.gov, or www.hud.gov/answers.
The FHA Resource Center is prepared to accept calls from persons who are
deaf or hard of hearing, as well as individuals with speech and
communication disabilities. Information on how to make an accessible phone
call is available at
https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs

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