Technical Review
Reason Codes

Information by State  Print version

Chapter 3
Miscellaneous Policies
Page 3-08

The manner in which loans are rated under HUD's Post Endorsement Technical Review process and the list of underwriting codes has been updated effective with system changes made November 19, 2005. For authorized FHAC users, the new rating codes will appear on the Mortgagee Performance Reports and on the individual case and underwriter report. (Password Protected)

The Mortgagee Performance report has been changed and reorganized for both the Underwriter/Valuation Review and Mortgage Credit Review subsections as follows:

• % of Unaccep/Poor was renamed to Percent Unaccept.
• Number Accept field was renamed Number Conform.
• Number Deficnt field was added to provide the number of cases with Deficient review rating.
• Number Mitigat field was added to provide the number of cases with a mitigated review.
• Number Good, Number Fair, and Number Poor fields were removed.

Effective November 21, 2005, only the updated codes will appear on the Mortgagee Performance Report. There have been several formats of rating codes. Click the appropriate link to see the codes and definitions.

• Updated CHUMS reason codes effective 11/19/05; M10A code added effective 11/19/05; M07M, V21E and V24F to be added effective April 24, 2006; V codes updated based on new appraisal protocol effective 01/01/06
• New CHUMS Reason Codes effective 01/10/05
• Previous CHUMS Reason Codes effective 12/20/01 - 01/09/05
• Old CHUMS reason codes (effective prior to 12/20/01) can be found on the following HUD forms. Codes listed on any of these forms are obsolete
  • HUD-54118-MCR Mortgage credit
  • HUD-54118-UND Underwriter/Valuation
  • HUD-54118-VAL Valuation

The old ratings codes as listed on the old HUD-54118 forms are obsolete.

Effective November 21, 2005, HUD will rate loans CONFORMING, DEFICIENT or UNACCEPTABLE in two categories: Mortgage Credit (M codes) and Valuation (V codes). Prior to November 21, 2005, HUD rated loans Acceptable or Unacceptable. Effective with the changes announced January 10, 2005, the previous ratings of GOOD, FAIR or POOR in four categories: Mortgage Credit Underwriting (M codes), Valuation Underwriting (V codes), Architectural and Engineering Underwriting (A codes) or Closing Package (specific M codes) were eliminated.

A rating of CONFORMING means that no deficiencies were identified in the eligibility determination of the property, mortgagor, mortgage amount or term. A rating of DEFICIENT means that one or more deficiencies were identified in the review of the mortgage credit or property that do not present a risk to the Department or may be deficiencies in documentation or processing, but such deficiencies and errors did not result in change of eligibility.

A rating of UNACCEPTABLE means that deficiencies were noted indicating that the borrower and/or property should not be approved or resulted in a significant increase in mortgage risk through one or more of the following:

• A greater credit risk
• A decrease in property security
• Any acceptance of a mortgagor, or property, not permitted by HUD policy or statue
• Any action by the mortgagee to misrepresent either the financial capability of the applicant mortgagor or the condition of the property offered as security for the mortgage
• Any action that results in the omission or improper disclosure of information on the application that does not allow for a complete picture of the applicant's financial and/or the intended use of the property

An additional rating code of MITIGATED has been added. If an initial rating of UNACCEPTABLE was issued, and the lender was able to provide documentation in response to a request from HUD that mitigates the risk, then the UNACCEPTABLE rating will be changed to MITIGATED. If there was more than one code cited supporting the issuance of an UNACCEPTABLE rating, the rating will only be changed if all risk factors have been mitigated.

The codes have four characters. Codes beginning in "M" refer to borrower, credit eligibility and closing items. Codes beginning with a "V" relate to the lender's review of the valuation and (if applicable) architectural and engineering items. The number of codes has been substantially decreased because lenders can now review in FHA Connection the specific review comments on which the ratings are based. These comments provide more detailed feedback to lenders than was previously available.