All post-closing reviews of new Federal Housing Administration-insured mortgages must now use the defect taxonomy, effective immediately.

This is part of the FHA now requiring lenders to use the new Loan Review System for mortgages selected for quality control reviews and monitoring.

The defect taxonomy was created in June 2015 and introduced nine broad categories for which errors can be identified.

These categories are further broken down into reason codes that identify the source and cause of the defect and into four severity tiers.

All reviews currently in progress will continue to be handled through the existing processes. Thus, some lenders may be using both the existing processes and the LRS for a limited time, the FHA said in its announcement.

What the taxonomy does not do is establish standards for administrative or civil enforcement if there is a defect in a loan FHA insures.

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