Is a Mortgagee required to self-report fraud or material misrepresentation by sponsored Third Party Originators (TPOs)?

Yes.  The Mortgagee must monitor all FHA-insured Mortgages it originates, underwrites, services, or purchases, including those Mortgages originated by sponsored Third Party Originators (TPO), for potential fraud, material misrepresentation, or other Material Findings. 

Suspected instances of fraud, material misrepresentation, and other Material Findings must be investigated and documented by the Mortgagee’s Quality Control (QC) team, who must determine whether or not fraud or material misrepresentation actually occurred, or whether Material Findings exist.  The Mortgagee must report to FHA all Findings of fraud and material misrepresentation.

For additional information see Handbook 4000.1 V.A.2.d.ii and V.A.2.d.iv(A) at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh