[Federal Register Volume 65, Number 143 (Tuesday, July 25, 2000)]
[Notices]
[Pages 45788-45789]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-18745]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-4513-N-04]


Credit Watch Termination Initiative

AGENCY: Office of Assistant Secretary for Housing-Federal Housing 
Commissioner, HUD.

ACTION: Notice.

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SUMMARY: This notice advises of the cause and effect of termination of 
Origination Approval Agreements taken by HUD's Federal Housing 
Administration against HUD-approved mortgagees through its Credit Watch 
Termination Initiative. This notice includes a list of mortgagees which 
have had their Origination Approval Agreements (Agreements) terminated.

FOR FURTHER INFORMATION CONTACT: The Quality Assurance Division, Office 
of Housing, Department of Housing and Urban Development, 451 Seventh 
St. SW, Room B133-P3214, Washington, DC 20410; telephone (202) 708-2830 
(this is not a toll-free number). Persons with hearing or speech 
impairments may access that number via TTY by calling the Federal 
Information Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION: HUD has the authority to address 
deficiencies in the performance of lenders' loans as provided in the 
HUD mortgagee approval regulations at 24 CFR 202.3. On May 17, 1999 (64 
FR 26769), HUD published a notice on its procedures for terminating 
origination approval agreements with FHA lenders and placement of FHA 
lenders on Credit Watch status (an evaluation period). In the May 17, 
1999 notice, HUD advised that it would publish in the Federal Register 
a list of mortgagees which have had their Origination Approval 
Agreements terminated.

Termination of Origination Approval Agreement

    Approval of a mortgagee by HUD/FHA to participate in FHA mortgage 
insurance programs includes an Agreement between HUD and the mortgagee. 
Under the Agreement, the mortgagee is authorized to originate single 
family mortgage loans and submit them to FHA for insurance endorsement. 
The Agreement may be terminated on the basis of poor performance of 
FHA-insured mortgage loans originated by the mortgagee. The Termination 
of a mortgagee's Agreement is separate and apart from any action taken 
by HUD's Mortgagee Review Board under HUD's regulations at 24 CFR part 
25.

Cause

    HUD's regulations permit HUD to terminate the Agreement with any 
mortgagee having a default and claim rate for loans endorsed within the 
preceding 24 months that exceeds 200 percent of the default and claim 
rate within the geographic area served by a HUD field office, and also 
exceeds the national default and claim rate. For the third review 
period, HUD is only terminating the Agreement of mortgagees whose 
default and claim rate exceeds both the national rate and 300 percent 
of the field office rate.

Effect

    Termination of the Agreement precludes that branch(s) of the 
mortgagee from originating FHA-insured single family mortgages within 
the area of the HUD field office(s) listed in this notice. Mortgagees 
authorized to purchase, hold, or service FHA insured mortgages may 
continue to do so.

[[Page 45789]]

    Loans that closed or were approved before the Termination became 
effective may be submitted for insurance endorsement. Approved loans 
are: (1) Those already underwritten and approved by a Direct 
Endorsement (DE) underwriter employed by an unconditionally approved DE 
lender; and (2) cases covered by a firm commitment issued by HUD. Cases 
at earlier stages of processing cannot be submitted for insurance by 
the terminated branch; however, they may be transferred for completion 
of processing and underwriting to another mortgagee or branch 
authorized to originate FHA insured mortgages in that area. Mortgagees 
are obligated to continue to pay existing insurance premiums and meet 
all other obligations associated with insured mortgages.
    A terminated mortgagee may apply for a new Origination Approval 
Agreement if the mortgagee continues to be an approved mortgagee 
meeting the requirements of 24 CFR 202.5, 202.6, 202.7, 202.8 or 202.10 
and 202.12, if there has been no Origination Approval Agreement for at 
least six months, and if the Secretary determines that the underlying 
causes for termination have been remedied.
    To enable the Secretary to ascertain whether the underlying causes 
for termination have been remedied, a mortgagee applying for a new 
Origination Approval Agreement must obtain an independent review of the 
terminated office's operations as well as its mortgage production, 
specifically including the FHA-insured mortgages cited in its 
termination notice. This independent analysis shall identify the 
underlying cause for the mortgagee's high default and claim rate. The 
review must be conducted and issued by an independent Certified Public 
Accountant (CPA) qualified to perform audits under Government Auditing 
Standards as set forth by the General Accounting Office.
    The mortgagee must also submit a written corrective action plan to 
address each of the issues identified in the CPA's report, along with 
evidence that the plan has been implemented. The application for a new 
Agreement should be in the form of a letter, accompanied by the CPA's 
report and corrective action plan. The request should be sent to the 
Director, Office of Lender Activities and Program Compliance, 451 
Seventh Street SW, Room B133-P3214, Washington, DC 20410, or by courier 
to 490 L'Enfant Plaza, East, S.W., Suite 3214, Washington, DC 20024.

Action

    The following mortgagees have had their Agreements terminated by 
HUD:

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                                                                   HUD office      Termination    Home ownership
        Mortgagee name             Mortgagee branch address      jurisdictions   effective date      centers
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Allied Mortgage Capital Corp.  513 East Center Street,          Memphis, TN....      06/02/2000  Atlanta.
                                Kingsport, TN 37660.
Challenge Mortgage Corp......  15 Spinning Wheel Road, STE      Chicago, IL....      06/05/2000  Atlanta.
                                426, Hinsdale, IL 60521.
First Guaranty Mortgage Corp.  8180 Greensboro Dr., STE 1175,   Richmond, VA...      06/02/2000  Philadelphia.
                                McLean, VA 22102.
First Republic Mortgage Corp.  6230 Fairview RD #200,           Greensboro, NC.      03/20/2000  Atlanta.
                                Charlotte, NC 28210.
General Mortgage Corp........  23880 Woodward Avenue, Pleasant  Detroit, MI....      06/02/2000  Philadelphia.
                                Ridge, MI 48069.
Wells Fargo Home Mortgage Inc  14402 John Humphrey Drive,       Chicago, IL....      06/02/2000  Atlanta.
                                Orland Park, IL 60462.
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    Dated: July 17, 2000.
William C. Apgar,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 00-18745 Filed 7-24-00; 8:45 am]
BILLING CODE 4210-27-P