[Federal Register Volume 67, Number 129 (Friday, July 5, 2002)]
[Notices]
[Pages 44871-44873]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-16768]


-----------------------------------------------------------------------

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-4513-N-10]


Credit Watch Termination Initiative

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

ACTION: Notice.

-----------------------------------------------------------------------

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.

[[Page 44872]]


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 tenth 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.
    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, SW., Suite 3214, 
Washington, DC 20024.

Action

    The following mortgagees have had their Agreements terminated by 
HUD:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Mortgagee branch                                                  Termination
            Mortgagee name                     address                   HUD office jurisdictions          effective date      Home ownership centers
--------------------------------------------------------------------------------------------------------------------------------------------------------
A and E Mortgage Co. LLC.............  625 W First Ave.,        Newark, NJ...............................      05/02/2002  Philadelphia.
                                        Roselle, NJ 07203.
Alliance Mortgage Banking Corp.......  2735 Buffalo Road,       Buffalo, NY..............................      05/01/2002  Philadelphia.
                                        Rochester, NY 14624.
Embassy Mortgage Inc.................  2121 Woodale Blvd., Ste  New Orleans, LA..........................      05/01/2002  Denver.
                                        C, Baton Rouge, LA
                                        70806.
Lincoln Mortgage Corp................  27950 Orchard Lake Rd.,  Detroit, MI..............................      03/02/2002  Philadelphia.
                                        Ste 120, Farmington
                                        Hills, MI 48334.
Luzal Inc............................  10312 Jurupa Road, Mira  Santa Ana, CA............................      05/01/2002  Santa Ana.
                                        Loma, CA 91752.
Mortgage One Corp....................  9610 Two Notch Road,     Columbia, SC.............................      05/01/2002  Atlanta.
                                        Ste 5, Columbia, SC
                                        29223.
Regal Mortgage Services, Inc.........  3802 W. 96th Street,     Indianapolis, IN.........................      05/02/2002  Atlanta.
                                        Ste 120, Indianapolis,
                                        IN 46268.
SGB Corporation......................  1 South 660 Midwest      Chicago, IL..............................      05/02/2002  Atlanta.
                                        Rd., Ste 100, Oakbrook
                                        Terrace, IL 60181.
--------------------------------------------------------------------------------------------------------------------------------------------------------



[[Page 44873]]

    Dated: June 24, 2002.
John C. Weicher,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 02-16768 Filed 7-3-02; 8:45 am]
BILLING CODE 4210-27-P