[Federal Register Volume 68, Number 55 (Friday, March 21, 2003)]
[Notices]
[Pages 13941-13943]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-6744]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-4513-N-11]


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 (FHA) 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

[[Page 13942]]

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 thirteenth 
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: (1) 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; (2) there has been no Origination Approval Agreement for at 
least six months; and (3) 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:

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                                                                                                          Termination
            Mortgagee name               Mortgagee branch address         HUD office jurisdictions         effective         Home ownership centers
                                                                                                              date
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American Capital Mortgage Bankers LTD.  1981 Marcus Ave Ste C112,  New York, NY.........................   01/09/2003  Philadelphia.
                                         Lake Success, NY 11042.
American International Mortgage         2001 Marcus Ave Ste S168,  New York, NY.........................   01/09/2003  Philadelphia.
 Bankers Inc..                           Lake Success, NY 11042.
Automated Financial Services..........  5500 S Redwood Road Ste    Salt Lake City, UT...................   01/09/2003  Denver.
                                         201, Salt Lake City, UT
                                         84123.
Century Funding LTD...................  4128 Steve Reynolds Blvd,  Atlanta, GA..........................   01/09/2003  Atlanta.
                                         Norcross, GA 30093.
Cornerstone Mortgage Group LTD........  1055 East Tropicana Ste    Las Vegas, NV........................   01/10/2003  Santa Ana.
                                         425, Las Vegas, NV 89119.
Discover Mortgage Inc.................  5736 Osuna NE 9,           New Mexico, NM.......................   01/09/2003  Denver.
                                         Albuquerque, NM 87109.
Encore Mortgage Service...............  1010 Laurel Oak Corp Ctr   Camden, NJ...........................   01/10/2003  Philadelphia.
                                         301, Voorhees, NJ 08043.
Hennessy Mortgage Group Inc...........  904 N Crowley Road Ste D,  Fort Worth, TX.......................   01/09/2003  Denver.
                                         Crowley, TX 76036.
Home Mortgage Inc.....................  7200 W 13TH Ste 4,         Topeka, KS...........................   01/10/2003  Denver.
                                         Wichita, KS 67212.
Southern Finance Mortgage Corp........  10251 Sunset Drive Ste     Florida State, FL....................   01/13/2003  Atlanta.
                                         103, Miami, FL 33173.
US Mortgage Finance Corp..............  602 Chadds Ford Ave,       Philadelphia, PA.....................   11/17/2002  Philadelphia.
                                         Chadds Ford, PA 19317.
White Oak Mortgage Group LLC..........  7101 Creedmoor Rd, Ste     Richmond, VA.........................   11/17/2002  Philadelphia.
                                         101, Raleigh, NC 27613.
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[[Page 13943]]

    Dated: Dated: March 12, 2003.
John C. Weicher,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 03-6744 Filed 3-20-03; 8:45 am]
BILLING CODE 4210-27-P