[Federal Register Volume 75, Number 211 (Tuesday, November 2, 2010)]
[Notices]
[Pages 67388-67389]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-27549]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5411-N-06]


Credit Watch Termination Initiative; Termination of Direct 
Endorsement (DE) Approval

AGENCY: Office of the 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 
Direct Endorsement (DE) Approval taken by HUD's Federal Housing 
Administration (FHA) against HUD-approved mortgagees through the FHA 
Credit Watch Termination Initiative. This notice includes a list of 
mortgagees which have had their DE Approval terminated.

FOR FURTHER INFORMATION CONTACT: The Quality Assurance Division, Office 
of Housing, Department of Housing and Urban Development, 451 Seventh 
Street, SW., Room B133-P3214, Washington, DC 20410-8000; telephone 
(202) 708-2830 (this is not a toll-free number). Persons with hearing 
or speech impairments may access that number through 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 HUD's 
mortgagee approval regulations at 24 CFR 202.3. On May 17, 1999 HUD 
published a notice (64 FR 26769), 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 Approval Agreements 
terminated. On January 21, 2010 HUD issued Mortgagee Letter 2010-03 
which advised the extended procedures for terminating Underwriting 
Authority of Direct Endorsement mortgagees.
    Termination of Direct Endorsement Approval: Approval of a DE 
mortgagee by HUD/FHA authorizes the mortgagee to underwrite single 
family mortgage loans and submit them to FHA for insurance endorsement. 
The Approval may be terminated on the basis of poor performance of FHA-
insured mortgage loans underwritten by the mortgagee. The termination 
of a mortgagee's DE Approval 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 DE Approval 
with any mortgagee having a default and claim rate for loans endorsed 
within the preceding 24 months that exceeds 300 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 quarterly 
review period ending March 31, 2010, HUD is terminating the DE Approval 
of mortgagees whose default and claim rate exceeds both the national 
rate and 300 percent of the field office rate.
    Effect: Termination of the DE Approval precludes the mortgagee from 
underwriting 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 those already underwritten and approved by a DE underwriter, and 
cases covered by a firm commitment issued by HUD. Cases at earlier 
stages of processing cannot be submitted for insurance by the 
terminated mortgagee; however, the cases may be transferred for 
completion of processing and underwriting to another mortgagee with DE 
Approval 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 reinstatement of the DE 
Approval if the DE Approval for the affected area or areas has been 
terminated for at least six months and the mortgagee continues to be an 
approved mortgagee meeting the requirements of 24 CFR 202.5, 202.6, 
202.7, 202.10 and 202.12. The mortgagee's application for reinstatement 
must be in a format prescribed by the Secretary and signed by the 
mortgagee. In addition, the application must be accompanied by an 
independent analysis 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 analysis must be prepared by an independent 
Certified Public Accountant (CPA) qualified to perform

[[Page 67389]]

audits under Government Auditing Standards as provided by the 
Government Accountability 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 20410-8000 or by courier to 490 L'Enfant Plaza, 
East, SW., Suite 3214, Washington, DC 20024-8000.
    Action: The following mortgagees have had their DE Approvals 
terminated by HUD:

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                                   Mortgagee branch         HUD Office       Termination
        Mortgagee name                  address           jurisdictions    effective date  Homeownership centers
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Freedom Mortgage Corp.........  907 Pleasant Valley     Fort Worth.......         10/4/10  Denver.
                                 Ave. Mount Laurel, NJ
                                 08054.
Freedom Mortgage Corp.........  907 Pleasant Valley     Des Moines.......         10/4/10  Denver.
                                 Ave. Mount Laurel, NJ
                                 08054.
Alacrity Lending Company......  2535 E. Southlake       Houston..........         8/30/10  Denver.
                                 Blvd., Ste 100
                                 Southlake, TX 76092.
Benefit Funding Corp..........  10724 Baltimore Ave.    Washington.......         8/16/10  Philadelphia.
                                 Beltsville, MD 20705.
Nichols Mortgage Services Inc.  1811 N. Meridian St.    Indianapolis.....         8/11/10  Atlanta.
                                 Indianapolis, IN
                                 46202.
Pine State Mortgage Corp......  6065 Roswell Road NE,   Greensboro.......         8/11/10  Atlanta.
                                 Ste 300 Atlanta, GA
                                 30328.
Liberty Mortgage Corp.........  3720 Davinci Ct., Ste   Minneapolis......          8/9/10  Denver.
                                 150 Norcross, GA
                                 30092.
D and R Mortgage Corp.........  29870 Middlebelt Rd.,   Greensboro.......          8/1/10  Atlanta.
                                 Ste 100 Farmington
                                 Hills, MI 48334.
Summit Funding Inc............  2601 Fair Oaks Blvd.    Fort Worth.......          8/1/10  Denver.
                                 Sacramento, CA 95864-
                                 4932.
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    Dated: October 22, 2010.
David H. Stevens,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 2010-27549 Filed 11-1-10; 8:45 am]
BILLING CODE 4210-67-P