[Federal Register Volume 77, Number 22 (Thursday, February 2, 2012)]
[Notices]
[Pages 5263-5264]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-2345]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5511-N-06]


Credit Watch Termination Initiative Termination of Origination 
Approval Agreements

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 
Origination Approval Agreements 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 Origination Approval Agreements 
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 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 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 Origination Approval Agreement (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 quarterly 
review period ending June 30, 2011, HUD is terminating the Agreements 
of mortgagees whose default and claim rate exceeds both the national 
rate and 200 percent of the field office rate.
    Effect: Termination of the Agreement precludes branch(es) of the 
mortgagee from originating FHA-insured single-family mortgages within 
the area of the HUD field office(s) listed in this notice and from 
establishing a new branch in the location(s) covered by the 
termination. 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 Direct Endorsement 
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 branch; however, they may be transferred for 
completion of processing and underwriting to another FHA-insured 
mortgagee with direct endorsement

[[Page 5264]]

approval for the area covered by the termination. 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 
Origination Approval Agreement if the approval for the affected branch 
or branches has been terminated for at least six months and the 
mortgagee continues to be an approved mortgagee meeting the 
requirements of Sec. Sec.  202.5, 202.6, 202.7, 202.8 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 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 mortgagee has had its Origination Agreement 
terminated by HUD:

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                                     Mortgagee branch        HUD Office        Termination      Homeownership
          Mortgagee name              office address        jurisdiction     effective date         center
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Mortgage Source LLC..............  600 Old Country      New York...........         11/1/11  Philadelphia.
                                    Rd., Room 210.
                                   Garden City, NY
                                    11530-2011.
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    Dated: December 20, 2011.
Carol Galante,
Acting Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 2012-2345 Filed 2-1-12; 8:45 am]
BILLING CODE 4210-67-P