[Federal Register Volume 85, Number 97 (Tuesday, May 19, 2020)]
[Notices]
[Page 29961]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-10660]


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

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-6209-N-01]


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

AGENCY: Office of the Assistant Secretary for Housing--Federal Housing 
Commissioner, Department of Housing and Urban Development (HUD).

ACTION: Notice.

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

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 that have had their DE Approval terminated.

FOR FURTHER INFORMATION CONTACT: 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) 
708-5997 (this is not a toll-free number). Persons with hearing or 
speech impairments may access that number through TTY by calling the 
Federal Relay at (800) 877-8339 (this is a toll-free number).

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 notice, 
HUD advised that it would publish in the Federal Register a list of 
mortgagees that have had their Approval Agreements terminated. HUD 
Handbook 4000.1 section V.E.3.a.iii outlines current procedures for 
terminating Underwriting Authority of Direct Endorsement mortgagees.
    Termination of Direct Endorsement Approval: HUD approval of a DE 
mortgagee 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 regulations at 24 CFR part 25.
    Cause: HUD regulations permit HUD to terminate the DE Approval of 
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 
that exceeds the national default and claim rate for insured mortgages.
    Effect: Termination of DE Approval precludes the mortgagee from 
underwriting FHA-insured single-family mortgages within the HUD field 
office jurisdiction(s) listed in this notice. Mortgagees authorized to 
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 geographic area. Mortgagees must continue to pay 
existing insurance premiums and meet all other obligations associated 
with insured mortgages.
    A terminated mortgagee may apply for reinstatement if their DE 
Approval in 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 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 reinstatement must be 
submitted through the Lender Electronic Assessment Portal (LEAP). The 
application must be accompanied by the CPA's report and the corrective 
action plan.
    Action: The following mortgagees have had their DE Approval 
terminated by HUD:

----------------------------------------------------------------------------------------------------------------
                                   Mortgagee home        HUD office        Termination
         Mortgagee name            office address       jurisdiction     effective date    Homeownership center
----------------------------------------------------------------------------------------------------------------
Independent Bank...............  3111 Unicorn Lake   San Antonio.......        4/3/2020  Denver.
                                  Boulevard, Suite
                                  120, Denton, TX
                                  76210-0118.
----------------------------------------------------------------------------------------------------------------

    The Deputy Assistant Secretary for Housing--Federal Housing 
Commissioner, Brian D. Montgomery, having reviewed and approved this 
document, is delegating the authority to electronically sign this 
document to submitter, Aaron Santa Anna, who is the Federal Register 
Liaison for HUD, for purposes of publication in the Federal Register.

    Dated: May 13, 2020.
Aaron Santa Anna,
Federal Register Liaison for the Department of Housing and Urban 
Development.
[FR Doc. 2020-10660 Filed 5-18-20; 8:45 am]
 BILLING CODE 4210-67-P