Can a new lender created through merger, acquisition or reorganization qualify for LI authority?

New lenders seeking Lender Insurance authority that were created through a merger, acquisition or reorganization, but lack a two year claim and default history, may be approved provided that:
  • The new lender has Unconditional Direct Endorsement approval;
  • One or more of the lenders participating in the merger, acquisition or reorganization had Lender Insurance approval at the time of the merger, acquisition or reorganization;
  • All of the HUD-approved lenders participating in the merger, acquisition or reorganization that had Lender Insurance authority at the time of the merger, acquisition or reorganization had an acceptable two year claim and default rate at the time of the merger, acquisition or reorganization;
  • The two year claim and default rate of the new lender derived by aggregating the claims and defaults of the formerly HUD-approved lenders participating in the merger, acquisition or reorganization, was not more than 150% of the combined two year claim and default rate for the states in which the HUD-approved lenders underwrote loans; and
  • The management and staff who were involved with Lender Insurance processing will continue to exercise those responsibilities for the new lender.

For additional information see Handbook 4000.1:I.A.5.b. at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh and

For more information on the Lender Insurance program go to the Lender Insurance Program web page at https://www.hud.gov/program_offices/housing/sfh/lender/lendins

All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.


Topic Number: KA-02180