What is a Principal-Authorized Agent relationship and how is it set up?

A Principal/Authorized Agent Relationship is one in which a Mortgagee with Unconditional Direct Endorsement (DE) authority permits another Unconditional DE-approved Mortgagee to underwrite Mortgages on its behalf.

A Mortgagee with Unconditional DE authority (acting as the “principal”) can designate another Unconditional DE-approved Mortgagee to act as its “authorized agent” for the purpose of underwriting Mortgages.

The principal must originate the Mortgage and the authorized agent must underwrite the Mortgage. The Mortgage may close in either Mortgagee’s name, and either may submit the Mortgage for endorsement.

The relationship must be documented in the Lender Electronic Assessment Portal (LEAP) by the authorized agent, and the principal’s FHA Lender ID must be entered in the “Originator” field on the FHA case file and in FHA Connection (FHAC).

The authorized agent must have Unconditional DE authority to underwrite the type of Mortgage being underwritten.  The Mortgagees must be approved as follows:

For a forward mortgage:
• the principal may have Unconditional DE authority for either forward mortgages or HECM; and

• the authorized agent must have Unconditional DE authority for forward Mortgages.

For a Home Equity Conversion Mortgage (HECM):
• the principal may have Unconditional DE authority for either forward Mortgages or HECM; and

• the authorized agent must have Unconditional DE authority for HECM.

The LEAP User Manual is located at: https://www.hud.gov/lenders under the LEAP Information link in the Approvals & Renewals section.

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

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-02993