What Credit Watch Termination requirements affect a DE Mortgagee's Origination or Underwriting authority?

In accordance with the Credit Watch Termination regulations, FHA may terminate the origination or underwriting authority of any Mortgagee whose default and claim rate exceeds both the national default and claim rate and 200 percent of the default and claim rate within the geographic area served by a HUD field office.  Specifically,
  • A Mortgagee whose authority has been terminated under Credit Watch is prohibited from originating or underwriting FHA-insured Single Family Mortgages within the area of the HUD field office(s) listed in the Credit Watch Termination Notice.
  • Termination of origination authority under Credit Watch is at the branch office level within the HUD field office jurisdiction(s) cited in the final termination notice.
  • Termination of Direct Endorsement underwriting authority under Credit Watch is at the institution level within the HUD field office jurisdiction(s) cited in the final termination notice.
  • The Mortgageeā€™s general FHA approval and supplemental authorities remain unaffected. 
  • Mortgages that closed or were approved before the termination of origination or underwriting authority became effective, may be endorsed. 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 authorized to originate or underwrite FHA-insured Mortgages in that area.  
For additional information see Handbook 4000.1 V.E.3.a.iii at:
Additional information is available using the Credit Watch Termination link in the Oversight & Sanctions section at: https://www.hud.gov/program_offices/housing/sfh/lender/

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-03048