How does suspension or termination of Lender Insuring authority affect a Mortgagee’s Direct Endorsement status?

Suspension of Lender Insurance authority is a temporary measure imposed by one of HUD’s Homeownership Centers (HOC) to address certain problems in the Mortgagee’s performance.

These may include a failure to submit requested case binders in a timely manner, failure to submit e-case binders that are legible and in the correct stacking order, or a failure to conduct adequate pre-endorsement reviews.

The suspension may be lifted by the HOC when the Mortgagee has demonstrated improved performance. There is no waiting period, and no specific re-application process.

If Lender Insurance authority is terminated for any reason, including a voluntary withdrawal by the Mortgagee, there is a mandatory six-month waiting period, and the lender must apply in writing to HUD Headquarters.
 
A lender’s Direct Endorsement (DE) authority is not affected by the suspension or termination of its Lender Insurance (LI) authority.

Lenders who have had their LI authority suspended or terminated may continue to underwrite and close FHA mortgages without prior review by HUD.  However, lenders are required to maintain Unconditional DE authority in order to participate in the LI program.  Termination of Unconditional DE authority will result in automatic termination of LI authority. 

For additional information see:
Handbook 4000.1 V.E.3.a.iv. at: https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh
the Lender Insurance Program web page at: https://www.hud.gov/program_offices/housing/sfh/lender/lendins, and,
the Lender Insurance Final Rule (effective 02/24/2012) at: https://www.federalregister.gov/documents/2012/01/25/2012-1508/federal-housing-administration-fha-single-family-lender-insurance-process-eligibility  https://www.gpo.gov/

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-04378