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For assistance with mortgage licensing, contact us at:Direct Phone: (714) 721-3963
Fax: (714) 829-1444
steven@imlicensing.com
Information herein is for educational purpose only and is not meant to be a complete statement of all state mortgage licensing requirements. Additional State and FHA mortgage licensing requirements may be required. If you need further information, we would encourage you to contact us directly.
FHA Licensing Frequently Asked Questions
Most Common FHA Licensing Applicant Questions
FAQs - Differences in Approval Types1. What is the difference between Title I and Title II lender approvals?
2. What are the differences between a mortgagee and a loan correspondent?
3. What's the difference between a supervised and nonsupervised lender (both mortgagee and loan correspondent)?
4. What type of approval does a lender need to originate and/or underwrite and/or service Title II Single Family Loans, including HECMs (Reverse Mortgages) or 203k (Rehabilitation mortgages)?
5. Does a mortgage broker or lender need to be a FHA approved lender to originate a single family loan that is subsequently insured by FHA?
6. Can a company that operates as both a mortgage company and a real estate company be approved as a FHA lender?
FAQs - Application and Its Processing
7. What kind of FHA lender approval can I apply for?
8. What are the types of Mortgagee Approvals?
9. What are the requirements to become a FHA approved nonsupervised loan correspondent (typically mortgage brokers, aka as a FHA mini-Eagle approval)?
10. What are the requirements to become a FHA approved nonsupervised mortgagee (mortgage lender or mortgage banker)?
11. What are the requirements to become a FHA approved Supervised Mortgagee?
12. What are the requirements to become a FHA approved Supervised Loan Correspondent?
13. What types of business forms can be FHA approved as a mortgagee or loan correspondent?
14. What are the FHA requirements for an LLC to be a FHA approved lender?
15. What are FHA's requirements concerning the use of "Doing Business As" names.
16. What are the net worth and liquidity requirements for nonsupervised loan correspondents and mortgagees?
17. What type of financial statement must be submitted with an application to become a FHA Approved Lender?
18. What are the office facilities requirements for FHA approved lenders?
19. What are the requirements related to sharing office space with another company?
20. What are the staffing requirements for a lender?
21. What are the requirements and restrictions on employees of FHA lenders?
22. What functions can a FHA approved lender contract out?
23. Can FHA Approved Lenders use non-employees as Loan Officers?
24. What is the experience requirement that must be documented in the resumes attached to an application for lender approval?
25. What credit reports are required to be submitted with a lender approval application and how are they evaluated.
26. What is a Sanctions Letter?
27. What is a Sponsor Letter?
28. What are the requirements for a lender's funding program?
29. What the various addresses on the HUD Form 11701 used for?
30. What are the quality control plan requirements for FHA approved lenders?
31. Where do I send my lender application and the application fee?
32. What is the processing time for an application and how do I check on the Status of my application for FHA lender approval?
33. How does a Lender who is already Title II approved become Title I approved?
34. How does a lender that used to be FHA approved get approved again?
35. Can Mortgage Brokers submit a surety bond in lieu of an annual audit to become a FHA approved nonsupervised loan correspondent and/or renewal their existing FHA approval?
FAQs - Differences in Approval Types
1. What is the difference between Title I and Title II lender approvals?
Title II approved lenders can participate as a mortgagee or loan correspondent in the FHA Title II loan programs, such as 203(b), 203(k), HEMCs, Condos and Multifamily. Title I approved lenders can participate as a lender or loan correspondent in the two FHA Title I loan programs, -- the property improvement loan program (2nd mortgages) and the manufactured housing (mobile) home program (where the home is classified as personal property).
Go to http://www.hud.gov/offices/hsg/sfh/ins/singlefamily.cfm for descriptions of the various Title II Single Family and Title I loan programs.
2. What are the differences between a mortgagee and a loan correspondent?
A mortgagee can originate, underwrite, fund, service and/or own FHA insured loans. In addition, mortgagees can obtain supplemental approval as a Direct Endorsement (DE) mortgagee and Lender Insurance (LI) mortgagee for FHA single family loans and a Mutifamily Accelerated Processing (MAP) mortgagee for FHA multifamily loans. Mortgagees are also known as Full-Eagles because they can do any lender function on a FHA loans. States typically license nonsupervised mortgagees as mortgage lenders. Some States have a correspondent lender's license which allows a nonsupervised mortgagee to originate, underwrite and fund mortgages but not service or own them. FHA mortgagees who are banks are considered supervised mortgagees.
A loan correspondent can only originate loans that are underwritten by their sponsoring DE mortgagee. They can't underwrite, own or service FHA insured loans. This is the only type of approval a mortgage broker can apply for. Loan correspondents are also known as Mini-Eagle because they can only originate FHA loans. They must use a DE mortgagee to sponsor them in an origination. FHA loan correspondents who are banks are considered supervised loan correspondents.
Please see paragraph 1-2 in Chapter 1 of the FHA Title II Mortgagee Approval Handbook 4060.1, Rev-2 at: http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4060.1/40601handbookHSGH.doc
3. What's the difference between a supervised and nonsupervised lender (both mortgagee and loan correspondent)?
A supervised lender is a financial institution that is a member of the Federal Reserve System, or a financial institution whose accounts are insured by the Federal Deposit Insurance Corporation (FDIC), or the National Credit Union Administration (NCUA). Examples of supervised mortgagees are banks, savings associations, and credit unions. FHA approval only applies to the legal entity that is the actual applicant and does not cover any subsidiaries or affiliates.
A nonsupervised lender is a company which does not qualify as supervised lender and whose principal activity is mortgage brokering or lending. Principal activity means more than half of the company's gross income is from their mortgage operations. Mortgage brokers apply for nonsupervised loan correspondent approval. Correspondent lenders and mortgage lenders apply for nonsupervised mortgagee approval.
4. What type of approval does a lender need to originate and/or underwrite and/or service Title II Single Family Loans, including HECMs (Reverse Mortgages) or 203k (Rehabilitation mortgages)?
Any company that wants to originate, underwrite, fund, service or own FHA loans must have its own approval. It cannot use another company's approval including any related companies.
Originations: Any lender approved by FHA to originate FHA Insured Title II Single Family loans can originate any type of FHA Title II Single Family Loan, including HECMs and 203Ks. They can be approved as a loan correspondent or as a mortgagee.
Underwriting: A mortgagee must obtain specific DE approval from their appropriate Single Family Homeownership Center to underwrite FHA Single Family loans and an additional approval to underwrite HECM and/or 203k loans. Loan Correspondents cannot underwrite.
Servicing: Any FHA approved mortgagee can service FHA Insured Single Family loans (including HECM and/or 203k loans) see paragraph 2-20 of paragraph 1-2 B. of HUD Handbook 4060.1, Rev-2 Only FHA approved mortgagees can be a servicer. Loan Correspondents cannot service FHA insured loans. The Title II Mortgagee Approval Handbook 4060.1, Rev-2 is at: http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4060.1/40601handbookHSGH.doc
The FHA Resource Center helps consumers and industry members with their questions. Its home web page is: http://www.hud.gov/offices/hsg/sfh/fharesourcectr.cfm . You can eMail the Resource Center at hud@custhelp.com or call them Monday-Friday, 8 am to 8 pm ET at (800) CALLFHA or (800) 225-5342.
5. Does a mortgage broker or lender need to be a FHA approved lender to originate a single family loan that is subsequently insured by FHA?
Yes. Only FHA approved lenders can originate a loan that is subsequently insured by FHA. The FHA loan origination process has 5 components: (1) taking a FHA loan application, (2) processing it, (3) underwriting it, (4) closing it and (5) funding the mortgage.
There are two recently issued mortgagee letters concerning non-FHA approved mortgage brokers. They are ML 08-14 and 08-17 available at: http://www.hud.gov/offices/adm/hudclips/
6. Can a company that operates as both a mortgage company and a real estate company be approved as a FHA lender?
Yes as long as the meet the "principal activity" part of the definition of a nonsupervised lender and their loan officers who plan to originate FHA loans do not have outside employment in the real estate industry.
Principal Activity: The FHA definitions of nonsupervised lenders are as follows:
Nonsupervised Mortgagee: Nondepository financial entities that have as their principal activity the origination, underwriting, funding, servicing and/or holding of real estate mortgages. They are commonly known as mortgage bankers, correspondent lenders or mortgage lenders in the industry
Nonsupervised Loan Correspondent: Nondepository financial entities that have as their principal activity the origination of real estate mortgages. They are commonly known as mortgage brokers in the industry. They must sale or transfer their FHA originations to the FHA approved mortgagee who underwrote the loan and can have multiple mortgagees that underwrite their loans. These underwriting mortgagees are referred to as "sponsors" in the FHA loan programs and are also known as DE mortgagees.
These definitions are in paragraph 1-2 in Chapter 1 of the FHA Title II Mortgagee Approval Handbook 4060.1, Rev-2 at: http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4060.1/40601handbookHSGH.doc
Compliance with the principal activity requirement is determined by gross income. At least 50% of a company's gross income comes from its mortgage business. This includes any type of mortgages. When a company is new, this calculation can't be made, but it is made for all nonsupervised lenders as part of the FHA lender annual renewal process.
Please see FAQ #21 below on employment restrictions on staff of a FHA approved lender.
FAQs - Application and Its Processing
7. What kind of FHA lender approval can I apply for?
Mortgage Brokers can only apply to be a:
Nonsupervised loan correspondent
Mortgage Lenders, Mortgage Bankers and Correspondent Lenders can apply to be a
Nonsupervised Mortgagee
Nonsupervised Loan Correspondent
Investing Mortgagee
Banks, Savings & Loans can apply to be a:
Supervised Mortgagee
Supervised Loan Correspondent
Investing Mortgagee
Local, State and Federal Agencies can apply to be a:
Government Mortgagee
Investing Mortgagee
Loan Correspondent Approval allows the lender to only originate Title II Single Family and/or Title I loans.
All Mortgagee approvals (except Investing) allow the lender to originate, underwrite, service and holds Title II Single Family, Title II Multifamily and/or Title I loans.
If you want to apply for both Title II and Title I loan programs, you will receive two FHA Lender ID numbers, one for Title II and a second for Title I
FHA Loan Programs:
Title II Single Family (203b, 203k Rehab, 234c Condo, HECM Reverse Mortgage)
Title II Multifamily (Rental Housing, Nursing Homes and Hospitals.)
Title I (Manufactured Home and Property Improvement Loans
8. What are the types of Mortgagee Approvals?
Any company that wants to originate, underwrite, fund, service or own FHA loans must have its own approval. It cannot use another company's approval including any related companies.
Types of Approved Mortgagees: FHA classifies approved mortgagees based on the functions they will perform, type of organization, type of supervisory agency, and net worth.
Supervised Mortgagee: Financial institutions that are members of the Federal Reserve System, and financial institutions whose accounts are insured by the Federal Deposit Insurance Corporation (FDIC), or the National Credit Union Administration (NCUA). Examples of supervised mortgagees are banks, savings associations, and credit unions. These mortgagees can originate, underwrite, fund, service and/or hold FHA insured loans.
Nonsupervised Mortgagee: Nondepository financial entities that have as their principal activity the origination, underwriting, funding, servicing and/or holding of real estate mortgages. They are commonly known as mortgage bankers, correspondent lenders or mortgage lenders in the industry.
Nonsupervised Loan Correspondent: Nondepository financial entities that have as their principal activity the origination of real estate mortgages. They are commonly known as mortgage brokers in the industry. They must sale or transfer their FHA originations to the FHA approved mortgagee who underwrote the loan and can have multiple mortgagees that underwrite their loans. These underwriting mortgagees are referred to as "sponsors" in the FHA loan programs and are also known as DE mortgagees.
Supervised Loan Correspondent: A mortgagee that qualifies for approval as a supervised mortgagee but only wishes to originate real estate mortgages.
Investing Mortgagee: An organization, including a charitable or not-for-profit institution or pension fund, which only wants to own FHA insured mortgages that it purchases with its own funds.
Governmental Mortgagee: A governmental agency may be approved as a mortgagee and do any of the lender functions of a FHA approved mortgagee.
Please see paragraph 1-2 in Chapter 1 of the FHA Title II Mortgagee Approval Handbook 4060.1, Rev-2 at: http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4060.1/40601handbookHSGH.doc .
9. What are the requirements to become a FHA approved nonsupervised loan correspondent (typically mortgage brokers, aka as a FHA mini-Eagle approval)?
Nonsupervised Loan Correspondent (Mini-Eagle) Application Package Checklist
Chapter and Paragraph references in this checklist are to parts of the Title II Mortgagee Approval Handbook 4060.1, Rev-2 which can be downloaded: http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4060.1/40601handbookHSGH.doc .
____ FHA Lender Approval Application Form 11701 (that can be downloaded at: http://www.ginniemae.gov/guide/pdf/11701.pdf) that is correctly filled out, signed and dated.
Common Errors in Application Form for Nonsupervised Loan Correspondent Approval
Section A
_____ Items 7, 8, 12 and/or 13 not filled in.
_____ Item 9: Can only check FHA Title I and FHA Title II boxes
_____ Item 11: Did not check Mortgage Co./Finance Co. Box
_____ Item 14: Did not include SSN and TAX ID numbers which FHA uses to verify no officer or owner is debarred or suspended by any Federal government agency or has defaulted on any government assisted loan (includes FHA, VA and student loans) Paragraph 2 10
_____ Item 14: Checked more than one officer in charge of day-to-day operations. Please check only one officer.
Section C
_____ Item 5: Did not check box for Loan Correspondent (Supervised/Nonsupervised)
_____ Item 6: Did not check box for Mortgage Co./Finance Co. box
_____ Items 8, 9 or 11 not filled in
_____ Item 10. Can only check boxes for Title I originations and/or Title II 1-4 Family Mortgages.
If only applying for Title I approval, please see the Title I Lender Approval Handbook 4700.2, Title I Letters 469, 478 and 2003-01 available at http://www.hud.gov/offices/adm/hudclips/index.cfm. For Title I there is no liquidity requirement.
____ Copy of $1,000 Application Fee Check: Made payable to HUD and mailed to the HUD/FHA lockbox -- PO Box 198619, Atlanta, GA 30384. Paragraph 2-7.
____ Copy of LLC Articles of Organization and Operating Agreement, if applicable: Must have 2 members, minimum 10 year term and provide for succession. Paragraphs 2-2(C) and 3-3(B)
____ Partnership Agreement Information, if applicable: Must include names and TAX IDs of general partners, names and SSNs of managing general partner's officers and directors, evidence that principal business activity of managing general partner meets FHA requirements and minimum of 10 year term. Paragraphs 2-2(B) and 3-3(A)
____ State DBA Approval, If applicable: Include copy of State certificate for use of the DBA, Fictitious or Assumed Name. Paragraphs 2-4 and 3-2(A)8
____ Copy of State License or Registration or documentation that applicant is exempt from State license or registration. Paragraphs 2-3 and 3 2(A)7
____ Combination Sponsor/Funding Letter: A Letter from a FHA approved DE Mortgagee stating it underwrite and fund any FHA loans originated by the applicant. An applicant with its own funding program can provide evidence of a minimum of $1 million of funding and only submit a Sponsor letter. Paragraphs 3-2(A)1, 3-2(A)13
____ Sanctions Letter: A certification by senior officer of applicant that neither the applicant, nor any of its officers or owners have been denied licensing nor been sanctioned, suspended or debarred by any Government or Regulatory Agency. Paragraphs 2-10 & 3-2(A)14
____ Commercial Credit or Dun & Bradstreet Business Report on Applicant: Include explanation of all negative items. Paragraph 3-2(A)4
____ Resume(s): Must show that one or more of the senior officer(s) of the applicant has at least 3 years experience in the mortgage operations that the applicant wishes to participate in. Paragraph 3-2(A)5
____ Credit Reports on all Principals: Provide Tri-Merged or Residential Mortgage Credit Reports on all officers Vice President and above and any owners with 25% or more ownership. Provide written explanations for all negative items. Paragraph 3-2(A)4
____ Audited Financial Report: CPA issued GAAS audit less than 12 months old with net worth calculation of at least $63,000 with a minimum of 20% liquid assets) Paragraphs2-5, 2-6 and 3-2(A)6
Office Facilities: Paragraphs 2-11(A) and 3-2(A)9
____ Pictures of office facilities (internal, external and signage)
____ A floor plan (may be hand drawn)
____ Certification by applicant that its facilities meet FHA requirements. Office must be in separate commercial space.
____ Quality Control Plan: Must be plan of applicant, tailored to applicant's duties with regard to FHA loans. Detailed requirements are in Chapter 7 but it cannot be a copy of this chapter since it explains what the Quality Control Plan must cover and is a guide. Paragraphs 7-1 through 7-12, as appropriate
Submit the application form and its required exhibits to:
Overnight: FHA
Lender Approval and Recertification Division
490 L'Enfant Plaza East, SW, Suite 3214
Washington, DC 20024
US Mail: FHA
Lender Approval and Recertification Division
451 7th Street, S.W., Room B133/P3214
Washington, DC 20410
Mail your $1,000 application fee check and its cover sheet to our lockbox in Atlanta at the address shown below. The fee cover sheet can be downloaded at http://www.hud.gov/offices/hsg/sfh/lender/titl2app.pdf. Mailing your application form and its required exhibits to the Atlanta lockbox will delay its receipt in Washington, DC by 30 days.
Dept of HUD
P.O. Box 198619
Atlanta, GA 30384
The FHA Title II Mortgagee Approval Handbook 4060.1, Rev-2 can be downloaded at: http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4060.1/40601handbookHSGH.doc .
The processing time for a complete application is 45-60 days depending on the number of other applications in the processing pipeline.
10. What are the requirements to become a FHA approved nonsupervised mortgagee (mortgage lender or mortgage banker)?
Nonsupervised Mortgagee (Full-Eagle) Application Package Checklist
Chapter and Paragraph references in this checklist are to parts of the Title II Mortgagee Approval Handbook 4060.1, Rev-2 which can be downloaded: http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4060.1/40601handbookHSGH.doc .
____ FHA Lender Approval Application Form 11701 (that can be downloaded at: http://www.ginniemae.gov/guide/pdf/11701.pdf) that is correctly filled out, signed and dated.
Common Errors in Mortgagee Application Form for Nonsupervised Mortgagee Approval
Section A
_____ Items 7, 8, 12 and/or 13 not filled in.
_____ Item 11: Did not check Mortgage Co./Finance Co. Box
_____ Item 14: Did not include SSN and TAX ID numbers which FHA uses to verify no officer or owner is debarred or suspended by any Federal government agency or has defaulted on any government assisted loan (includes FHA, VA and student loans) Paragraph 2 10
_____ Item 14: Checked more than one officer in charge of day-to-day operations. Please check only one officer.
Section C
_____ Item 5: Did not check box for non-supervised (not loan correspondent)
_____ Item 6: Did not check box for Mortgage Co./Finance Co.
_____ Items 9 or 11 not filled in
_____ Item 10. If you only want to originate, only check boxes for Title I originations and/or Title II 1-4 Family Mortgages.. If you want to also underwrite, service and/or own, check the service boxes. You can also check the multifamily boxes.
If only applying for Title I approval, please see the Title I Lender Approval Handbook 4700.2, Title I Letters 469, 478 and 2003-01 available at http://www.hud.gov/offices/adm/hudclips/index.cfm. For Title I there is no liquidity requirement.
____ Copy of $1,000 Application Fee Check: Made payable to HUD and mailed to the HUD/FHA lockbox -- PO Box 198619, Atlanta, GA 30384. Paragraph 2-7.
____ Copy of LLC Articles of Organization and Operating Agreement, if applicable: Must have 2 members, minimum 10 year term and provide for succession. Paragraphs 2-2(C) and 3-3(B)
____ Partnership Agreement Information, if applicable: Must include names and TAX IDs of general partners, names and SSNs of managing general partner's officers and directors, evidence that principal business activity of managing general partner meets FHA requirements and minimum of 10 year term. Paragraphs 2-2(B) and 3-3(A)
____ State DBA Approval, If applicable: Include copy of State certificate for use of the DBA, Fictitious or Assumed Name. Paragraphs 2-4 and 3-2(A)8
____ Copy of State License or Registration or documentation that applicant is exempt from State license or registration. Paragraphs 2-3 and 3 2(A)7
____ Copy of Fidelity Bond : $300,000 minimum covering applicant's employees and agents. HUD does not have to be the beneficiary. Paragraph 3-2(A)10
____ Copy of Errors & Omissions Insurance: $300,000 minimum covering applicant's employees and agents. HUD does not have to be the beneficiary. Paragraph 3-2(A)11
____ Funding Program: Provide evidence of a minimum of $1 million of funding (a letter of credit is acceptable). Paragraphs 3-2(A)13a
____ Sanctions Letter: A certification by senior officer of applicant that neither the applicant, nor any of its officers or owners have been denied licensing nor been sanctioned, suspended or debarred by any Government or Regulatory Agency. Paragraphs 2-10 & 3-2(A)14
____ Commercial Credit or Dun & Bradstreet Business Report on Applicant: Include explanation of all negative items. Paragraph 3-2(A)4
____ Resume(s): Must show that one or more of the senior officer(s) of the applicant has at least 3 years experience in the mortgage operations that the applicant wishes to participate in. Paragraph 3-2(A)5
____ Credit Reports on Principals: Provide Tri-Merged or Residential Mortgage Credit Reports on all officers Vice President and above and any owners with 25% or more ownership. Provide written explanations for all negative items. Paragraph 3-2(A)4
____ Audited Financial Report: CPA issued GAAS audit less than 12 months old with net worth calculation of at least $250,000 with a minimum of 20% liquid assets) Paragraphs 2-5, 2-6 and 3-2(A)6
Office Facilities: Paragraphs 2-11(A) and 3-2(A)9
____ Pictures of office facilities (internal, external and signage)
____ A floor plan (may be hand drawn)
____ Certification by applicant that its facilities meet FHA requirements. Office must be in separate commercial space.
____ Quality Control Plan: Must be plan of applicant, tailored to applicant's duties with regard to FHA loans. Detailed requirements are in Chapter 7 but it cannot be a copy of this chapter since it explains what the Quality Control Plan must cover and is a guide. Paragraphs 7-1 through 7-12, as appropriate
Submit the application form and its required exhibits to:
Overnight: FHA
Lender Approval and Recertification Division
490 L'Enfant Plaza East, SW, Suite 3214
Washington, DC 20024
US Mail: FHA
Lender Approval and Recertification Division
451 7th Street, S.W., Room B133/P3214
Washington, DC 20410
Mail your $1,000 application fee check and its cover sheet to our lockbox in Atlanta at the address shown below. The fee cover sheet can be downloaded at http://www.hud.gov/offices/hsg/sfh/lender/titl2app.pdf. Mailing your application form and its required exhibits to the Atlanta lockbox will delay its receipt in Washington, DC by 30 days.
Dept of HUD
P.O. Box 198619
Atlanta, GA 30384
See FHA Title II Mortgagee Approval Handbook 4060.1, Rev-2 at:
The processing time for a complete application is 45-60 days depending on the number of other applications in the processing pipeline.
11. What are the requirements to become a FHA approved Supervised Mortgagee?
Supervised Mortgagee Application Package Checklist
Chapter and Paragraph references in this checklist are to parts of the Title II Mortgagee Approval Handbook 4060.1, Rev-2 which can be downloaded: http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4060.1/40601handbookHSGH.doc
____ FHA Lender Approval Application Form 11701 (that can be downloaded at: http://www.ginniemae.gov/guide/pdf/11701.pdf) that is correctly filled out, signed and dated.
Common Errors in Mortgagee Application Form for Supervised Mortgagee Approval
Section A
_____ Items 7, 8, 12 and/or 13 not filled in.
_____ Item 14: Did not include SSN and TAX ID numbers which FHA uses to verify no officer or owner is debarred or suspended by any Federal government agency or has defaulted on any government assisted loan (includes FHA, VA and student loans) Paragraph 2 10
_____ Item 14: Checked more than one officer in charge of day-to-day operations. Please check only one officer.
Section C
_____ Item 5: Did not check box for supervised (not loan correspondent)
_____ Items 9 or 11 not filled in
_____ Item 10. If you only want to originate, only check boxes for Title I originations and/or Title II 1-4 Family Mortgages. If you want to also underwrite, service and/or own, check the service boxes. You can also check the multifamily boxes.
If only applying for Title I approval, please see the Title I Lender Approval Handbook 4700.2, Title I Letters 469, 478 and 2003-01 available at http://www.hud.gov/offices/adm/hudclips/index.cfm. For Title I there is no liquidity requirement.
____ Copy of $1,000 Application Fee Check: Made payable to HUD and mailed to the HUD/FHA lockbox -- PO Box 198619, Atlanta, GA 30384. Paragraph 2-7.
____ State DBA Approval, If applicable (include copy of State certificate for use of the DBA, Fictitious or Assumed Name) Paragraphs 2-4 and 3-2(A)8
____ Copy of Fidelity Bond: $300,000 minimum covering applicant's employees and agents. HUD does not have to be the beneficiary. Paragraph 3-2(A)10
____ Copy of Errors & Omissions Insurance: $300,000 minimum covering applicant's employees and agents. HUD does not have to be the beneficiary. Paragraph 3-2(A)11
____ Quality Control Plan: Must be plan of applicant, tailored to applicant's duties with regard to FHA loans. Detailed requirements are in Chapter 7 but it cannot be a copy of this chapter since it explains what the Quality Control Plan must cover and is a guide. Paragraphs 7-1 through 7-12, as appropriate
Submit the application form and its required exhibits to:
Overnight: FHA
Lender Approval and Recertification Division
490 L'Enfant Plaza East, SW, Suite 3214
Washington, DC 20024
US Mail: FHA
Lender Approval and Recertification Division
451 7th Street, S.W., Room B133/P3214
Washington, DC 20410
Mail your $1,000 application fee check and its cover sheet to our lockbox in Atlanta at the address shown below. The fee cover sheet can be downloaded at http://www.hud.gov/offices/hsg/sfh/lender/titl2app.pdf. Mailing your application form and its required exhibits to the Atlanta lockbox will delay its receipt in Washington, DC by 30 days.
Dept of HUD
P.O. Box 198619
Atlanta, GA 30384
The FHA Title II Mortgagee Approval Handbook 4060.1, Rev-2 can be downloaded at: http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4060.1/40601handbookHSGH.doc.
The processing time for a complete application is 45-60 days depending on the number of other applications in the processing pipeline.
12. What are the requirements to become a FHA approved Supervised Loan Correspondent?
Supervised Loan Correspondent Application Package Checklist
Chapter and Paragraph references in this checklist are to parts of the Title II Mortgagee Approval Handbook 4060.1, Rev-2 which can be downloaded: http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4060.1/40601handbookHSGH.doc ____ FHA Lender Approval Application Form 11701 (that can be downloaded at: http://www.ginniemae.gov/guide/pdf/11701.pdf) that is correctly filled out, signed and dated.
Common Errors in Application Form for Nonsupervised Loan Correspondent Approval
Section A
_____ Items 7, 8, 12 and/or 13 not filled in.
_____ Item 9: Can only check FHA Title I and FHA Title II boxes
_____ Item 11: Did not check Mortgage Co./Finance Co. Box
_____ Item 14: Did not include SSN and TAX ID numbers which FHA uses to verify no officer or owner is debarred or suspended by any Federal government agency or has defaulted on any government assisted loan (includes FHA, VA and student loans) Paragraph 2 10
_____ Item 14: Checked more than one officer in charge of day-to-day operations. Please check only one officer.
Section C
_____ Item 5: Did not check box for Loan Correspondent (Supervised/Nonsupervised)
< _____ Item 6: Did not check box for Supervised Loan Correspondent
_____ Items 8, 9 or 11 not filled in
_____ Item 10. Can only check boxes for Title I originations and/or Title II 1-4 Family Mortgages.
If only applying for Title I approval, please see the Title I Lender Approval Handbook 4700.2, Title I Letters 469, 478 and 2003-01 available at http://www.hud.gov/offices/adm/hudclips/index.cfm. For Title I there is no liquidity requirement.
____ Copy of $1,000 Application Fee Check: Made payable to HUD and mailed to the HUD/FHA lockbox -- PO Box 198619, Atlanta, GA 30384. Paragraph 2-7.
____ Sponsor Letter: A Letter from a FHA approved DE Mortgagee stating it will underwrite any FHA loans originated by the applicant. Paragraphs 3-2(A)1
____ State DBA Approval, if applicable: Include copy of State certificate for use of the DBA, Fictitious or Assumed Name. Paragraphs 2-4 and 3-2(A)8
____ Quality Control Plan: Must be plan of applicant, tailored to applicant's duties with regard to FHA loans. Detailed requirements are in Chapter 7 but it cannot be a copy of this chapter since it explains what the Quality Control Plan must cover and is a guide. Paragraphs 7-1 through 7-12, as appropriate
Submit the application form and its required exhibits to:
Overnight: FHA
Lender Approval and Recertification Division
490 L'Enfant Plaza East, SW, Suite 3214
Washington, DC 20024
US Mail: FHA
Lender Approval and Recertification Division
451 7th Street, S.W., Room B133/P3214
Washington, DC 20410
Mail your $1,000 application fee check and its cover sheet to our lockbox in Atlanta at the address shown below. The fee cover sheet can be downloaded at http://www.hud.gov/offices/hsg/sfh/lender/titl2app.pdf. Mailing your application form and its required exhibits to the Atlanta lockbox will delay its receipt in Washington, DC by 30 days.
Dept of HUD
P.O. Box 198619
Atlanta, GA 30384
The FHA Title II Mortgagee Approval Handbook 4060.1, Rev-2 can be downloaded at: http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4060.1/40601handbookHSGH.doc.
13. What types of business forms can be FHA approved as a mortgagee or loan correspondent?
A mortgagee seeking approval must be a corporation (including Subchapter S), partnership, other chartered institution, or a permanent organization having succession (typically LLCs who meet some additional criteria)
A sole proprietorship is not an acceptable business form for approval as a FHA mortgagee.
See paragraph 2-1 in Chapter 2 of the Title II Mortgagee Approval Handbook 4060.1, Rev-2 at: http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4060.1/40601handbookHSGH.doc for additional details.
14 What are the FHA requirements for an LLC to be a FHA approved lender?
The FHA lender approval regulations don't list LLCs as an eligible business type, but does allow for the approval of "permanent organizations with succession." FHA's legal staff decided that an LLC could meet that requirement if the LLC's Articles of Organization and/or Operating Agreement contained the following:
. Specify that the LLC consist of two or more members. A single member LLC is acceptable only if the member is a corporation consisting of two or more persons;
. Specify a minimum term of existence of at least ten years in its Operating Agreement (can be a new LLC);
. Provide for succession;
. Authorize continuance in the event of the withdrawal or death of a member; and
. Specify that the LLC will not terminate until all FHA-insured mortgages have been transferred to another approved mortgagee.
See paragraph 2-2.C in Chapter 2 of the Title II Mortgagee Approval Handbook 4060.1, Rev-2 at: http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4060.1/40601handbookHSGH.doc for additional details.
15 What are FHA's requirements concerning the use of "Doing Business As" names.
When applying to be approved, all applicants must submit documentation that they have State approval for both their legal name and any "doing business as" name they use.
See paragraph 2-4 in Chapter 2 of the Title II Mortgagee Approval Handbook 4060.1, Rev-2 at: http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4060.1/40601handbookHSGH.doc.
Once a lender is approved, lenders can add DBAs to their institutional profile via the FHA Connection. This helps us locate a company when we get an inquiry that uses the company's DBA vs. legal name. Although a mortgagee may have more than one "dba," each home or branch office is limited to one "dba" identity for FHA purposes. The lender must have State approval to use a DBA name before it updates its profile via FHA Connection. See paragraph 6-9 in Chapter 6 of the Title II Mortgagee Approval Handbook 4060.1, Rev-2 at: http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4060.1/40601handbookHSGH.doc .
16 What are the net worth and liquidity requirements for nonsupervised loan correspondents and mortgagees?
Nonsupervised Loan correspondents (also known as mortgage brokers in the industry) must have a minimum adjusted net worth of $63,000, with at least 20% being liquid assets. They also must have an additional $25,000 of adjusted net worth for each branch (both traditional and non-traditional) they wish to register with FHA up to a maximum adjusted net worth of $250,000 that includes the initial $63,000.
The requirements for nonsupervised mortgagees (also known as mortgage lenders in the industry) are higher. They must have a minimum adjusted net worth of $250,000, with at least 20% being liquid assets to be initially approved. To recertify (renew) their FHA approval each year, they are required to maintain an adjusted net worth of one percent of the volume of insured mortgages the mortgagee originated, purchased, or serviced, but not less than $250,000, up to a maximum of $1,000,000.
Adjusted net worth must be determined in accordance with chapter 7 of the most recent version of the HUD IG Handbook 2000.04 Consolidated Audit Guide for Audits of HUD Programs at: http://www.hud.gov/offices/oig/reports/auditguide, and be audited by the CPA. See paragraph 7-6(B) of above referenced handbook for information on unacceptable assets for this calculation.
Note: Only assets of the Tax ID entity that is the applicant can be used to meet the adjusted net worth and liquidity requirements. While the above link provides a complete list, the most common mistakes made by applicants are to include "goodwill" and personal assets in the calculation. A motor vehicle is only eligible if it is owned by the Tax ID entity and personal use is solely incidental. In addition, personal residences and funds in personal account cannot be used to meet the net worth and/or liquidity requirements.
See paragraphs 2-5 and 2-6 in Chapter 2 of the Title II Mortgagee Approval Handbook 4060.1, Rev-2 at: http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4060.1/40601handbookHSGH.doc for additional details.
17 What type of financial statement must be submitted with an application to become a FHA Approved Lender?
The applicant must submit its most current CPA prepared audited financial statements for the period ended not more than 12 months prior to submission of the application. The financial statements must be supplemented by a computation of Adjusted net worth must be determined in accordance with chapter 7 of the most recent version of the HUD IG Handbook 2000.04 Consolidated Audit Guide for Audits of HUD Programs at: http://www.hud.gov/offices/oig/reports/auditguide, and be audited by the CPA. See paragraph 7-6(B) of above referenced handbook for information on unacceptable assets for this calculation.
For an ongoing business concern, a full set of financial statements is required:
. Balance sheet;
. Income statement;
. Cash flow statement;
. Retained earnings statement;
. Footnotes; and
. Auditor's report containing an unqualified (clean) opinion.
All financial statements must be prepared in accordance with Generally Accepted Accounting Principles (GAAP). The audit must be performed in accordance with Generally Accepted Auditing Standards (GAAS) by a Certified Public Accountant (or a Public Accountant licensed on or before Dec. 31, 1970) licensed to perform audits in the state in which the applicant's home office is located and who has not been suspended, debarred, or otherwise excluded from performing audits of mortgagees. The audit report must be complete, original and contain the auditor's report on the audit firm's letterhead stationery.
New Company. If the applicant is a new company and has had no revenues or cash flow, the income statement and cash flow statement are not required.
Consolidated Audits: FHA will accept the audits of the consolidated financial statements of the parent if it includes consolidating schedules, audited by the auditor, which distinguish the balance sheet, operating statement and computation of adjusted net worth of the entity that is applying for FHA lender approval. The consolidating schedules must be subjected to the auditing procedures applied to the consolidated statement of the parent, and the auditor's opinion must cover the financial statement accounts of the subsidiary.
Audited financial statements over six months old. If the audited financial statements are for a period ended more than six months but less than 12 months prior to submission of the application, additional financial statements must be submitted. This shall be in the form of a full set of financial statements (unaudited) and a computation of adjusted net worth. The unaudited financial statements must be certified by management and be for the most recent interim accounting period, but not older than three months.
Corrected Deficiency in Adjusted Net Worth. If the computation of adjusted net worth shows inadequate adjusted net worth at the date of the financial statements and the applicant has corrected this deficiency prior to issuance of the auditor's report, then the auditor will report this as a subsequent event. A new computation of adjusted net worth must be provided and the audit reports shall be dual dated, when subsequent events relate to adjusted net worth. If the auditor's report has already been issued, the auditor must verify that the applicant subsequently met the net worth requirement and issue an opinion on it, including a new computation of adjusted net worth.
Number of Months Covered by the Audit: FHA's policy has always been that audits submitted in lender approval application submissions cover 12 months, normally the most recently completed fiscal year of the applicant. This requirement was not included in our handbook when it was reissued in 2006 because the vast majority of audits we received prior to the handbook being reissued were for 12 months.
Due to an increase of inquiries on this matter, FHA has affirmed that a 12 month audit is required to make a reasonable assess of an applicant's financial viability through its ability to meet our critical financial requirements. Twelve months of financial data is reflective of the company's annual business cycle and is a better representation than a lesser period. It is a common practice that business decisions are based on a company's annual performance and if available coupled with year to date financial information. This requirement is applicable to companies with at least one year of active business operation
FHA will review requests to accept audits that cover less than 12 months on a case by case basis, but will not consider any such requests if the number of months covered by the audit is less than 9 months. All requests must include an explanation why an audit covering 12 months could not be provided.
See paragraphs 3-2 and 3-2A(6) of the Title II Mortgagee Approval Handbook 4060.1, Rev-2 at: http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4060.1/40601handbookHSGH.doc
18. What are the office facilities requirements for FHA approved lenders?
Office Facilities. The mortgagee may conduct its FHA loan origination, underwriting and/or servicing activities from any FHA registered locations (home office and registered offices). A mortgagee is fully responsible for the actions of its offices. Mortgagees that lease space from a real estate agent must assure compliance with RESPA requirements.
A. Home office. Each applicant must identify which location they consider their main or home office for FHA mortgage activities. It doesn't have to be the entity's corporate office. A mortgagee's home office facilities must:
1. Have adequate office space and equipment;
2. Be in a location conducive to mortgage lending;
3. Be located in a commercial space that is separate and apart from any other entity. A mortgagee may share general reception-type entrances or lobbies with another business;
4. Be clearly identified to the public so that loan applicants and mortgagors will know, at all times, exactly with whom they are doing business. This includes a permanently affixed business sign and other common means of identification used by a business entity;
5. Display a fair housing poster;
Evidence of Acceptable Facilities. An applicant applying for approval as a non-supervised mortgagee or a non-supervised loan correspondent must provide sufficient evidence that its facilities meet FHA requirements. The applicant must submit photographs of its facilities, including its entrance, with evidence of permanent identification to the public. The applicant must submit a floor plan, which may be hand-drawn. The applicant must also submit a certification, signed by a senior officer, that the facilities comply with FHA requirements. These submissions are in lieu of an on-site visit by FHA to the mortgagee's office facilities; however, FHA may still conduct an on-site visit. Evidence of acceptable facilities is not required for branch offices.
See paragraph 2-11 in Chapter 2 of the Title II Mortgagee Approval Handbook 4060.1, Rev-2 at: http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4060.1/40601handbookHSGH.doc.
19. What are the requirements related to sharing office space with another company?
While a mortgagee's office must be located in a space that is separate and apart from any other entity, it may share general reception-type entrances, lobbies, bath rooms and conference rooms with other businesses.
See paragraphs 2-11(A)(3) and (B)(3) in Chapter 2 of the Title II Mortgagee Approval Handbook 4060.1, Rev-2 at: http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4060.1/40601handbookHSGH.doc.
20. What are the staffing requirements for a lender?
Staffing Requirements. An approved lender must have sufficient staff or permitted contractor support for loan origination, processing, underwriting, servicing, and collection activities, to the extent that the mortgagee engages in these activities.
Home office. The mortgagee must have a home office staff of at least two full time employees. A shared receptionist, while permitted, may not be used to meet this requirement. An officer who works full time for the lender can count toward this requirement.
Managers, Loan Officers and Underwriters. Loan officers (also known as loan originators) of FHA-insured mortgages must be employees of the mortgagee. Underwriters of FHA-insured mortgages must be employees of the mortgagee; its authorized agent; or, if the mortgagee is a loan correspondent, its sponsors. Managers, loan originators and underwriters may not be independent contractors or contract employees.
See paragraph 2-12 in Chapter 2 of the Title II Mortgagee Approval Handbook 4060.1, Rev-2 at: http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4060.1/40601handbookHSGH.doc
21. What are the staffing requirements and restrictions on employees of FHA lenders?
The following requirements only apply to those employees of a lender that are involved in the origination, underwriting or servicing of FHA loans.
An approved mortgagee must employ trained personnel that are competent to perform their assigned responsibilities. Employees are those individuals who are under the direct supervision and control of an FHA approved mortgagee and where the individuals are exclusively employed by the FHA approved mortgagee in the mortgage lending and real estate fields. The mortgagee must demonstrate the essential characteristics of the employer-employee relationship upon inquiry by the Department. A mortgagee must exercise control and responsible management supervision over its home office and branch employees. Control and supervision must include, at a minimum, regular and ongoing reviews of employee performance and of work performed.
Compensation of employees may be on a salary, salary plus commission, or commission only basis and includes bonuses. All compensation earned from origination, underwriting and/or servicing of FHA insured loans must be reported on Form W-2. Employees who perform underwriting and loan servicing activities may not receive commissions. Income earned on non-FHA loans can be reported on Form 1099.
During normal duty hours employees who are involved with FHA transactions may conduct only the business of the mortgagee.
A mortgagee may employ staff full time or part time (less than the normal 40 hour work week). They may have other employment including self employment. However, such employment may not be in mortgage lending, real estate, or a related field. This restriction also applies to income earned as an owner in another company in the mortgage lending, real estate, or a related field. FHA has this restriction due to the potential for a conflict in interest.
DE underwriters may not work on a part time basis for any other mortgagee, even underwriting conventional mortgage loans. A DE underwriter may not underwrite loans for a parent or subsidiary of the underwriter's approved employer. A DE underwriter's authority is through the employer and does not extend under any corporate umbrella.
A FHA lender may have officers and/or owners who represent other entities as long as long as loan applicants and borrowers know which entity they are doing business with. However, the FHA approved lender's officer whose experience was used to meet the 3 years experience as part of the lender's approval is subject to the same employment and income restrictions of an employee above in this FAQ. Branch managers are considered officers of a lender.
See paragraph 2-9 of the Title II Mortgagee Approval Handbook 4060.1, Rev-2 at: http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4060.1/40601handbookHSGH.doc.
22. What functions can a FHA approved lender contract out?
Outsourcing. A mortgagee may contract out certain administrative and clerical functions that do not materially affect underwriting decisions or increase the risk to FHA. However, the mortgagee is still responsible for the quality of the mortgages and must ensure compliance with program requirements and RESPA requirements. The management, underwriting, and loan originator functions may not be contracted out.
A. Types of functions that may be contracted out are:
. Clerical Assistance;
. Loan processing: typing of loan documents, mailing out and collecting verification forms, ordering credit reports, and/or preparing for endorsement and shipping loans to investors;
. Loan servicing: ministerial processing of a foreclosure action, preservation and protection, and/or tax services;
. Legal functions;
. Quality control reviews; and
. Such other functions as may be approved in advance by the Department.
B. Provider Requirements. The functions listed above may not be contracted out to third party loan originators, real estate brokers, or similar entities. An approved mortgagee may own or have an ownership interest in a separate business entity that offers such contract services. An affiliated business arrangement, in which affiliated or related companies make referrals to each other, is regulated under RESPA. The term "affiliated business arrangement" means an arrangement in which (A) a person who is in a position to refer business incident to or a part of a real estate settlement service involving a federally related mortgage loan, or an associate of such person, has either an affiliate relationship with or a direct or beneficial ownership interest of more than 1 percent in a provider of settlement services; and (B) either of such persons directly or indirectly refers such business to that provider or affirmatively influences the selection of that provider.
Mortgagees may not contract with entities or persons that are suspended, debarred, or under a relevant LDP or have agreed to a voluntary exclusion under 24 CFR part 24.
C. Costs of Outsourced Services. The costs of such services may not be imposed on a FHA borrower or mortgagor except as allowed in the various FHA loan programs.
See paragraph 2-13 in Chapter 2 of the Title II Mortgagee Approval Handbook 4060.1, Rev-2 at: http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4060.1/40601handbookHSGH.doc
23. Can FHA Approved Lenders use non-employees as Loan Officers?
Loan officers (also known as loan originators) of FHA insured loans must be employees of the FHA approved lender. They may not be independent contractors or contract employees.
See paragraph 2-9(A), 2-12(C) and 2-13 in Chapter 2 of the Title II Mortgagee Approval Handbook 4060.1, Rev-2 at: http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4060.1/40601handbookHSGH.doc
24. What is the experience requirement that must be documented in the resumes attached to an application for lender approval?
While at least one senior officer of the applicant must have a minimum of three years acceptable experience in the mortgage activities for which the mortgagee is seeking approval, relevant training may be substituted for some of the required experience. Normally, training can substitute for about 6 months of the experience requirement. This determination is done on a case-by-by basis. An applicant must submit, with its application, current resumes documenting this experience. In determining the acceptability of an officer's experience, the Department will consider:
. Experience in originating single family and multifamily mortgages.
. Experience in servicing single family and multifamily mortgages.
. Experience in investing funds in real estate mortgages.
. Experience in managing other individuals performing these services.
. Experience in real estate sales or brokerage does not qualify.
See paragraphs 2-9(B) and 3-2(A)(5) the Title II Mortgagee Approval Handbook 4060.1, Rev-2 at: http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4060.1/40601handbookHSGH.doc.
25. What credit reports are required to be submitted with a lender approval application and how are they evaluated.
Credit Reports. An applicant, other than a supervised institution or a governmental institution, must order and pay for credit reports and submit the complete originals, with the application, directly to the Lender Approval and Recertification Division, HUD Headquarters.
(1) Personal credit reports for the principals of the applicant, including the chairman of the board, president, vice presidents and any person or entity owning 25 percent or more of the mortgagee's voting stock or a controlling interest. Personal credit reports must be either Residential Mortgage Credit Reports (RMCR) or three-merged reports and include a public records search. Other types, e.g. in-file credit reports, are not acceptable.
(2) A business credit report if a principal owner is a business entity.
(3) A business credit report on the applicant. This is required even if the applicant is a start-up company. The report can be from Dunn & Bradstreet, Equifax, Experian, Transunion or other credit report companies as long as it contains a public records search.
A written explanation must be submitted by the applicant for all negative items disclosed by any credit report. Credit Reports are evaluated pursuant to the FHA underwriting guidelines as set forth in HUD Handbook 4155.1 at http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4155.1/index.cfm including any updates and/or revisions.
Please see paragraph 3-2(A)(4) of the Title II Mortgagee Approval Handbook 4060.1, Rev-2 at: http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4060.1/40601handbookHSGH.doc
26. What is a Sanctions Letter ?
Sanctions Letter. The applicant must certify that neither it nor any of its officers, directors, or principals, has been denied an operating license or otherwise sanctioned by any licensing or regulatory body. A state-licensed mortgagee must submit with its application for approval, a letter certifying to the Department that the mortgagee sought and has not been refused a license, and has not been sanctioned by any State or States in which it will originate insured mortgages. If the mortgagee or any of its officers, directors, or principals has been sanctioned or subject to an action by the State against its license, the applicant must submit a copy of the documents concerning the action together with a written explanation.
See paragraph 3-1(A)(14) in Chapter 3 of the Title II Mortgagee Approval Handbook 4060.1, Rev-2 at: http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4060.1/40601handbookHSGH.doc.
27. What is a Sponsor Letter?
An application from a mortgagee applying for approval as a loan correspondent must be accompanied by a letter from an approved direct endorsement mortgagee that will be its Sponsor, signed by an executive officer of the Sponsor, requesting approval of the loan correspondent. The letter must contain the Sponsor's mortgagee Identification Number. The letter may also state the mortgagee will fund all loans where it is the sponsor
The following is a sample of a combo sponsor/funding letter:
U.S. Dept. of Housing and Urban Development
Lender Approval and Recertification Division
Room B-133 / P-3214
451 7th Street, SW
Washington, DC 20410-8888
To Director, Lender Approval and Recertification Division:
This is to certify that [insert your company name and HUD/FHA Identification Number] has agreed to sponsor [enter the name of the applicant loan correspondent company] as an FHA approved loan correspondent mortgagee and will underwrite any loan when we are the sponsor.
I further certify that [enter your company name] will fund and purchase the FHA insured mortgages originated by [ insert the name of the applicant loan correspondent company] with our company as sponsor.
Signed,
Senior Officer of
Sponsoring Mortgagee
See paragraph 3-1(A)(1) in Chapter 3 of the Title II Mortgagee Approval Handbook 4060.1, Rev-2 at: http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4060.1/40601handbookHSGH.doc .
28. What are the requirements for a lender's funding program?
Funding Program. The applicant must provide a letter or letters establishing or confirming acceptable funding arrangements totaling not less than $1 million, unless applying as a supervised mortgagee or Government Institution.
a. A Non-supervised Mortgagee, except a mortgagee approved for participation only in the multifamily mortgage insurance programs, must maintain a warehouse line of credit or other mortgage funding program acceptable to the Department. Acceptable programs include table funding and concurrent funding arrangements. The program must be adequate to fund the mortgagee's average 60-day origination production pipeline, but not less than a $1 million warehouse line of credit or funding program. The line of credit must be issued directly to the mortgagee. In lieu of a warehouse line of credit, a mortgagee may have a letter from a financial institution stating that it will fund all mortgages originated by the mortgagee.
b. A Non-supervised Loan Correspondent must comply with the same funding requirements as a non-supervised mortgagee or have a written agreement or letter from each of its Sponsors to fund all mortgages that the sponsor underwrites. The application package must include, for each Sponsor, either:
. A separate agreement between the Sponsor and the non-supervised loan correspondent, which includes the funding provisions, or warehouse line of credit, or
. A Sponsor letter containing the written agreement that the Sponsor will fund all mortgages it underwrites that were originated by the non-supervised loan correspondent.
c. A Supervised Loan Correspondent must have a letter or written agreement from each of its Sponsors that the Sponsor will purchase all FHA mortgages that the loan correspondent originates and that the Sponsor underwrites.
d. An Investing Mortgagee must have, or have arranged for, funds sufficient to support a projected investment in real estate mortgages of at least $1 million.
See paragraph 3-1(A)(13) in Chapter 3 of the Title II Mortgagee Approval Handbook 4060.1, Rev-2 at: http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4060.1/40601handbookHSGH.doc.
29. What the various addresses on the HUD Form 11701 used for?
In addition to a geographic address, Title II applicants are required to provide the following additional addresses (if different)
CHUMS (Processing and Underwriting) Address (Title II only): The CHUMS address is used by FHA for all correspondence related to a lender's loan origination activities.
Endorsement Address (Title II only): The Endorsement address is used by FHA for all correspondence related to the Mortgage Insurance Certificate.
Mailing Address (Title I, or Title II Home Office): The Mailing address is used by FHA to send letters and notices to lenders.
Premium Billing Address (Home Office only): The Premium Billing address is used by FHA for all correspondence related to the premiums.
Payee Address (Home Office only): The Payee address is used by FHA for all correspondence related to claim payment
30. What are the quality control plan requirements for FHA approved lenders (mortgagees and loan correspondents)?
Every lender applicant must have a Quality Control (QC) Plan of its mortgage operation that meets FHA requirements. FHA's requirements are explained in Chapter 7 of the FHA Title II Mortgagee Approval Handbook 4060.1 which can be downloaded at: http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4060.1/40601handbookHSGH.doc. This chapter is not a QC plan itself and FHA does not provide sample QC plans. Rather this chapter explains the requirements for a QC plan. Each lender's plan must be tailored to the operations of the lender and cover the type of FHA approval they are requesting. Copying/paraphrasing Chapter 7 is not an acceptable QC plan.
The QC plan protects both the lender and its business partners, including FHA, from violations of various rules governing a lender's mortgage business. The various requirements can be grouped into 5 major components: (1) Management and operation of the QC function, (2) Compliance with FHA's requirements to maintain its FHA lender approval, (3) Compliance with all regulatory requirements, (4) QC reviews of lender's originating and underwriting activities and (5) QC reviews of lender's servicing activities. The following highlights the major requirements of each component cross referenced to Chapter 7 of Handbook 4060.1.
1. Management and Operation of the QC Function
. The plan must cover the lender's operations and indicate which parts apply to a lender's FHA business. 7-1
. Lender management monitors that required reviews are done when required and provides written responses to all reviews. 7-3(D) & 7-3(I)
. If the QC function is contracted out, the lender must provide the contract that details the roles and responsibilities of each party. 7-3(B)(2) & 7-3(H)(2)
. The QC personnel must have: (1) an arms-length relationship to the work they review, (2) the necessary training to do the reviews, and (3) a copy of the lender's operating procedures. 7-3(B) & (C).
. Expand QC oversight when fraud or patterns of deficiencies are identified and report fraud and serious violations to FHA. 7-3(F), 7-3(J) & 7-5(C).
. All QC review records must be retained at least 2 years. 7-3(K)
. QC can be used by lenders as a risk assessment. 7-4
2. Compliance with FHA requirements to maintain its FHA lender approval
. Verify lender's offices where they conduct FHA business meet FHA requirements including staffing and facilities. 7-3(G)
. Verify lender's staffing of its FHA operations meets FHA requirements and none of them are prohibited from participation. 7-3(G) & (L)
3. Compliance with all regulatory requirements
. Verify lender in compliance with Fair Housing requirements. 7-8(A) & 7-11(C)
. Verify lender in compliance with HMDA. 7-8(B)
. Verify lender in compliance with RESPA. 7-8(D) & 7-11(A) & (D)
4. QC reviews of lender's originating activities
Reviews must cover any of the following originating functions that a lender performs on a FHA insured loan: taking applications, processing, underwriting, closing and funding. If two lenders originate a loan together, each one must conduct QC reviews on functions they performed.
. Verify no misleading or false advertising for loan applications. 7-8(I)
. Review a representative sample of a lender's FHA loans types and its offices. 7-3(F) & 7-9.
. Review 10% of all originations, 100% of early payment defaults, and 10% of all rejected loan applications. 7-6(C) & (D) and 7-8(A)(1)
. Verify reviews are done when required 7-6(A) &(B)
. Verify all required documents are in the loan file for completeness, correct processing, underwriting, funding and closing. 7-6(F) & (G) and 7-7.
. Verify each loan review is supplemented by obtaining new credit reports, verification of credit documents (employment, income, source of funds), desk review of appraisal, reverification of owner-occupancy. 7-6(E).
. Verify that upfront FHA insurance premiums are paid when due, loans submitted for insurance are eligible and submitted on time. 7-8(G)
. Verify that automated underwritten loan files are reviewed, including data integrity checks. 7-9(A)
5. QC reviews of lender's servicing activities
. Plan must identify all servicing functions performed by the lender that will be reviewed. 7-10(A)
. Verify reviews are done when required 7-10(B)
. Verify sampling of loans selected for review meets FHA requirements. 7-10(C)
. If selected loan was assumed, verify none of the participants were ineligible. 7 11(B)
. Verify that all defaults are reported to FHA by the required deadlines. 7-12(O).
. Verify that all Loss Mitigation tools have been considered and their use is documented. 7-12(R) and 7-12(S)
. Verify that foreclosure proceedings meet FHA requirements. 7-12(T)
. Verify there are adequate controls and procedures in place to ensure claim filing are accurate, timely and comply with FHA requirements. 7-12(W)
31. Where do I send my lender application and the application fee?
Send your lender application form 11701 and all required exhibits to one of the following addresses in Washington, DC:
Overnight: FHA
Lender Approval and Recertification Division
490 L'Enfant Plaza East, SW, Suite 3214
Washington, DC 20024
US Mail: FHA
Lender Approval and Recertification Division
451 7th Street, S.W., Room B133/P3214
Washington, DC 20410
Note: The current version of our application form 11701 has an error in its instructions. We share our form with Ginnie Mae. When they went to payment of their application fee by wire transfer, someone changed our instructions in error to say the same thing. FHA still requires a payment of its lender approval application fee by check. Sorry for the confusion.
Mail your $1,000 application fee check and its cover sheet to our lockbox in Atlanta at the address shown below.
Dept of HUD
P.O. Box 198619
Atlanta, GA 30384
The fee cover sheet can be downloaded at http://www.hud.gov/offices/hsg/sfh/lender/titl2app.pdf. Mailing your application form and its required exhibits to the Atlanta lockbox will delay its receipt in Washington, DC by up 60 days.
If you mail your application to our PO Lockbox in Atlanta in error, and want it reviewed as soon as possible, please send another application package to our Washington office at one of its addresses listed above. Please include a copy of the processed check with your package.
See paragraph 2-7(B) of the Title II Mortgagee Approval Handbook 4060.1, Rev-2 at: http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4060.1/40601handbookHSGH.doc .
32. What is the processing time for an application and how do I check on the Status of my application for FHA lender approval?
Applications are reviewed in the order they are received.
We are currently reviewing applications received as recently as the 4th week of June and the 1st week of July.
Once we start our review, it takes up to two weeks to complete it.
The contact person listed on the application form may be contacted if there are minor problems with the application.
Otherwise, a decision will be made to approve or disapprove the application and the applicant will be notified of the decision by letter.
Please include the applicant's full legal name and Tax ID number to assist us in locating the application on our control log.
The most common deficiencies in application packages are the CPA audited financial statements - see FAQ #17 above (this is only required from mortgage brokers, correspondent lenders and mortgage lenders) and the Quality Control Plan see FAQ #30 above.
Applications must be sent to the Lender Approval Division in Washington, DC.
The Application fee is mailed to HUD's lockbox in Atlanta, GA.
Mailing an application to the Atlanta address will delay its receipt in Washington by up to 60 days.
If you mailed your application to our PO Lockbox in Atlanta in error, and want it reviewed as soon as possible, please send another application package to our Washington office at one of its addresses listed below. Please include a copy of the processed check with your package.
Overnight: FHA
Lender Approval and Recertification Division
490 L'Enfant Plaza East, SW, Suite 3214
Washington, DC 20024
US Mail: FHA
Lender Approval and Recertification Division
451 7th Street, S.W., Room B133/P3214
Washington, DC 20410
33. How does a Lender who is already Title I or Titel II approved obtain the other approval?
You file a full lender application package with the following exceptions:
1. No application fee is required.
2. If you are using the same home office that was used for your FHA Lender approval, you don't need to submit any evidence of meeting the office facilities requirements.
3. If you have already have on file with us a CPA audit (either the audit you used to obtain initial approval or an annual renewal audit submitted to us via of the Lender Assessment SubSystem) that is less than 12 months old, you don't need to give us a new audit.
34. How does a lender that used to be FHA approved get approved again?
FHA does not have a reinstatement process for previously approved FHA lenders unless your approval was terminated within the last 30 days. Rather, you must reapply from scratch.
If your approval was withdrawn by FHA, you have 30 days to seek reinstatement from the date of withdrawal. Otherwise, you must wait 12 months after the effective date of the withdrawal before you can reapply. You must submit a full application package to reapply. See the last sentence in paragraph 4-9 in the below reference handbook.
If you voluntarily withdrew your approval, you, you can reapply again at any time in the future, but must submit a full application to reapply.
One exception: If you voluntarily withdrew your approval within the last 12 months and have not moved the physical location of your home office, you don't need to include the following attachments with your application (if they are normally required for your type of lender approval) when you reapply:
Photos of their office facilities
Resumes of any officers previously submitted
Quality Control Plan
See paragraph 6-25 in the FHA Title II Mortgagee Approval Handbook 4060.1, Rev-2 can be downloaded at: http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4060.1/40601handbookHSGH.doc.
If you are not sure how long ago your approval was terminated, please go to FHA's Neighborhood Watch page at https://entp.hud.gov/sfnw/public/ . Under its "Details" tab, you can obtain information on each FHA lender including when its approval was terminated. You can search for a lender by name or FHA lender ID number. When searching by FHA ID number, only use the first 5 digits to look up the company and use the full 10 digits to look up one of its branches.
35. Can Mortgage Brokers submit a surety bond in lieu of an annual audit to become a FHA approved nonsupervised loan correspondent and/or renewal their existing FHA approval?
No...The Congress did consider a change on this matter, but it was not included in the final version of the Housing bill that was enacted on July 30, 2008.