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New Articles:
- Pennsylvania Surety Bond Mortgage Licensing Requirements
- Rhode Island Mortgage Loan Originator Professional Requirements under SAFE
- Illinois Requires Licensing of Mortgage Loan Originators
- Kansas Mortgage Broker Licensing becomes part of NMLS
- Maryland NMLS-Approved SAFE Mortgage Loan Originator Test Available
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For assistance with mortgage licensing, contact us at:Direct Phone: (714) 656-3960
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 Mortgage Broker Licensing FAQ
Most
Commonly Asked FAQs from
Mortgage
Brokers About Being a FHA Approved Lender
(Revised
January 7, 2008)
1.
What kind of FHA lender approval can a mortgage broker apply for?
2.
Can a mortgage brokerage company (or a mortgage lending company) that
also operates as a real estate company be approved as a FHA lender?
3.
Are there any employment restrictions?
4.
Can a FHA approved lender share officers and/or owners with other
entities?
5.
Can a loan officer who has a real estate license originate FHA loans?
6.
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?
7.
Can a non-FHA approved mortgage broker be paid a mortgage broker fee on
a FHA forward mortgage?
8.
Can a non-FHA approved mortgage broker be paid a mortgage broker fee on
a FHA reverse mortgage, also known as a HECM mortgage?
9
Are referral fees allowed in the origination of FHA Insured single
family loans?
10.
Does FHA allow Net Branches?
11.
What does a mortgage broker need to submit to get approved as a FHA
nonsupervised loan correspondent?
1.
What kind of FHA lender approval can a mortgage broker apply for?
Mortgage brokers can
only apply for approval as a nonsupervised loan correspondent (aka
mini-eagle). Since the FHA single family loan programs (203b,
203k, 234c, Reverse Mortgage or HECM, etc) are Title II, they normally
only apply for Title II approval. FHA Title I approval in
only needed to do Title I property improvement loans and manufactured
(mobile) housing loans.
2.
Can a mortgage brokerage company (or a mortgage lending company) that
also operates as a real estate company be approved as a FHA lender
(either nonsupervised mortgagee or nonsupervised loan correspondent)?
Yes as long as the
company meets the “principal activity” part of the
definition of a nonsupervised lender.
Principal
Activity: FHA required all
non-federally supervised applicants to have as their principal activity
their mortgage business. This requirement is contained in the
definitions of a nonsupervised mortgagee and nonsupervised loan
correspondent.
Nonsupervised
Mortgagee (aka as Full Eagle): 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 (aka as Mini-Eagle): 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 and at
least 50% of a company’s gross income must come from its
mortgage business for a company to be approved as a FHA lender and
renew its approval each year.
3.
Are there any employment restrictions?
Any employee of a FHA
lender who earns compensation on FHA loans cannot have other employment
including self employment and outside employment in the mortgage
lending, real estate, or a related field.
The most common related fields are financial
planning and insurance. Their income earned on FHA loans must be
reported to the IRS on a W-2. This restriction does not apply
to employees of a FHA lender who do not do any FHA loans.
This restriction is in
paragraph 2-9(G) 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.
4.
Can a FHA approved lender share officers and/or owners with other
entities?
Yes. 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. In addition, the FHA approved
lender’s officer whose experience was used to meet the 3
years experience as part of the lender’s approval by FHA
cannot represent other entities during normal business hours.
Branch managers are considered officers of a lender.
See paragraph 2-9(C)
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.
5.
Can a loan officer who has a real estate license originate FHA loans?
Yes, but it
can’t be employment with 2 different companies or self
employment. This restriction is in paragraph
2-9(G) 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.
6.
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.
Participation in the FHA mortgage insurance programs is limited to FHA
approved lenders. Non-FHA approved mortgage brokers can not
perform any of the duties and responsibilities of a lender on a FHA
loan. This includes: (1) taking a FHA loan
application, (2) processing it, (3) underwriting it, (4) closing it and
(5) funding the mortgage.
Please see paragraph
2-1 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.
7.
Can a non-FHA approved mortgage broker be paid a mortgage broker fee on
a FHA forward mortgage?
FHA
issued the following policy alert on 10-30-07 on this matter:
THE
SUBJECT MESSAGE IS APPLICABLE ON FORWARD MORTGAGES ONLY
POLICY
ALERT – RESPA/FHA EXISTING POLICY REGARDING NON FHA APPROVED
MORTGAGE BROKER FEES IN FHA MORTGAGE TRANSACTIONS
The
subject alert reconfirms existing FHA policy regarding the use of non
FHA-approved mortgage brokers. FHA loan origination services must be
performed by a FHA-approved lender or FHA approved mortgage broker
(loan correspondent). A loan correspondent may be compensated for the
actual loan origination services it performs either directly by the
consumer or indirectly by the FHA approved lender without being in
violation of either the RESPA statute and regulations or FHA
regulations.
In
transactions where the mortgage broker is not an FHA-approved broker,
the loan origination services cannot be performed. Under these
circumstances, RESPA would prohibit the payment to the non FHA-approved
mortgage broker because those services, under FHA regulations, would
have to be performed again by either an FHA-approved lender or loan
correspondent. The payment to the unapproved broker for duplicated
services amounts to an unearned fee in violation of section 8(b) of
RESPA. Further, this payment also acts as a disguised referral fee for
steering the borrower to the FHA-approved lender or loan correspondent
which is in violation of section 8(a) of RESPA. While a broker who is
not FHA-approved may assist a prospective FHA borrower in obtaining an
FHA loan, the non-approved broker cannot perform required FHA loan
origination services. In these instances, the fee charged must be paid
from the mortgagor’s own available assets, must be disclosed
on the HUD-1 at closing and a copy of the contract included in the loan
file submitted for insurance endorsement.
Under
no circumstances, may a borrower pay a fee that is not commensurate
with the amount normally charged for the similar services, goods or
facilities. If the payment or a portion thereof bears no reasonable
relationship to the market value of the goods, facilities or services
provided, the excess over the market rate may be used as evidence of a
compensated referral or unearned fee in violation of section 8(a) or
(b) of RESPA and 24 CFR 3500.14(g).
RESPA
provided further guidance to industry regarding payments by lenders to
mortgage brokers in Policy Statement 1999-1. While the policy statement
specifically speaks of lender payments to mortgage brokers, those
payments are indirectly paid by the consumer and the policy statement
would apply equally to payments made directly by the consumer.
Please
read this notice online at FHA’s website at: http://www.hud.gov/offices/hsg/sfh/lender/notaprbr.pdf
For
FHA technical support, please contact the
8.
Can a non-FHA approved mortgage broker be paid a mortgage broker fee on
a FHA reverse mortgage, also known as a HECM mortgage?
Please see paragraph
6-13(I) of FHA Handbook 4235.1 Home Equity Conversion Mortgages and
Mortgagee Letters 00-10 and 06-07 on this issue.
For FHA technical
support, please contact the
9.
Are referral fees allowed in the origination of FHA Insured single
family loans?
No.
Paragraph 5-3(A)(4) of FHA Handbook 4000.2 prohibits payments to any
party for referring a loan (finder’s fee).
All mortgage
transactions, including FHA insured loans, must be in compliance with
RESPA. Information on RESPA can be found on: http://www.hud.gov/offices/hsg/sfh/res/respa_hm.cfm
Please contact the
10.
Does FHA allow Net Branches?
No.
A FHA approved lender is prohibited from engaging an
existing, separate mortgage company or broker to function as a branch
of the approved mortgagee and allowing that separate entity to
originate insured mortgages under the approved mortgagee’s
FHA mortgagee number. This is sometimes called “net
branching.”
A
FHA approved mortgagee must pay all of its operating expenses including
the compensation of all employees of its main and branch
offices. Other operating expenses that must be paid by the
FHA approved mortgagee include, but are not limited to, equipment,
furniture, office rent, utilities and other similar expenses incurred
in operating a mortgage lending business.
A
branch compensation plan that includes the payment of operating
expenses by the branch manager, any other employee or by a third party
is a prohibited arrangement
The
following includes some, but not all, examples of unacceptable
provisions in employment agreements:
1.
Require all contractual relationships with vendors such as leases,
telephones, utilities, and advertising to be in the name of the
“employee” (branch) and not in the name of the FHA
approved mortgagee;
2. Require
the “employee” (branch) to indemnify the FHA
approved mortgagee if it incurs damages from any apparent, express, or
implied agency representation by or through the
“employee’s” (branch’s)
actions; and
3. Require
the “employee” (branch) to issue a personal check
to cover operating expenses if funds are not available from an
operating account.
See paragraph 2-14 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
11.
What are the requirements to become a FHA approved nonsupervised loan
correspondent (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
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
____
Copy of $1,000 Application Fee Check: Made payable to HUD and
mailed to the HUD/FHA lockbox --
____
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
490 L’Enfant Plaza East, SW,
US
Mail:
FHA
Mail
your $1,000 application fee check and its cover sheet to our lockbox in
Dept of HUD
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 30-45 days depending on the number of
other applications in the processing pipeline.
________________________________________
This email box is used
by the FHA
This Division has a
2nd email box, LASS@hud.gov,
for questions about the annual renewal process for FHA approved
lenders. This includes submitting audited
financial statements using the Lender Assessment SubSystem (LASS),
payment of the annual renewal fee and the annual verification
report (V-form).
If you have questions
about a FHA loan program, payment of FHA insurance
premiums, FHA DE approval and other non-lender approval
questions, please contact the FHA Resource Center.
Their web site is:
http://www.hud.gov/offices/hsg/sfh/fharesourcectr.cfm .
Their email address
is: hud@custhelp.com
Their phone number
is: (800) CALLFHA or (800) 225-5342.