04-27207. Credit Watch Termination Initiative

AGENCY:

Office of the Assistant Secretary for Housing—Federal Housing Commissioner, HUD.

ACTION:

Notice.

SUMMARY:

This notice advises of the cause and effect of termination of Origination Approval Agreements taken by HUD's Federal Housing Administration (FHA) against HUD-approved mortgagees through the FHA Credit Watch Termination Initiative. This notice includes a list of mortgagees which have had their Origination Approval Agreements terminated.

FOR FURTHER INFORMATION CONTACT:

The Quality Assurance Division, Office of Housing, Department of Housing and Urban Development, 451 Seventh Street, SW., Room B133-P3214, Washington, DC 20410-8000; telephone [phone] (this is not a toll free number). Persons with hearing or speech impairments may access that number through TTY by calling the Federal Information Relay Service at [phone].

SUPPLEMENTARY INFORMATION:

HUD has the authority to address deficiencies in the performance of lenders' loans as provided in HUD's mortgagee approval regulations at 24 CFR 202.3. On May 17, 1999 (64 FR 26769), HUD published a notice on its procedures for terminating Origination Approval Agreements with FHA lenders and placement of FHA lenders on Credit Watch status (an evaluation period). In the May 17, 1999 notice, HUD advised that it would publish in the Federal Register a list of mortgagees, which have had their Origination Approval Agreements terminated.

Termination of Origination Approval Agreement: Approval of a mortgagee by HUD/FHA to participate in FHA mortgage insurance programs includes an Origination Approval Agreement (Agreement) between HUD and the mortgagee. Under the Agreement, the mortgagee is authorized to originate single family mortgage loans and submit them to FHA for insurance endorsement. The Agreement may be terminated on the basis of poor performance of FHA-insured mortgage loans originated by the mortgagee. The termination of a mortgagee's Agreement is separate and apart from any action taken by HUD's Mortgagee Review Board under HUD's regulations at 24 CFR part 25.

Cause: HUD's regulations permit HUD to terminate the Agreement with any mortgagee having a default and claim rate for loans endorsed within the preceding 24 months that exceeds 200 percent of the default and claim rate within the geographic area served by a HUD field office, and also exceeds the national default and claim rate. For the 20th review period, HUD is terminating the Agreement of mortgagees whose default and claim rate exceeds both the national rate and 200 percent of the field office rate.

Effect: Termination of the Agreement precludes that branch(s) of the mortgagee from originating FHA-insured single family mortgages within the area of the HUD field office(s) listed in this notice. Mortgagees authorized to purchase, hold, or service FHA insured mortgages may continue to do so.

Loans that closed or were approved before the termination became effective may be submitted for insurance endorsement. Approved loans are (1) those already underwritten and approved by a Direct Endorsement (DE) underwriter employed by an unconditionally approved DE lender and (2) cases covered by a firm commitment issued by HUD. Cases at earlier stages of processing cannot be submitted for insurance by the terminated branch; however, they may be transferred for completion of processing and underwriting to another mortgagee or branch authorized to originate FHA insured mortgages in that area. Mortgagees are obligated to continue to pay existing insurance premiums and meet all other obligations associated with insured mortgages.

A terminated mortgagee may apply for a new Origination Approval Agreement if the mortgagee continues to be an approved mortgagee meeting the requirements of 24 CFR 202.5, 202.6, 202.7, 202.8 or 202.10 and 202.12, if there has been no Origination Approval Agreement for at least six months, and if the Secretary determines that the underlying causes for termination have been remedied. To enable the Secretary to ascertain whether the underlying causes for termination have been remedied, a mortgagee applying for a new Origination Approval Agreement must obtain an independent review of the terminated office's operations as well as its mortgage production, specifically including the FHA-insured mortgages cited in its termination notice. This independent analysis shall identify the underlying cause for the mortgagee's high default and claim rate. The review must be conducted and issued by an independent Certified Public Accountant (CPA) qualified to perform audits under Government Auditing Standards as provided by the General Accounting Office. The mortgagee must also submit a written corrective action plan to address each of the issues identified in the CPA's report, along with evidence that the plan has been implemented. The application for a new Agreement should be in the form of a letter, accompanied by the CPA's report and corrective action plan. The request should be sent to the Director, Office of Lender Activities and Program Compliance, 451 Seventh Street, SW., Room B133-P3214, Washington, DC 20410-8000 or by courier to 490 L'Enfant Plaza, East, SW., Suite 3214, Washington, DC 20024.

Action: The following mortgagees have had their Agreements terminated by HUD:

Mortgagee name	Mortgagee branch address	HUD office jurisdictions	Termination effective date	Home ownership centers
America's Mortgage Resource, Inc	3317 N I-10 Service Road, Metairie, LA 70003	New Orleans, LA	9/10/2004	Denver.
American Union Mortgage, Inc	5250 S. Commerce Dr., Ste 101, Murray, UT 84107	Salt Lake City, UT	9/10/2004	Denver.
ARK LA TEX Financial Services LLC	4137 S Sherwood Forest Blvd., Baton Rouge, LA 70816	New Orleans, LA	10/4/2004	Denver.
Fieldstone Mortgage Company	6243 I H 10 W, Ste 205, San Antonio, TX 78201	San Antonio, TX	9/10/2004	Denver.
Gateway Funding Diversified Mtg Srvs LP	300 Welsh Rd, Bldg 5, Horsham, PA 19044	Philadelphia, PA	9/10/2004	Philadelphia.
Hamilton Mortgage Corporation	1 Independence Dr., Ste 416, Birmingham, AL 35209	Birmingham, AL	10/5/2004	Atlanta.
Major Mortgage	13300 Old Blanco Rd. Ste 304, San Antonio, TX 78216	San Antonio, TX	10/5/2004	Denver.
Major Mortgage	2660 South Rainbow Blvd. D104, Las Vegas, NV 89146	Las Vegas, NV	10/5/2004	Santa Ana.
Mortgage Plus of America Corp	940 N 10th Street, Ste 200 Kalamazoo, MI 49009	Grand Rapids, MI	9/10/2004	Philadelphia.
Old American Mortgage, Inc	4516 South, 700 East #100, Murray, UT 84107	Salt Lake City, UT	10/5/2004	Denver.
Pan American Financial Corp	Roosevelt Ave, 1505 2nd Floor, Guaynabo, PR 00968	San Juan, PR	10/5/2004	Atlanta.
Summit Financial Mortgage LLC	7586 W Jewell Ave, Ste 101, Lakewood, CO 80232	Denver, CO	9/10/2004	Denver.
Villa Mortgage, Inc	2796 Mack Road, Fairfield, OH 45014	Cincinnati, OH	10/6/2004	Philadelphia.

Dated: December 6, 2004.

Sean Cassidy,

General Deputy Assistant Secretary for Housing.