04-12649. 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 the 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 18th review period, HUD is only 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
Allied Home Mortgage Capital	251 Keisler Drive, Ste 100, Cary, NC 27511	Greensboro, NC	2/17/2004	Atlanta.
Americap Mortgage Corp	1979 Lakeside Parkway, Ste 450, Tucker, GA 30084	Atlanta, GA	4/1/2004	Atlanta.
Centurion Mortgage Corp	5402 D Gateway Centre, Flint, MI 48507	Grand Rapids, MI	4/1/2004	Philadelphia.
CH Mortgage Co. I LTD	1100 South Tryon St., Ste 101, Charlotte, NC 28203	Greensboro, NC	4/1/2004	Atlanta.
Diversifed Mortgage, Inc	26133 U.S. 19 North, Ste 412, Clearwater, FL 33763	Tampa, FL	4/1/2004	Atlanta.
Equity One, Inc.	301 Lippincott Drive, Marlton, NJ 08053	Philadelphia, PA	4/1/2004	Philadelphia.
First Florida State Mortgage Corp	2090 Sarno Road, Melbourne, FL 32935	Orlando, FL	4/1/2004	Atlanta.
First Rochester Mortgage Corp	2024 W Henrietta Rd., Ste 2A, Rochester, NY 14623	Buffalo, NY	4/1/2004	Philadelphia.
First City Mortgage, Inc	325 Country Club Drive, Stockbridge, GA 30281	Atlanta, GA	4/1/2004	Atlanta.
Go Blue, Inc	5583 Davis Blvd., Ste 200, North Richland Hill, TX 76180	Fort Worth, TX	4/1/2004	Denver.
Homeowners Mortgage of America, Inc	501 Village Trace Bldg., Marietta, GA 30067	Atlanta, GA	4/1/2004	Atlanta.
Lenders Choice Mortgage Services, Inc	13930 SW 47 St. #203, Miami, FL 33175	Miami, FL	2/17/2004	Atlanta.
Lodge Mortgage, Inc	19221 I 45 South, Ste 330, Conroe, TX 77385	Houston, TX	4/1/2004	Denver.
Lone Star Realty Investment, Inc	620 E Southlake Blvd., Southlake, TX 76092	Fort Worth, TX	4/1/2004	Denver.
McKinley Mortgage LLC	9825 Kenwood Rd., Ste 203, Cincinnati, OH 45242	Cincinnati, OH	4/1/2004	Philadelphia.
Mortgage Express, Inc	374 Meridian Parke Ln, Ste A, Greenwood, IN 46142	Indianapolis, IN	4/1/2004	Atlanta.
Sensible Mortgage Solutions, Inc	6112 Arlington Road, Jacksonville, FL 32211	Jacksonville, FL	2/17/2004	Atlanta.
Tropical Mortgage of North Florida, Inc	2002 Southside Blvd., Ste 100-C, Jacksonville, FL 32216	Jacksonville, FL	4/1/2004	Atlanta.

Dated: May 21, 2004.

Sean Cassidy,

General Deputy, Assistant Secretary for Housing.