04-5396. 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 17th 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
American United Mtg Serv	4230 LBJ Freeway Ste 626 Dallas, TX 75244	Dallas, TX	11/29/2003	Denver
American United Mtg Serv	4230 LBJ Freeway Ste 626 Dallas, TX 75244	Fort Worth, TX	11/29/2003	Denver
Approval First Mortgage	3510 S Florida Ave Ste 102 Lakeland, FL 33803	Tampa, FL	12/26/2003	Atlanta
BSM Financial LP	16479 Dallas Parkway, #211 Addision, TX 75001	Fort Worth, TX	12/24/2003	Denver
Community Central Mortgage	85 North Main St. Ste 301 Mt. Clemens, MI 48083	Detroit, MI	12/26/2003	Philadelphia
Enterprise Mortgage	14200 Northbrook Dr. San Antonio, TX 78232	San Antonio, TX	12/24/2003	Denver
Fortune Mortgage	955 Congress Park Dr. Centerville, OH 45459	Cincinnati, OH	12/29/2003	Philadelphia
Home Loan Corporation	1112 East Copeland Rd. Ste 550, Arlington, TX 76011	Dallas, TX	12/24/2003	Denver
Legacy Mortgage	12800 S Ridgeland Ste G Palos Heights, IL 60463	Chicago, IL	12/24/2003	Atlanta
Meier Mortgage	7035 Bee Caves Road Ste 103 Austin, TX 78746	San Antonio, TX	11/29/2003	Denver
Metrociti Mortgage	4500 California Ave, #204 Bakersfield, CA 93309	Fresno, CA	12/12/2003	Santa Ana
New Freedom Mortgage	5248 So. Pinemont Dr. #C-190 Murray, UT 84123	Salt Lake City, UT	12/24/2003	Denver
Pinnacle Financial	2611 Technology Dr. Orlando, FL 32804	Tampa, FL	12/2/2003	Atlanta
Prem Mortgage	8678 West Spring Mtn Rd, #130, Las Vegas, NV 89117	Las Vegas, NV	12/24/2003	Santa Ana
Premiere Service Mortgage	297 Buttermilk Pike Fort Mitchell, KY 41017	Cincinnati, OH	11/29/2003	Philadelphia
Progressive Mortgage	5400 Transportation Blvd Ste 8 Cleveland, OH 44125	Cleveland, OH	12/24/2003	Philadelphia
RBC Mortgage Company	5801 Allentown Road Camp Springs, MD 20746	Baltimore, MD	12/24/2003	Philadelphia
Standard Home Mortgage	35787 Moravian Dr. Clinton Twp, MI 48035	Detroit, MI	12/29/2003	Philadelphia
Sunpoint Corporation	2400 S. Cimarron Rd. Ste 130 Las Vegas, NV 89117	Las Vegas, NV	12/29/2003	Santa Ana

Dated: March 5, 2004.

John C. Weicher,

Assistant Secretary for Housing—Federal Housing Commissioner.