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FHA Mortgagees Terminated

3 firms lose origination approvals, direct endorsement authority

June 30, 2012

By MortgageDaily.com staff


Three firms have lost their ability to originate or underwrite mortgages for the Federal Housing Administration.

Direct endorsement approval was terminated for Strategic Mortgage Co. on April 17, according to a notice filed by the Department of Housing and Urban Development in the Federal Register. The mortgagee is based in Columbus, Ohio, while the HUD office jurisdiction impacting the termination is in Indianapolis.

Strategic's state license was terminated on Jan. 25, according to the Nationwide Mortgage Licensing System & Registry. Its website, which is still active, says, "Our loan officers are experts in government loans, such as FHA and VA." The company claims to be "one of the largest, privately owned mortgage banks in Ohio."

Direct endorsement mortgagees are authorized to underwrite FHA loans. Termination can occur when the mortgagee's default and claim rate exceed 200 percent of the rate for the local area and also exceeds the national default and claim rate.

Terminated mortgagees cannot underwrite FHA loans within the region covered by the local HUD field office. Loans that were closed or underwritten prior to the termination date can be submitted for endorsement, while other loans in process need to be completed by another mortgagee.

After six months, terminated mortgagees can reapply for approval, though an independent analysis identifying the cause of the high default rate along with a corrective action plan must accompany the application.

Also losing its direct endorsement authority on April 17 was Community Central Mortgage Co. LLC in Mount Clemens, Mich. The mortgagee was a subsidiary of Community Central Bank, which failed in May 2011.

HUD additionally terminated Community Central's origination approval agreement, which authorized the company to originate single-family mortgages. HUD uses the same performance requirements for origination agreement terminations as it does for direct endorsement terminations. Also like with direct endorsement terminations, mortgagees can reapply in six months.

In February, HUD disclosed that Mortgage Source LLC lost both its direct endorsement approval and its origination agreement in November 2011. The impacted branch of the Garden City, N.Y.-based company fell within the jurisdiction of HUD's New York office.

Out of 116 FHA loans originated in 2010 and 2011 by two branches of Mortgage Source, 16 were seriously delinquent as of February 2012.

Mortgage Source's web site is dead, and it hasn't had any locations authorized to originate since 2010 according to the NMLS.

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