Branches of six mortgage companies have lost their approval to originate loans insured by the Federal Housing Administration. One of the terminated lenders operates a rapidly growing FHA lending subsidiary.
Origination approval agreements were terminated on July 1 for the companies under the Credit Watch Termination Initiative, according to a Federal Register notice today.
The U.S. Department of Housing and Urban Development terminates FHA approval when loans endorsed over the prior 24 months from a mortgagee have a default and claim rate in excess of HUD's national rate and more than 200 percent of the local HUD region's rate.
The termination applies only to the branch listed in HUD's notice.
Among the terminated mortgagees were an Addison, Texas, branch of AAA Worldwide Financial Co.; a Lawrenceville, Ga., branch of American Mortgage Services Inc.; and a Birmingham, Ala., branch of Community Home Lending Inc.
In addition, a Gretna, La., branch of Landmark Mortgage Corp. and a Mesa, Ariz., branch of Southwest Stage Funding LLC were terminated.
Ideal Mortgage Bankers saw its branch at 201 Old Country Road, in Melville, N.Y., lose its FHA approval. Ideal, which closed its national wholesale lending operation in July, is the parent of Lend America -- which has embarked on a strategy to use the FHA Hope for Homeowners program to help servicers, institutional investors and hedge funds refinance troubled mortgages. Lend America has added hundreds of employees since last year, and its headcount stood at 600 earlier this year.
HUD said in today's notice that loans which have already been underwritten and approved by a direct endorsement underwriter may still be submitted for insurance endorsement. But other loans in process must be transferred to another FHA-approved lender.
Terminated mortgagees are still obligated on previously insured mortgages.
After six months, terminated mortgagees can reapply for a new origination approval agreement if they convince the secretary of HUD that they have remedied their problems.