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Notice

Credit Watch Termination Initiative

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Information about this document as published in the Federal Register.

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AGENCY:

Office of 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 against HUD-approved mortgagees through its Credit Watch Termination Initiative. This notice includes a list of mortgagees which have had their Origination Approval Agreements (Agreements) terminated.

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FOR FURTHER INFORMATION CONTACT:

The Quality Assurance Division, Office of Housing, Department of Housing and Urban Development, 451 Seventh St. SW., Room B133-P3214, Washington, DC 20410; telephone (202) 708-2830. (This is not a toll free number). Persons with hearing or speech impairments may access that number via TTY by calling the Federal Information Relay Service at (800) 877-8339.

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SUPPLEMENTARY INFORMATION:

HUD has the authority to address deficiencies in the performance of lenders' loans as provided in the HUD 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 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 Start Printed Page 21267preceding 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 ninth review period, HUD is only terminating the Agreement of mortgagees whose default and claim rate exceeds both the national rate and 300 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 set forth 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 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 nameMortgagee branch addressHUD office jurisdictionsTermination effective dateHome ownership centers
Advantage Investors Mortgage Corp8500 Stemmons Frwy, Ste 2020, Dallas, TX 75247Dallas, TX01/24/2002Denver.
American Mortgage CorpRoad No 2 KM. 12.3 Bayamon, PR 00621San Juan, PR01/24/2002Atlanta.
Continental Mortgage Corp457 Ponce De Leon Ave, 2ND FL., San Juan, PR 00917San Juan, PR01/24/2002Atlanta.
Dalma Corp5468 Memorial Drive, Suites C&D, Stone Mountain, GA 30083Atlanta, GA11/27/2001Atlanta.
EFG Financial Inc901 Corporate Center Drive 502, Monterey Park, CA 91754Los Angeles, CA11/27/2001Santa Ana.
First Residential Mortgage1100 East Park Drive, Ste 200, Birmingham, AL 35235Birmingham, AL11/27/2001Atlanta.
Georgetown Mortgage Inc4360 Georgetown Square, Ste. 800, Atlanta, GA 30338Atlanta, GA01/24/2002Atlanta.
Irwin Mortgage Corp12015 Justice Ave., Baton Rouge, LA 70816New Orleans, LA11/27/2001Denver.
Keystone Mortgage and Investment Co809 N 5th Ave., Phoenix, AZ 85003Phoenix, AZ01/24/2002Santa Ana.
Mirad Financial Group Inc20951 Brookhurst St. #25, Huntington Beach, CA 92646Santa Ana, CA01/24/2002Santa Ana.
Omega Financial Services Inc11711 Whittier Blvd., M Whittier, CA 90601Los Angeles, CA11/27/2001Santa Ana.
On-Line Mortgage Express1501 W. 9th Street, Upland, CA 91786Santa Ana, CA01/24/2002Santa Ana.
Pacific Network Funding Inc16025 E Gale Ave, Ste B-5, City of Industry, CA 91745Santa Ana, CA01/24/2002Santa Ana.
Pine State Mortgage Corp6065 Roswell Rd NE, Ste 120, Atlanta, GA 30328Atlanta, GA01/24/2002Atlanta.
Tri-Mex Mortgage Corp3345 Wilshire Blvd, Ste 1100, Los Angeles, CA 90010Los Angeles, CA11/27/2001Santa Ana.
Tri-Mex Mortgage Corp3345 Wilshire Blvd, Ste 1100, Los Angeles, CA 90010Santa Ana, CA11/27/2001Santa Ana.
White Oak Mortgage Group LLC7101 Creedmoor Rd, Ste 101, Raleigh, NC 27613Greensboro, NC01/24/2002Atlanta.
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Dated: April 24, 2002.

John C. Weicher,

Assistant Secretary for Housing—Federal Housing Commissioner.

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[FR Doc. 02-10602 Filed 4-29-02; 8:45 am]

BILLING CODE 4210-27-P