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Credit Watch Termination Initiative

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Office of Assistant Secretary for Housing-Federal Housing Commissioner, HUD.




This notice advises of the cause and effect of termination of Origination Approval Agreements taken by the Department of Housing and Urban Development's (HUD) 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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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.Start Printed Page 53991

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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 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 fifteenth review period, HUD is only terminating the Agreement of mortgagees whose default and claim rate exceeds both the national rate and 250 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
American Home Mortgage Company951 Eastgate Loop Ste. 1300 Chattanooga, TN 37411Knoxville, TN06/23/2003Atlanta
American Mortgage Service, Inc8086 Highway 51 North Millington, TN 38053Memphis, TN06/23/2003Atlanta
Approved Mortgage Corp107 N. State Rd. 135, Ste. 301 Greenwood, IN 46142Indianapolis, IN06/23/2003Atlanta
Capital Mortgage Finance Corp2200 Defense Highway Ste. 100 Crofton, MD 21114Washington, DC05/19/2003Philadelphia
Citizens First Mortgage Solutions, Inc3145 Tucker Norcross Rd Tucker, GA 30084Atlanta, GA06/23/2003Atlanta
Countrywide Home Loans, Inc4700 Hardy St., Ste. #H Hattiesburg, MS 39402Jackson, MS06/23/2003Atlanta
Crest Mortgage Company14850 Montfort Dr Ste. 100 Dallas, TX 75254Dallas, TX06/23/2003Denver
Crest Mortgage Company14850 Montfort Dr Ste. 100 Dallas, TX 75254Fort Worth, TX06/23/2003Denver
Decatur Mortgage Company LLC6350 Westhaven Dr Ste. H Indianapolis, IN 46254Indianapolis, IN06/23/2003Atlanta
Encore Mortgage Service1010 Laurel Oak Corp Ctr 301 Voorhees, NJ 08043Philadelphia, PA05/19/2003Philadelphia
First Community Mortgage, Inc3049 Cleveland Ave Ste. 200 Fort Myers, FL 33901Coral Gables, FL06/23/2003Atlanta
First Security Mortgage Service13915 Carrollwood Village Run Tampa, FL 33624Tampa, FL06/23/2003Atlanta
Golden Empire Mortgage, Inc10535 Foothill Blvd., Ste. #460 Rancho Cucamonga, CA 91730Santa Ana, CA06/23/2003Santa Ana
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Gulf Atlantic Funding Group5400 S University Dr Ste. 603 Davie, FL 33328Coral Gables, FL06/23/2003Atlanta
K&B Capital Corporation1950 Spectrum Cr #400 Marietta, GA 30067Atlanta, GA06/23/2003Atlanta
Key Bank & Trust7F Gwynns Mill Court Owings Mills, MD 21117Baltimore, MD06/23/2003Philadelphia
Nally & Company2100 Gardiner Lane Ste. 216 Louisville, KY 40205Louisville, KY06/23/2003Atlanta
New Heights Capital, LLC2900 Chamblee Tucker Rd, NE Atlanta, GA 30341Atlanta, GA06/23/2003Atlanta
New York Mortgage Bankers189-10 Hillside Ave. Hollis, NY 11423New York, NY06/23/2003Philadelphia
Northland Funding Group, DBA Capital Mortgage Services3305 Northland Dr Ste. 208 Austin, TX 78731San Antonio, TX06/23/2003Denver
Pinnacle Financial Corp12600 World Plaza Ln Fort Myers, FL 33907Coral Gables, FL05/19/2003Atlanta
Pryme Investment & Mtg. Brokers, Inc491 West 5300 South Murray, UT 84123Salt Lake City, UT05/19/2003Denver
Radius Capital Corp4871 West Avenue M Quartz Hill, CA 93536Los Angeles, CA06/23/2003Santa Ana
Saxon Equities Corp300 Motor Parkway Hauppauge, NY 11788New York, NY06/23/2003Philadelphia
US Mortgage Finance Corp901 Dulaney Valley Rd Ste. 801 Towson, MD 21204Baltimore, MD06/23/2003Philadelphia
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Dated: September 5, 2003.

John C. Weicher,

Assistant Secretary for Housing—Federal Housing Commissioner.

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[FR Doc. 03-23329 Filed 9-12-03; 8:45 am]