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1. Overview of the DE Program Lender Application and Approval Process


Contents:

Change Date

May 10, 2009


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2.A.1.aa. DE Program Participation Is a Privilege

FHA's approval of a lender to participate in the Direct Endorsement (DE) Program is a privilege. To obtain DE approval, a lender must demonstrate it has the qualifications, experience, and expertise to underwrite mortgage loans that satisfy FHA requirements. To maintain approval, a lender must consistently underwrite and close loans that meet all FHA requirements.


An approved DE lender must conduct business in accordance with prudent mortgage lending practices, industry standards and all Federal and state laws applicable to mortgage banking.

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2.A.1.bb. Lender Code of Ethics

A DE mortgage lender must conduct its business operations in accordance with accepted sound mortgage lending practices, ethics and standards.

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2.A.1.cc. Requirement for HOC Establishment of a Lender Applicant File

Each Home Ownership Center (HOC) must establish a file for each mortgage lender that applies for DE approval within its jurisdiction. The file must contain


  • documentation of the entrance conference with the lender
  • copies of the conditional approval letter, or rejection letter if applicable, and
  • individual Underwriting Reports for the 15 (or more) pre-closing test cases.

Reference: For information on the pre-closing test case phase, see HUD 4155.2 2.B.3.

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2.A.1.dd. DE Lender Application and Approval Process

The table below describes the stages of the lender application and approval process for the DE Program.

Stage Description

1

The mortgage lender applies for, and receives, basic DE approval from FHA's Office of Lender Activities and Program Compliance, located at FHA Headquarters.


Reference: For information on the requirements for obtaining basic FHA mortgage lender approval, see HUD 4060.1open new window, Mortgagee Approval Handbook.

2

The mortgage lender applies for pre-closing DE approval by sending to the HOC where their corporate office is located


  • a letter requesting pre-closing DE approval, which includes the DE underwriter's name and CHUMS ID number, and
  • a copy of the HUD approval letter, received from the Office of Lender Approval, in HUD Headquarters, granting basic approval.

3

Upon receipt of the written request from the lender, the HOC


  • sends out an approval letter for pre-closing that includes the specific requirements that must be met for release to unconditional DE approval
  • provides reference material to the lender
  • establishes a lender file, and
  • sets up an entrance conference with the lender, which is either conducted face-to-face or on a conference-by-phone.

Note: The purpose of the conference is to

  • educate the lender about the submission and processing procedures used by the HOC for pre-closing test cases
  • provide the mortgage lender with contact information for the HOC
  • highlight underwriting requirements, and
  • allow the HOC to answer questions from the mortgage lender.

4

The mortgage lender submits DE pre-closing test cases.


Reference: For more information on the pre-closing "test case" review phase, see HUD 4155.2 2.B.3.

5

The lender is either granted unconditional approval or is terminated.


Reference: For more information on the unconditional approval phase, see HUD 4155.2 2.B.4.

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