B. Loans Involving HUD Employees, Relationships Posing a Possible Conflict of Interest, and Lender Employees

The jurisdictional HOC is responsible for processing HUD/FHA employee loan applications.

Loan applications from HUD/FHA employees are not eligible for DE processing. For loan applications involving HUD/FHA employees, the lender must

• process the loan application, and
• submit the complete underwritten loan package to the attention of the Processing and Underwriting Division Director for commitment processing and approval.

The HOC reviews the loan package, and approves or rejects the loan for the HUD/FHA employee.

Exception: For streamline refinances only, any HUD/FHA employee or member of their household (for example, spouse, parent, or child) may have their streamline refinance processed by a DE lender.

Reference: For more information on streamline refinances, see HUD 4155.1 3.C and HUD 4155.1 6.C.

A mortgage lender that has provided a construction loan, or has a financial interest in, owns, is owned by, or is affiliated with the building or selling entity or real estate firm, may originate mortgages under the DE Lender program provided that

• the appraisal is performed by a qualified, independent, FHA-approved fee appraiser, and
• when required, inspections are performed by fee inspectors on the FHA Inspector Roster.

Mortgage lender personnel may perform the mortgage credit analysis.

If a mortgage lender employee is the borrower or seller in a mortgage loan transaction

• the employee cannot be involved in processing the application
• an independent, FHA appraiser, who is not affiliated with the mortgagee, must be used
• if an inspection is involved, it must be performed by an FHA-approved fee inspector
• the application should be processed by a different branch from the one at which the employee works, or by the mortgage lender's main office, and
• the case must be clearly annotated with "Employment" on the HUD-92900-LT, FHA Loan Underwriting and Transmittal Summary, and on the front of the case binder.