FHA Third-Party Originator Sponsors Warned by HUD
February 22, 2012
A sponsoring Federal Housing Authority-approved mortgagee could face administrative action for failure by a sponsored third-party originator, such as a mortgage broker, to comply with FHA lending requirements, the Department of Housing and Urban Development has warned.
In recent guidance, HUD also warned that enforcement is not limited to sponsoring mortgagees but extends as well to approved mortgagees acting as sponsored TPOs or any individual acting on either party’s behalf.
Offenders may be hauled before HUD’s Mortgagee Review Board, the department’s disciplinary body for errant lenders, and punished with suspension, debarment or limited denials of participation. They may also be required to pay civil fines and other assessments, the department said.
According to HUD, all TPOs must be sponsored by an FHA-approved Direct Endorsement lender. Sponsors may be conditional or unconditional DE lenders but only an unconditional DE lender is authorized to set up a sponsored TPO in the Sponsored Originator Registry in FHA Connection, the department said.
Sponsors are responsible for ensuring that their sponsored TPOs adhere to FHA rules and that they have procedures in place to closely monitor and evaluate their wards’ lending activities. The same due diligence applies to approved mortgagees that act as sponsored TPOs, HUD added.
Non-FHA-approved sponsored TPOs are prohibited from closing loans in their name. Loans they originated must close in the name of their DE sponsor.
In the past, TPOs were loan correspondents approved by the FHA and were authorized to close FHA-insured loans in their name. However, they lost their approved status and closing authority late last year as HUD tightened its oversight of FHA lenders.
Since Dec. 31, 2010, loan correspondents that have not converted or obtained new FHA lender approval as Title II mortgagees could no longer originate or close FHA loans in their own name.
HUD clarified that an FHA-approved mortgagee that opts to become a sponsored TPO for another FHA-approved lender may originate and close loans in its own name. As of Aug. 22 last year, the FHA Connection has allowed FHA-approved mortgagees acting as sponsored TPOs to have a mortgage insurance certificate issued in its own name, the department said.
Other areas of interest
- Mortgage Originations
- FHA, VA
- Regulations
- HUD
- FHA Lenders
- FHA Activity
- FHA Programs
- FHA & Ginnie Mae
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