Elimination of FHA Approval of Loan Correspondents -Final Regs About to be Published

Elimination of FHA Approval of Loan Correspondents The final rule limits the FHA approval process to mortgagees, but provides that all loan correspondents approved as of the date of the effective date of this final rule will maintain their approval through December 31, 2010. Commencing 30 days following publication of this rule, FHA will no longer approve new applicants for approval as loan correspondents. Processing and Closing a Loan The final rule clarifies that, as a result of HUD’s elimination of the FHA approval process for loan correspondents, the requirements regarding Principal-Authorized Agent relationships will also change. Mortgage loans originated through Principal-Authorized Agent relationships will be permitted to close in either party’s name. However, to participate in such relationships, both the Principal and Authorized Agent must be approved as Direct Endorsement lenders under 24 CFR 203.3. Further, for mortgage loans originated under the relationship, the Principal must originate and the Authorized Agent must underwrite, and their actions must be recorded as such in FHA Connection (FHA's Computer Home Underwriting Mortgage System).

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