Direct Endorsement

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Summary:
Direct Endorsement makes it easier and quicker for people to buy homes by allowing them to get mortgage insurance directly with a HUD-approved lender.

Purpose:
Direct Endorsement is not a separate program; rather, it is the mechanism that enables HUD/Federal Housing Administration (FHA)-approved lenders to consider single-family mortgage applications without first submitting paperwork to HUD. FHA mortgage insurance programs help low- and moderate-income families become homeowners by lowering some of the initial costs of their mortgage loans. FHA mortgage insurance also encourages lenders to make loans to otherwise creditworthy borrowers and projects that might not be able to meet conventional underwriting requirements, by protecting lenders against loss in case of default.

Type of Assistance:
Virtually all single-family FHA mortgage lending is done through Direct Endorsement, which enables an FHA-insured mortgage to be processed as rapidly as other mortgages. In general, HUD maintains a list of approved mortgage lenders that use Direct Endorsement. This list is available to potential homebuyers at their local HUD Field Office or on the Internet (see below for link).

Eligible Grantees:
FHA-approved lending institutions, such as banks, mortgage companies, and savings and loan associations, can use the Direct Endorsement process if they meet HUD’s criteria, ensuring that lenders have enough experience and conduct their business in accordance with sound lending ethics and standards. For example, the lender must have 5 years’ experience originating single-family mortgages, or have a principal officer who has originated them for at least 5 years. The lender must also follow all HUD regulations and other laws that apply to mortgage lending.

Eligible Customers:
Any person who meets the income requirements for a HUD-insured single-family mortgage and can make the monthly mortgage payments is eligible to apply to a HUD-approved lender that uses Direct Endorsement. Investors also may participate.

Application:
A lender who wants to participate in Direct Endorsement must complete an Application for Approval as Direct Endorsement Mortgagee and access the Underwriter Registry screen on HUD’s FHA Connection system to add new underwriters (ML 96-10). Once a lender is approved and participating in the program, it must fulfill certain responsibilities. For example, HUD maintains a Credit Alert Interactive Voice Response System, which the lender must consult to find out if an applicant for a mortgage has been delinquent on another HUD-insured mortgage; if so, the lender will have to judge--using HUD criteria--whether extenuating circumstances were involved before continuing to process the application. Lenders are guided in meeting their duties by a set of HUD technical handbooks. Finally, once a borrower is approved by the lender and closing has occurred, the lender submits the loan to HUD for FHA insurance endorsement.

Funding Status:
Not applicable.

Technical Guidance:
Direct Endorsement is authorized under Section 203(b) of the National Housing Act (12 U.S.C. 1709 (b), (I)). Program regulations are in 24 CFR 203.5 and 203.255. The program is administered by HUD’s Office of Housing-Federal Housing Administration.

For More Information:

General--To learn more about Direct Endorsement, homebuyers should contact a HUD-approved lender. For a searchable listing of approved lenders access HUD’s FHA Approved Lender List, or call the FHA Mortgage Hotline (1-800-CALLFHA). Detailed--Lenders interested in participating in the program should get the Single Family Direct Endorsement Program Handbook (HUD Housing Handbook 4000.4), which is available on the Internet from HUDCLIPS (see below) or by mail from HUD.

For underwriting guidance, lenders must follow several HUD Housing Handbooks: Architectural Processing and Inspections for Home Mortgage Insurance (4145.1), Valuation Analysis for Home Mortgage Insurance (4150.1), and Mortgage Credit Analysis (4155.1), as well as mortgagee letters and instructions from the local HUD Field Office. These handbooks and materials are all available on the Internet at HUDCLIPS or by mail from HUD.