Lender Insurance (LI) authority is only granted to high performing Mortgagees, per regulations outlined at 24 CFR 203.6. To be considered high-performing, a Mortgagee must have, and maintain at all times, Unconditional Direct Endorsement (DE) approval authority and an acceptable Default and Claim rate (compare ratio) for the state(s) in which the Mortgagee has underwritten loans. LI Mortgagees must also comply with other HUD requirements as outlined in Section I.A.5.b, Title II Single Family Lender Insurance Authority in the Single Family Housing Policy Handbook (Handbook 4000.1).
Obtaining LI Authority
To obtain LI authority, the Mortgagee must apply through the FHA Connection (FHAC) and meet the following eligibility requirements:
- Be an FHA-approved Mortgagee with Unconditional DE approval authority; and
- Have a compare ratio that is at or below 150 percent.
If the Mortgagee does not have compare ratio data because it was recently created by a merger, acquisition, or reorganization that resulted in the issuance of a new FHA Lender ID, it must submit a Change Request through the Lender Electronic Assessment Portal (LEAP) to apply for LI authority. Any entity involved in the merger, acquisition, or reogranization must meet the eligibility requirements outlined above and the surviving Mortgagee must submit the required documents outlined in Handbook 4000.1.
Maintaining LI Authority
In accordance with 24 CFR 203.4(b), LI authority may be terminated when a Mortgagee's compare ratio is greater than 150 percent. Similiar to the Credit Watch Termination Initiative, LI Mortgagees compare ratio will be monitored on a quarterly basis by HUD. Termination of LI authority can also occur for other reasons, such as:
- The Homeownership Center recommends termination following a suspension, or
- Loss of DE approval authority, or
- Termination by HUD's Mortgagee Review Board (MRB).
HUD will monitor LI peformance on an ongoing basis, but will communicate results at least quarterly based on the prior 24-month periods ending March, June, September and December. LI performance will be evaluated against other Mortgagees only in state(s) in which the institution operated (i.e., underwrote loans with an amortization commencement date) within the preceding 24 months. LI peformance is monitored by using the Neighborhood Watch Early Warning System.
LI Mortgagees are strongly encouraged to submit electronic case binders. The Electronic Case Binder Developer's Guide provides information for lenders' software development and maintenance staff regarding the submission of electronic case binders.
Mortgagees with additional questions may contact the FHA Resource Center at firstname.lastname@example.org or (800) 225-5342.