A Loan Correspondent is a mortgagee meeting all of the fha qualifications, which has as it's principal activity the origination of
HUD-insured mortgages for the sale or transfer to its Sponsor(s) (sponsoring lender(s)).
In terms of FHA mortgage loans, mortgage companies that meet all of the fha qualifications and get licensed as Loan Correspondents,
may only originate (no lending, servicing, etc.). All FHA mortgage loans originated by a Loan Correspondent must be underwritten and funded
by a sponsoring Non-Supervised Mortgagee.
If your company does not meet one or more of the fha qualifications - HUD requirements listed below, please contact Federal Mortgage
Licensing, Inc. (FML). We will be happy to discuss possible strategies and alternatives that you can employ
to position your company to meet the requirements.
Business Form
A corporation, Limited Liability Company, partnership or other chartered
financial institution.
Sole proprietorships are not permitted.
Staff
Must have at least two or more full time employees.
A shared receptionist is permitted but cannot be used to meet this requirement.
All employees (except a shared receptionist) must be employed exclusively by the applicant.
The Operational officer or manager of each office must have a minimum of three years experience in originating mortgage loans.
State Licensing
Must be licensed or exempt from licensing in state where home office is located.
Must be licensed or exempt from licensing in state or states where each HUD Approved Branch office operates.
Net Worth
Must have an adjusted net worth of at least $63,000, plus $25,000 for each branch office up to a maximum required net worth of $250,000.
20 percent of net worth up to a maximum amount of $100,000 must consist of liquid assets (cash, cash equivalents or readily convertible instruments)
You Must submit audited financial statements with your Loan Correspondent application.
Audited financial statements must include a computation of adjusted net worth page.
FML will provide a sample of the HUD Adjusted Net Worth page needed for your audited financials as well as
copies of the fha qualifications - HUD regulations governing the computation of adjusted net worth and governing which assets
are considered acceptable or unacceptable. You simply forward the sample and regulations to the CPA who
prepares your audited financials and give them our phone number. FML will work with your CPA to insure that
your audited financials meet FHA/HUD requirements.
Office Facilities
Must be separate and apart from any other entity.
Must be in a location conducive to mortgage lending.
Must be clearly identified to the public (signs, name listed on building directory).
Must have standard office equipment (desks, phones, fax, copy machine, etc.).
Must submit a Certification printed on company letterhead certifying that your office facilities meet FHA/HUD requirements.
FML will provide you with the required Facilities Certification, which tracks the language of the applicable
FHA/HUD regulations. You simply print the Certification on your letterhead, sign it, and date it.
FML will also guide you through the process of producing the additional documentation required by HUD to
establish that all of the office facilities requirements are met.
Sanctions
Must submit Certification printed on company letterhead certifying that your company has not been sanctioned.
FML will provide you with the required Sanctions Certification, which tracks the language of the applicable
FHA/HUD regulations. You simply print the Certification on your letterhead, sign it, and date it.
Sponsoring Lender
Must have a sponsoring lender.
The Sponsoring lender must provide a letter stating that it will fund all FHA mortgages originated by your company.
Loan Correspondent applications are submitted to the sponsoring lender for review.
After the sponsoring lender determines that the application package is complete and all
requirements are met, the sponsoring lender will add the required funding letter to the
application package and forward the package to the HUD Office of Lender Approval
FML likely maintains a working relationship with your sponsoring lender.
FML will work with your sponsoring lender to monitor the progress of your application
and to expedite the review process. If you do not have a sponsoring lender,
FML will assist you in finding one.
FHA Quality Control Plan
All applicants must have a written fha quality control plan that meets the requirements of applicable FHA/HUD regulations.
Must submit a copy of your fha quality control plan printed on company letterhead with your application package.
FML will save you thousands of dollars in legal fees or consulting fees by providing you with a
fha quality control plan that meets all of the requirements of the applicable FHA/HUD regulations.
Numerous companies have utilized our Quality Control Plan and have obtained FHA/HUD approval
with our assistance. You simply print the Quality Control Plan on your letterhead.
You will be responsible for implementing and maintaining compliance within the plan.
Credit/Sanctions Requirements
The mortgage company as well as its principals (officers and owners 25% or more of the company) must have acceptable credit histories.
An original business credit report must be submitted even if it indicates that the company has no credit history (fairly common, especially for newly formed entities).
The principals must submit tri-bureau credit reports, which include a search of public records. No minimum credit score is required, but outstanding past due accounts, collections, judgments, and tax liens are cause for disapproval. Similar derogatory items that occurred in the past and have been paid and/or brought current, and bankruptcies as well, can be overcome with an acceptable explanation and proper documentation; however, bankruptcies must have been discharged one or two years prior to applying for approval depending on the type of bankruptcy.
Neither the company nor the principals may have incurred license restrictions, suspensions, disbarments or similar sanctions.
HUD will conduct a background search in the Mortgage Asset Resource Institute (MARI) system to verify whether any such sanctions have been incurred.
FML can guide you through the process of obtaining the proper documentation. We have assisted many clients
draft the appropriate explanation letter necessary to appease HUD.
A Non-Supervised Mortgagee is a financial institution that has as its principal
activity the lending or investment of funds in real estate mortgages. It is an
institution that does not meet the requirements of a Supervised Mortgagee
(member of the Federal Reserve System, or insured by the Federal Deposit Insurance
Corporation (FDIC), or the National Credit Union Administration (NCUA)).
Non-Supervised Mortgagees may originate, fund, hold, service, purchase and sell FHA mortgage loans.
Prior to obtaining Direct Endorsement authority, Non-Supervised Mortgagees must submit all of their
FHA mortgage loans to HUD for underwriting review. Non-Supervised Mortgagees obtain Direct Endorsement
authority through the FHA/HUD field office in their area. In order to obtain Direct Endorsement authority,
the Non-Supervised Mortgagee must have in their employ an FHA/HUD approved underwriter and must process and
underwrite a number of FHA mortgage loans under the supervision of their area field office.
If you do not meet one or more of the HUD requirements listed below, please contact
Federal Mortgage Licensing, Inc. (FML). We will be happy to provide strategies and alternatives
for meeting the requirements free of charge.
Business Form
A corporation, Limited Liability Company, partnership or other chartered
financial institution.
Sole proprietorships are not permitted.
Staff
At least two or more full time employees.
A shared receptionist is permitted but cannot be used to meet this requirement.
All employees (except a shared receptionist) must be employed exclusively by the applicant.
Senior operational officer or manager of each office must have a minimum of three years experience in making and originating mortgage loans (origination experience alone is not sufficient).
State Licensing
Must be licensed or exempt from licensing in state where home office is located.
Must be licensed or exempt from licensing in state or states where each HUD Approved Branch Office operates.
Net Worth
Must have an adjusted net worth of at least $250,000.
20 percent of net worth up to a maximum amount of $100,000 must consist of liquid assets (cash, cash equivalents or readily convertible instruments).
Must submit audited financial statements with your Non-Supervised Mortgagee application.
Audited financial statements must include a computation of adjusted net worth page.
FML will provide a sample of the HUD Adjusted Net Worth page needed for your audited financials as
well as copies of the FHA/HUD regulations governing the computation of adjusted net worth and
governing which assets are considered acceptable or unacceptable. You simply forward the sample
and regulations to the CPA who prepares your audited financials and give them our phone number.
FML will work with your CPA to insure that your audited financials meet FHA/HUD requirements.
Office Facilities
Must be separate and apart from any other entity.
Must be in a location conducive to mortgage lending.
Must be clearly identified to the public (signs, name listed on building directory).
Must have standard office equipment (desks, phones, fax, copy machine, etc.).
Must submit a Certification printed on company letterhead certifying that your office facilities meet FHA/HUD requirements.
FML will provide you with the required Facilities Certification, which tracks the language
of the applicable FHA/HUD regulations. You simply print the Certification on your letterhead, sign it,
and date it. FML will also guide you through the process of producing the additional documentation
required by HUD to establish that all of the office facilities requirements are met.
Sanctions
Must submit Certification printed on company letterhead certifying that your company has not been sanctioned.
FML will provide you with the required Sanctions Certification, which tracks the language of the applicable
FHA/HUD regulations. You simply print the Certification on your letterhead, sign it, and date it.
Line of Credit
Letter(s) establishing or confirming warehouse line(s) of credit of not less than $1 million (must be adequate to fund the mortgagee's average 60-day origination production pipeline).
The line of credit must be issued directly to the mortgagee.
Certificates of Insurance
Must have Fidelity Bond in the amount of at least $300,000.
Must have Errors and Omissions insurance of at least $300,000.
FML will provide contact information for obtaining a Fidelity Bond and Errors and Omissions
insurance and will work with the insurance company to expedite issuance of the policies.
Quality Control Plan
All applicants must have a written quality control plan that meets the requirements of applicable FHA/HUD regulations.
Must submit a copy of your Quality Control Plan printed on company letterhead with your application package.
FML will save you thousands of dollars in legal fees or consulting fees by providing you with a
Quality Control Plan that meets all of the requirements of the applicable FHA/HUD regulations.
Numerous companies have utilized our Quality Control Plan and have obtained FHA/HUD approval
with our assistance. You simply print the Quality Control Plan on your letterhead.
You will be responsible for implementing and maintaining compliance within the plan.
Credit/Sanctions Requirements
The mortgage company as well as its principals (officers and owners 25% or more of the company) must have acceptable credit histories.
An original business credit report must be submitted even if it indicates that the company has no credit history (fairly common, especially for newly formed entities).
The principals must submit tri-bureau credit reports, which include a search of public records. No minimum credit score is required, but outstanding past due accounts, collections, judgments, and tax liens are cause for disapproval. Similar derogatory items that occurred in the past and have been paid and/or brought current, and bankruptcies as well, can be overcome with an acceptable explanation and proper documentation; however, bankruptcies must have been discharged one or two years prior to applying for approval depending on the type of bankruptcy.
Neither the company nor the principals may have incurred license restrictions, suspensions, disbarments or similar sanctions.
HUD will conduct a background search in the Mortgage Asset Resource Institute (MARI) system to verify whether any such sanctions have been incurred.
FML can guide you through the process of obtaining the proper documentation. We have assisted many clients
draft the appropriate explanation letter necessary to appease HUD. FML is now offering credit repair services
through an agreement with Xilent Credit Corporation. If you or any of your borrowers are in need of credit repair,
simply sign up for credit repair services through our website. Just click on the Credit Repair
tab to begin the process.
Upon approval, both Loan Correspondents and Non-Supervised Mortgagees will be granted an Approved Area.
Your HUD Approved Area will be a limited geographic region surrounding you home office.
Some Approved Areas span an entire state, some span less than an entire state, and others span more than one
state.
You may only originate/fund FHA loans within your Approved Area.
If your Approved Area spans more than one state, you must be licensed or exempt
from licensing in each of those states. On a very limited basis, additional
Approved Areas, such as an Area immediately neighboring your initial Approved Area,
may be granted. Generally, an additional Approved Area may only be obtained by
opening a Branch Office in that Area. Loan Correspondents must file a Branch
Office Notification application with all required supporting documentation.
Non-Supervised Mortgagee may register additional branch offices on-line through FHA
Connection.
If your branch office does not meet one or more of the HUD requirements listed below, please contact
Federal Mortgage Licensing, Inc. (FML). We will be happy to discuss possible strategies and
alternatives that you can employ to position your branch office to meet the requirements.
Staff
At least two or more full time employees.
A shared receptionist is permitted but cannot be used to meet this requirement.
All employees (except a shared receptionist) must be employed exclusively by the applicant.
Senior operational manager of each office must have a minimum of three years experience in making and originating mortgage loans (origination experience alone is not sufficient).
State Licensing
Must be licensed or exempt from licensing in state or states where each HUD Approved Branch Office operates.
Net Worth
Must have an adjusted net worth of at least $63,000, plus $25,000 for each branch office up to a maximum required net worth of $250,000.
20 percent of net worth up to a maximum amount of $100,000 must consist of liquid assets (cash, cash equivalents or readily convertible instruments).
Must submit audited financial statements or compiled financial statements with your Branch Office Notification application.
Audited/compiled financial statements must include a computation of adjusted net worth page.
FML will provide a sample of the HUD Adjusted Net Worth page needed for your audited/compiled financials
as well as copies of the FHA/HUD regulations governing the computation of adjusted net worth and governing
which assets are considered acceptable or unacceptable. You simply forward the sample and regulations to
the CPA who prepares your audited/compiled financials and give our phone number to your CPA.
FML will determine whether you will need new audited financials or whether compiled financials
will be sufficient. FML will work with your CPA to insure that your audited/compiled financials
meet FHA/HUD net worth requirements as they apply specifically to adding additional branch offices.
Office Facilities
Must be separate and apart from any other entity.
Must be in a location conducive to mortgage lending.
Must be clearly identified to the public (signs, name listed on building directory).
Must have standard office equipment (desks, phones, fax, copy machine, etc.).
Must certify in your Branch Office Notification application, under pains and penalties of perjury, that your branch office facilities meet FHA/HUD requirements.
FML will assist you in assessing the facilities and staff at your branch office and in determining
if the branch office meets the FHA/HUD facilities and staff requirements.
If the branch office does not meet the facilities or the staff requirements,
FML will provide guidance as you take necessary steps to meet the requirements.
Conversion from Loan Correspondent to Non-Supervised Mortgagees Approval Requirements
Top
HUD Approved Loan Correspondents applying to convert to a Non-Supervised Mortgagee must meet all of
the Non-Supervised Mortgagee Approval Requirements listed above; however, the supplementary documentation
required for a Conversion Application is considerably less than that required of an initial HUD applicant.
Federal Mortgage Licensing, Inc. will save you time and money by providing a checklist of exactly what
items must be submitted with your Conversion Application and what items may be omitted.
