The Department of Housing and Urban Development has announced three changes to the geographic areas where mortgagees (including loan correspondents) can originate new single family loans. These changes will provide more flexibility in how mortgagees can operate.

• The first change expands all lending areas where each registered office can originate to all HUD field office jurisdictions within groups of States.
• Second, the number of branches a mortgagee needs to originate on a nationwide basis has been reduced from 25 to 13 using the revised lending areas.
• The third change will allow mortgagees to have a single office with approval to do nationwide “direct” lending via the Internet and/or a call center.

Currently, when a mortgagee is approved by FHA to originate insured single family mortgages each of the mortgagee’s registered offices is restricted to originating mortgages only on properties that are located within that office’s “Lending Area” which is also known as the “Areas Approved for Business.” These lending areas are clusters of HUD field office jurisdictions and were most recently published as Appendix VI of HUD Handbook 4000.2 Rev-3, dated May 20, 2004. By using these lending areas, nationwide origination could be achieved by selective placement of about 25 branches across the country.

The Department of Housing and Urban Development (HUD) has now determined that there should be an overall expansion of lending areas. Under this change, the lending areas will be composed of all of the HUD field office jurisdictions within groups of States. This should allow a mortgagee to better utilize each State lending license they have obtained and service a larger area by each mortgagee office.

HUD has been aware that mortgagees could register with the Department a network of as few as 25 selectively placed offices to obtain approval to originate single family loans in the combined jurisdictions of the 81 HUD field offices. However, use of the new expanding lending areas will only require as few as 13 offices. If a mortgagee only wants to originate in the 48 continental States and the District of Columbia, this number is further reduced to as few as 10 offices in some instances.

HUD has determined it is appropriate to offer mortgagees an additional way to originate on a nationwide basis using the Internet and/or a call center. This type of “direct nationwide” origination must meet all current origination and RESPA requirements, unless specifically exempted. Direct lending will be allowed pursuant to the following process and criteria:

• An FHA approved Title II mortgagee or loan correspondent must request a separate FHA branch ID number to be used for the sole purpose of direct nationwide lending. Each mortgagee will be limited to only one branch ID number for its direct nationwide lending operation. This operation must have a separate manager and may be co-located in an existing office or established at a new location.
• All mortgagees and loan correspondents must submit a fully executed Branch Office Notification form (HUD 92001-B) to the Department for review and approval. If approved, a separate 10 digit branch office ID number will be issued to be used for direct lending only.  Apply Now!
• The mortgagee must also submit a request on its letterhead, signed by a Vice President or higher corporate officer, and include a statement that it agrees to originate only direct mortgages through the branch ID number and not use the ID number to order case numbers for loans that are not originated through any means other than their internet and/or call center operation.
• In addition to the foregoing, the letter must include a list of the States where the mortgagee will engage in the origination of FHA single family mortgages by Direct nationwide lending. Mortgagees will be granted approval to only originate in the States requested, which in some cases could be all States.

• The mortgagee has updated its quality control plan to include specific elements covering direct market lending.
• The mortgagee has already obtained the appropriate State licenses and meets all other State requirements to originate loans in the specific States included in the request.
• The mortgagee agrees to notify HUD in writing if it no longer meets the requirements of any of these States. This will result in the State being removed from the lending area of the direct lending branch.
• Neither the mortgagee nor any of its officers, directors, or principals or employees have been denied a license or otherwise sanctioned by any Federal, State, or Local agency or have been suspended, debarred, or otherwise denied participation in HUD programs.