FHA Single Family Housing Policy Handbook 4000.1, Part I — a. Title II Direct Endorsement Authority (04/10/2025)

FHA Single Family Housing Policy Handbook 4000.1, Part I — a. Title II Direct Endorsement Authority (04/10/2025)

a. Title II Direct Endorsement Authority (04/10/2025) i. Scope of Authority Approval to participate in FHA’s Direct Endorsement Program permits a Mortgagee to underwrite Title II Single Family Mortgages without FHA’s prior review and submit them directly for FHA insurance endorsement. The Mortgagee must obtain separate Direct Endorsement approval for forward mortgage and Home Equity Conversion Mortgage (HECM) programs. (A) Definitions (1) Conditional Authority Conditional Authority is the authority of a Mortgagee that has applied for and received basic FHA Mortgagee approval as a Supervised, Nonsupervised, or Government Mortgagee, and has not entered or completed the Test Case Phase. (2) Test Case and Test Case Phase Test Case refers to a Mortgage submitted to HUD by a Mortgagee during the Test Case Phase for Unconditional Direct Endorsement approval. These Mortgages must be processed per the Direct Endorsement eligibility requirements and reviewed by HUD for endorsement approval. The Test Case Phase is when a Mortgagee with conditional authority is approved by an FHA Homeownership Center (HOC) to submit one or more Test Cases for FHA underwriting review. (3) Unconditional Direct Endorsement Authority Unconditional Direct Endorsement Authority permits a Mortgagee to underwrite and close Title II Single Family Mortgages prior to submitting them to FHA for FHA insurance endorsement. (B) Standard To obtain Unconditional Direct Endorsement authority, the Mortgagee must successfully complete the Test Case Phase, which permits FHA to evaluate the Mortgagee’s qualifications, experience, and expertise to underwrite Mortgages that satisfy FHA requirements. (C) Exception Unconditional Direct Endorsement authority may be granted, without the need for the Test Case Phase, to the following categories of Mortgagees created by merger, acquisition, or reorganization: I. DOING BUSINESS WITH FHA A. FHA Lenders and Mortgagees (09/20/2021) 5. Supplemental Mortgagee Authorities Handbook 4000.1 29 Last Revised: 11/26/2025 • surviving FHA-approved Mortgagees; or • new Mortgagees resulting in new FHA Lender IDs. ii. Eligibility Requirements A Mortgagee must meet the following requirements in order to apply for and participate in FHA’s Direct Endorsement Program. (A) Standard (1) FHA Mortgagee Approval A Mortgagee must have FHA approval as a Title II Supervised, Nonsupervised, or Government Mortgagee to be eligible to participate in the Direct Endorsement Program. Mortgagees approved as Investing Mortgagees are not eligible to participate in the Direct Endorsement Program. (2) Origination Experience The Mortgagee must have: • at least five years of experience in the origination of Single Family Mortgages; or • a Principal Officer with at least five years of managerial experience in the origination of Single Family Mortgages. For the purposes of this Handbook 4000.1 a Principal Officer is the same as a Corporate Officer. (3) Personnel Requirements The Mortgagee must have a Direct Endorsement (DE) underwriter on its permanent staff. (B) Exception for Certain Mortgagees Created by Merger, Acquisition, or Reorganization Unconditional Direct Endorsement authority may be granted without the need for the Test Case Phase following a merger, acquisition, or reorganization, so long as the following criteria are met: • Either or both institutions, of the surviving FHA-Approved Mortgagee or the FHA-Approved Mortgagee resulting in a new FHA Lender ID, were unconditionally Direct Endorsement-approved prior to the merger, acquisition, or reorganization. • If both institutions are unconditionally Direct Endorsement-approved, then the management and staff of at least one of the Mortgagees involved with the Mortgagee’s Unconditional Direct Endorsement authority prior to the merger, acquisition, or reorganization must continue to exercise those responsibilities I. DOING BUSINESS WITH FHA A. FHA Lenders and Mortgagees (09/20/2021) 5. Supplemental Mortgagee Authorities Handbook 4000.1 30 Last Revised: 11/26/2025 for the new Mortgagee. If only one institution is unconditionally Direct Endorsement-approved, then the management and staff involved with that Mortgagee’s Unconditional Direct Endorsement authority prior to the merger, acquisition, or reorganization must continue to exercise those responsibilities for the new Mortgagee. • Both Mortgagees have claim and default rates at or below the 150 percent national compare ratio. If only one institution is unconditionally Direct Endorsement-approved, then only that Mortgagee’s claim and default rate is to be considered. iii. Application and Approval (A) First-Time Applicants (1) Application (a) Request to Enter into the Test Case Phase The Mortgagee must submit a written application for Unconditional Direct Endorsement authority to FHA by emailing the required documentation to the FHA Resource Center at [email protected]. (b) Required Documentation The Mortgagee’s Direct Endorsement application must contain a letter signed by a Corporate Officer requesting entry into the Test Case Phase that contains the Mortgagee’s home office 10-digit FHA Lender ID and all underwriters’ names and the four-character FHA-assigned identification numbers issued to these underwriters. (2) Notification and Entrance Conference If the Mortgagee meets the requirements for conditional authority and submits the required documentation, the Mortgagee will receive a Test Case Phase approval letter from the HOC. The HOC will also provide reference materials and a list of the specific requirements that must be met for the Mortgagee to obtain Unconditional Direct Endorsement authority. The Mortgagee must participate in an in-person or telephone entrance conference with the HOC before it will be eligible to submit Test Cases. (3) Test Case Phase The Mortgagee must submit Test Cases to FHA for review during the Test Case Phase. FHA will review these cases for compliance with FHA’s origination, underwriting, and closing requirements. I. DOING BUSINESS WITH FHA A. FHA Lenders and Mortgagees (09/20/2021) 5. Supplemental Mortgagee Authorities Handbook 4000.1 31 Last Revised: 11/26/2025 (a) Case Binder Submission Mortgagees who receive a Direct Endorsement Program Test Case approval letter from FHA must submit all Test Case binders for review post-closing. The Mortgagee must submit all Test Case files using the FHA Catalyst: Case Binder Module. The Mortgagee must ensure that: • all required certifications are executed; and • a complete case file post-closing is submitted that includes all required origination, underwriting, and closing documents as specified in the uniform case binder stacking order. The HOC will perform a review for compliance with FHA underwriting and closing guidelines. Review results will be documented in accordance with the Title II Loan Reviews Findings, and Mortgagees must respond to requests using the functions provided in the Loan Review System (LRS). The HOC will issue either a Firm Commitment (approval) or Firm Reject (denial) via a Notice of Return (NOR). Once a Firm Commitment is issued, the HOC will process the case for endorsement. If a NOR is issued, the Mortgagee must make all necessary corrections and provide all required documentation to the HOC using the LRS before the Mortgage can be endorsed. (b) Test Case Underwriting Report Mortgagees who receive a Direct Endorsement Program Test Case approval letter from FHA must review all Test Case results in the LRS. (c) Test Case Closing Documents The Mortgagee must ensure that all required certifications are executed and included with each complete case binder that is submitted to the HOC for endorsement processing. (4) Approval Decision (a) Approval of Unconditional Direct Endorsement Authority After the Mortgagee successfully completes the required Test Cases, FHA will grant the Mortgagee approval for Unconditional Direct Endorsement authority. The Mortgagee must receive a minimum of 15 Firm Commitments for forward mortgage authority or five Firm Commitments for HECM mortgage authority within a period of 12 consecutive months following the date of the Direct Endorsement Program Test Case approval letter in order to be granted Unconditional Direct Endorsement authority. I. DOING BUSINESS WITH FHA A. FHA Lenders and Mortgagees (09/20/2021) 5. Supplemental Mortgagee Authorities Handbook 4000.1 32 Last Revised: 11/26/2025 The Mortgagee will receive an approval letter and may then begin submitting Mortgages to FHA for endorsement without prior review by FHA. (b) Denial of Unconditional Direct Endorsement Authority The Mortgagee will be denied approval for Unconditional Direct Endorsement authority if, at any time during the Test Case Phase, FHA determines that the Mortgagee’s submissions demonstrate a lack of knowledge of FHA requirements, or if FHA identifies unacceptable practices. (i) Denial Decision FHA will provide the Mortgagee with written notice of a denial of Unconditional Direct Endorsement authority that specifies the reason for the denial. (ii) Denial Appeal The Mortgagee may appeal this denial by requesting an informal conference. The Mortgagee must submit its appeal in writing to the HOC that processed the Test Cases. The HOC must receive the appeal within 30 Days of the date of the notice of denial. (iii) Informal Conference FHA will conduct an informal conference with the Mortgagee and its counsel, if any, no later than 60 Days from the date of the denial. (iv) Determination FHA will issue a determination in writing following the informal conference stating whether Unconditional Direct Endorsement authority is approved or denied. (v) Appeal Following Informal Conference The Mortgagee may appeal a denial following the informal conference by submitting a written request to the Deputy Assistant Secretary (DAS) for Single Family Housing, or their designee, within 30 Days of the date of the denial determination. The Mortgagee is not entitled to any meeting or informal conference with the DAS or the designee. The Mortgagee will be notified in writing of the decision of the DAS or the designee. The decision of the DAS or the designee constitutes final agency action. I. DOING BUSINESS WITH FHA A. FHA Lenders and Mortgagees (09/20/2021) 5. Supplemental Mortgagee Authorities Handbook 4000.1 33 Last Revised: 11/26/2025 (c) Reapplication Following Denial Any Mortgagee who is denied Unconditional Direct Endorsement authority will not be permitted to re-apply until it has: • demonstrated appropriate remedial education or action; • supplied evidence to support such action; and • waited a minimum of 180 Days from the date of final agency action. (B) Applications from Mortgagees Created by Merger, Acquisition, or Reorganization (1) Standard The Mortgagee must submit a written application for Unconditional Direct Endorsement authority to the FHA Resource Center at [email protected]. (2) Required Documentation The Mortgagee’s Direct Endorsement application must contain the following: • a letter signed by a Corporate Officer requesting Unconditional Direct Endorsement authority that specifies: o the FHA-approved and non-approved entities involved in the merger, acquisition, or reorganization; o which entity is the surviving entity; and o the effective date of the merger, acquisition, or reorganization; and • supporting documentation evidencing that the Mortgagee meets the exception criteria detailed above. iv. Principal/Authorized Agent Relationship (A) Definition A Principal/Authorized Agent Relationship is one in which a Title II Mortgagee with Unconditional Direct Endorsement authority permits another Unconditional Direct Endorsement-approved Title II Mortgagee to underwrite Mortgages on its behalf. (B) Standard A Title II Mortgagee with Unconditional Direct Endorsement authority (acting as the “principal”) can designate another Unconditional Direct Endorsement-approved Title II Mortgagee to act as its “authorized agent” for the purpose of underwriting Mortgages. I. DOING BUSINESS WITH FHA A. FHA Lenders and Mortgagees (09/20/2021) 5. Supplemental Mortgagee Authorities Handbook 4000.1 34 Last Revised: 11/26/2025 (1) Required Authorities The authorized agent must have Unconditional Direct Endorsement authority to underwrite the type of Mortgage that is being underwritten. The Title II Mortgagees must be approved as follows. For a forward Mortgage: • the principal may have Unconditional Direct Endorsement authority for either forward Mortgages or HECM; and • the authorized agent must have Unconditional Direct Endorsement authority for forward Mortgages. For a HECM: • the principal may have Unconditional Direct Endorsement authority for either forward Mortgages or HECM; and • the authorized agent must have Unconditional Direct Endorsement authority for HECM. (2) Process The principal must originate the Mortgage and the authorized agent must underwrite the Mortgage. The Mortgage may close in either Title II Mortgagee’s name, and either may submit the Mortgage for endorsement. (C) Required Documentation The relationship must be documented in LEAP by the authorized agent, and the principal’s FHA Lender ID must be entered in the “Originator” field on the FHA case file and in FHAC. v. Sponsor/Sponsored Third-Party Originator Relationship (A) Definition A Sponsor/Sponsored Third-Party Originator (TPO) Relationship is one in which a Mortgagee (acting as the “sponsor”) permits another entity to act as an originator and originate Mortgages on behalf of the Mortgagee. (B) Standard Only a Mortgagee with Direct Endorsement authority may use sponsored TPOs. A Mortgagee must ensure its sponsored TPO meets all state license, registration, or equivalent approval requirements. A Mortgagee is responsible for the actions of its sponsored TPOs under 24 CFR § 202.8(a)(3). I. DOING BUSINESS WITH FHA A. FHA Lenders and Mortgagees (09/20/2021) 5. Supplemental Mortgagee Authorities Handbook 4000.1 35 Last Revised: 11/26/2025 A Mortgagee must ensure its sponsored TPO and the TPO’s officers, partners, directors, principals, managers, supervisors, loan processors, and loan originators are not ineligible under 24 CFR § 202.5(j). A sponsored TPO is authorized to originate Mortgages for sale or transfer to a Mortgagee with Direct Endorsement authority. A Mortgagee must ensure its sponsored TPO does not close Mortgages in their own name. (1) Exception for Mortgagees Acting as a Sponsored Third-Party Originator A Mortgagee may permit its sponsored TPO to close Mortgages in their own name if the TPO is also a Mortgagee. (C) Required Documentation A Mortgagee with Unconditional Direct Endorsement authority must confirm registration of its sponsored TPO on the Sponsored Originator Maintenance screen in FHAC. A Mortgagee must register its sponsored TPO on the Sponsored Originator Maintenance screen in FHAC if the sponsored TPO is not on the registry. The sponsored TPO’s legal name and Employer Identification Number (EIN) must be included.

Source: FHA Single Family Housing Policy Handbook 4000.1, Part I — a. Title II Direct Endorsement Authority (04/10/2025) · source URL · snapshot 8c03836f77f317e1