FHA Single Family Housing Policy Handbook 4000.1, I. > DOING BUSINESS WITH FHA > A. FHA Lenders and Mortgagees (09/20/2021) > 5. Supplemental Mortgagee Authorities — c. Title I Programs

(C) Direct Endorsement Authority for Manufactured Home Loan (1) Scope of Authority Approval to participate in FHA’s Direct Endorsement Program permits a Lender to underwrite Title I Single Family Loans without FHA’s prior review and submit them directly for FHA insurance endorsement.

(a) Definitions (i) Conditional Direct Endorsement Authority Conditional Direct Endorsement Authority is the authority of a Lender that has applied for and received basic FHA Lender approval as a Supervised, Nonsupervised, or Government Lender, and has not entered or completed the Test Case Phase. Test Case Phase The Test Case Phase is when a Lender must submit each case binder to HUD for a pre-closing review. If the Loan passes the review, HUD will issue permission to close the Loan. Once HUD determines that the Lender has sufficient competence, HUD will grant the Lender permission to close Loans without a pre-closing review. However, a minimum of 10 Loans must go through the pre-closing review process before HUD will waive the pre-closing review process. (ii) Unconditional Direct Endorsement Authority Unconditional Direct Endorsement Authority permits a Lender to underwrite and close Title I Loans prior to submitting them to FHA for FHA insurance endorsement.

(D) Application and Approval for Direct Endorsement Authority for Manufactured Home Loans (1) First-Time Applicants

(a) Application (i) Request to Enter into the Test Case Phase The Lender must submit a written application for Unconditional Direct Endorsement authority to the Financial Operations Center (FOC), Attention: Premiums (Title I Insurance Processing) Branch. To be approved to participate in FHA’s Title I Direct Endorsement Program, each Lender must satisfactorily underwrite sufficient pre-closing Test Cases, as prescribed by HUD. (ii) Required Documentation To apply for Direct Endorsement Title I authority, the Lender must submit a letter to the FOC requesting entry into the Test Case Phase. The letter must contain the Lender’s home office address and 10-digit Lender ID and be signed by a Corporate Officer. Test Case Phase The Lender must submit at least 10 Title I Test Cases to the FOC for review and final approval before closing and disbursing loan funds. The Lender must submit loan documentation to the attention of MH Pre- Closing Review at the FOC.

(b) Approval Decision (i) Approval of Unconditional Direct Endorsement Authority The FOC will review these cases for compliance with origination and underwriting requirements and issue a written approval or denial to the Lender. The Lender may only close and submit for insurance endorsement any Loan that receives written approval. HUD will approve the Lender for Unconditional Direct Endorsement when HUD determines that the Lender is consistently submitting Loans that satisfactorily meet Title I program requirements. HUD will advise the Lender in writing when Unconditional Direct Endorsement approval is granted. Direct Endorsement Processing An Unconditional Direct Endorsement-approved Lender must continue to report each Loan to HUD by obtaining a Title I case number through FHAC. The Lender must also comply with HUD’s post-closing requirements, including completing the insurance application and submitting the case binder for pre-endorsement review. Approval Limitations HUD may revoke a Lender’s Unconditional Direct Endorsement approval, or limit the approval to certain types of Loans. (HUD may extend or revoke DE approval in whole or in part at any time.) (ii) Denial of Unconditional Direct Endorsement Authority The Lender will be denied approval for Unconditional Direct Endorsement authority if, at any time during the Test Case Phase, FHA determines that the Lender’s submissions demonstrate a lack of knowledge of FHA requirements, or if FHA identifies unacceptable practices. Denial Decision FHA will provide the Lender with written notice of a denial of Unconditional Direct Endorsement authority that specifies the reason for the denial. Denial Appeal The Lender may appeal this denial by requesting an informal conference. The Lender must submit its appeal in writing to the FOC. The FOC must receive the appeal within 30 Days of the date of the notice of denial. Informal Conference FHA will conduct an informal conference with the Lender and its counsel, if any, no later than 60 Days from the date of the denial. Determination FHA will issue a determination in writing following the informal conference stating whether Unconditional Direct Endorsement authority is approved or denied. The decision after the conference constitutes final agency action. (iii) Reapplication following Denial Any Lender 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. (2) Applications from Lenders Created by Merger, Acquisition, or Reorganization (a) Standard The Lender must submit a written application for Unconditional Direct Endorsement authority to the FOC. (b) Required Documentation The Lender’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 Lender meets the exception criteria detailed above.