FHA Single Family Housing Policy Handbook 4000.1, Part II — b. Dealer Loan (05/09/2022)

FHA Single Family Housing Policy Handbook 4000.1, Part II — b. Dealer Loan (05/09/2022)

b. Dealer Loan (05/09/2022) i. Definition A Dealer Loan process refers to a Loan where a Dealer assists the Borrower in preparing the credit application or otherwise assists the Borrower in obtaining the Loan from the Lender. This may include completing the loan application for the Borrower, and collecting any other documentation or information as required by the Lender that is necessary to support the lending decision. When the seller, contractor or supplier of goods and services does not assist the Borrower in obtaining the Loan from the Lender, then the transaction is not considered a Dealer Loan. ii. Standard The credit application, signed by the Borrower, is filled out by the Borrower with assistance from the Dealer, contractor, or third party that has a financial interest in the loan transaction. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 1. Direct and Dealer Loan Process for Property Improvement Loan Program Handbook 4000.1 878 Last Revised: 11/26/2025 iii. Dealer Approval and Monitoring The Lender is responsible for approving Dealers prior to the Dealer’s participation in the Dealer Loan process. The Lender must complete an investigation of the Dealer and document the Findings for approval before the Dealer may begin originating Title I Loans through the Lender. (A) Dealer Eligibility for Participation in HUD Programs The Dealer must not be suspended, debarred, or excluded from participation in FHA programs as listed in an LDP, or SAM Excluded Parties List, or Credit Alert Verification Reporting System (CAIVRS). The Dealer, if acting as a Lender, must comply with all laws, rules, and requirements applicable to the loan transaction, including full compliance with the requirements applicable to the following under the purview of the Consumer Financial Protection Bureau (CFPB): • Truth in Lending Act (TILA) • Real Estate Settlement Procedures Act (RESPA) • Fair Credit Reporting Act (FCRA), and the Equal Credit Opportunity Act (ECOA), as implemented by Regulation B (12 CFR Part 1002) (B) Net Worth Requirement A Dealer must have and maintain a net worth of not less than $32,000 in assets acceptable to HUD. The following asset types and sources are not eligible for inclusion toward the minimum net worth: i. Any assets of the Dealer that are pledged to secure obligations of another person or entity. ii. Any asset due from either officers or stockholders of the Dealer or related entities, in which the Dealer’s officers and stockholders have a personal interest (unrelated to their position as an officer or stockholder). “Personal interest” refers to a relationship between the Dealer and a person or entity in which that specified person (e.g., spouse, parent, grandparent, child, brother, sister, aunt, uncle, or in-law) has a financial interest in or is employed in a management position by the Dealer. iii. Any investment in related entities in which the Dealer’s officer or stockholders have a personal interest unrelated to their position as an officer or stockholder or the Dealer. iv. That portion of an investment in joint ventures, subsidiaries, Affiliates and/or other related entities which is carried at a value greater than equity, as II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 1. Direct and Dealer Loan Process for Property Improvement Loan Program Handbook 4000.1 879 Last Revised: 11/26/2025 adjusted. “Equity as adjusted” means the book value on the books of the related entity reduced by the amount of unacceptable assets carried by the related entity. v. All intangibles, such as goodwill, covenants not to compete, franchisee fees, organization costs, etc. except unamortized servicing costs carried at a value established by an Arm’s Length Transaction and presented in accordance with Generally Accepted Accounting Principles (GAAP). vi. That portion of an asset not readily marketable and for which appraised values are very subjective carried at a value in excess of a substantially discounted appraised value. vii. Any asset which is principally used for the personal enjoyment of an officer or stockholder and not for normal business purposes. (C) Business Experience of the Dealer All Dealers must have demonstrated business experience as a Property Improvement contractor or supplier of goods and services. The Lender must evaluate the Dealer on the basis of experience and approve only those Dealers that the Lender considers to be reliable, financially responsible, and qualified to satisfactorily perform their contractual obligations. (D) Approval Procedure for the Dealer Lenders must follow the procedures listed below to approve a Dealer to participate in the Title I Property Improvement Loan program. (1) Application Form A prospective Dealer must complete form HUD-55013, Dealer/Contractor Application: Title I Property Improvement and Manufactured Home Loans. The Lender must retain form HUD-55013 and all supporting documentation in the Dealer’s file for each Dealer. (2) Financial Statement The Lender must obtain and review the Dealer’s most recent annual financial statement to confirm that the Dealer meets HUD’s minimum net worth requirement. The financial statement need not be prepared by a licensed accountant, but the Lender must take into consideration that the financial statement must be prepared by someone who is independent of the Dealer and is qualified by education and experience to prepare such statements. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 1. Direct and Dealer Loan Process for Property Improvement Loan Program Handbook 4000.1 880 Last Revised: 11/26/2025 (3) Credit Report A Lender must obtain and evaluate a commercial credit report on the dealership. The Lender must also obtain and evaluate an individual credit report on the Principal Owner(s) of the dealership to ensure that the owner(s) does not exhibit a disregard for credit. (4) Required Documentation of Approval Upon completion of the Lender’s thorough review and investigation of a Dealer, an authorized official of the Lender must sign the bottom of form HUD-55013 to document the Lender’s decision to approve the Dealer. The Lender must retain the approved application and all supporting documentation obtained during the application review. (5) Annual Renewal A Dealer is approved for a period of one year. To retain their approval status with the Lender, a Dealer must provide the Lender with a new form HUD-55013 and their most recent financial statement. In addition to the steps outlined above for the initial approval, the Lender must also evaluate its experience with the Dealer during the prior year. This evaluation must address performance factors such as: • the Dealer’s approval and rejection rates; • the collection history for Loans purchased from the Dealer; and • the Dealer’s complaint resolution practices. (E) Monitoring the Dealer The Lender is responsible for supervising and monitoring each approved Dealer’s activities with respect to Loans insured under Title I. (1) Standard As part of the monitoring duties, Lenders are required to visit each approved Dealer’s place of business at least once every six months to review their Title I performance and compliance. Lenders must take prompt action to resolve any dealer deficiencies discovered. Lenders must verify that Title I Dealers/contractors meet and maintain a net worth in assets that is acceptable to the Secretary. Lenders must maintain a file on each approved Dealer which contains the executed dealer approval for and supporting documentation required under 24 CFR § 201.27(a)(2). II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 1. Direct and Dealer Loan Process for Property Improvement Loan Program Handbook 4000.1 881 Last Revised: 11/26/2025 (2) Requirements In addition to the initial and annual dealer approval reviews, the Lender must monitor each approved Dealer’s activities with respect to Loans insured by HUD on an ongoing basis addressing the following review components. (a) Quality of Borrower Applicants The Lender must monitor the quality of applicants submitted by the Dealer. If a Dealer’s rejection rate is too high, the Lender should meet with the Dealer to review the Dealer’s marketing and borrower qualification practices. (b) Quality of Required Loan Documentation The Lender must monitor the quality and completeness of the loan documentation submitted by the Dealer. (c) Dealer Advertising The Lender must monitor dealer advertising and other marketing material to ensure against misleading or false claims. The Lender must ensure that advertising and other marketing material does not include prohibited practices or convey the impression that the Dealer has a special relationship or affiliation with the federal government. The Dealer must include a fair housing poster in its marketing materials, and display in any office that deals with Borrowers and the general public. Lenders are prohibited from advertising or marketing in a way that restricts lending services to persons on a protected basis or that conveys exclusion of persons on a protected basis. Copies of dealer advertisements and other marketing materials issued by the Dealer must be maintained in the Dealer’s file with the other required documents. (d) Borrower Complaints against Dealers The Lender must monitor complaints received on Loans originated by the Dealer. Documentation for all complaints and their resolution must be maintained in the Dealer’s file. Particular attention should be focused on the quality of service offered, whether warranties are honored in a timely manner, and the general manner in which the Dealer resolves complaints and conducts their business. (e) Irregular Business Practices All credible allegations of irregularities (inducements, disallowed payments to the Borrower, false statements, etc.) must be promptly reported to either II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 1. Direct and Dealer Loan Process for Property Improvement Loan Program Handbook 4000.1 882 Last Revised: 11/26/2025 HUD’s Office of the Inspector General located in the nearest HUD Field Office or HUD’s Quality Assurance Division (QAD) at: U.S. Department of Housing and Urban Development Quality Assurance Division 451 Seventh St., SW Washington, DC 20410 (f) Material Changes of Dealer A Lender must require each approved Dealer to provide written notification of any material change in their trade name, places of business, type of ownership, type of business, or principal individuals who control or manage the business. The Dealer must furnish such notification to the Lender within 30 Days after the date of any material change. Upon discovery of any material change, the Lender must determine that the eligibility of the Dealer has not changed. (g) Dealer’s File The Lender is to maintain a separate file for each approved Dealer. The file is to include the initial application and documentation used for approval and any information regarding the Lender’s experience with Title I Loans involving the Dealer. Each file must consist of information regarding borrower Default rates, records of inspections of properties delivered and installed by the Dealer, copies of letters concerning borrower complaints and their resolution, material changes, copies of dealer advertisements and other marketing materials, and records of the Lender’s visits to the Dealer’s premises. (F) Termination of the Dealer A Dealer’s approval will be terminated if a Dealer does not satisfactorily perform its contractual obligations to Borrowers, does not comply with Title I program requirements, or is unresponsive to inquiries pertaining to Lender supervision and monitoring requirements. The Lender is required to notify HUD immediately with written documentation of the reason(s) for termination. A Dealer whose approval is terminated as a result of these circumstances may not be re-approved by a Lender without prior written approval from HUD. Notices of termination for cause and requests for permission to re-approve a terminated Dealer must be in writing and sent to HUD’s QAD. A Lender may, at its discretion, terminate the approval of a Dealer for other reasons at any time. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 2. Property Improvement Loan Program Handbook 4000.1 883 Last Revised: 11/26/2025 2. Property Improvement Loan Program The Title I Property Improvement Loan Program Origination/Processing through Post-closing and Insurance sections in this Handbook 4000.1 is applicable to all Property Improvement Loans insured under Title I of the National Housing Act. The Lender must fully comply with all of the following standards and procedures for obtaining FHA loan insurance on a Loan. HUD insures private Lenders against loss on Property Improvement Loans they make. Both large and small improvements can be financed. Loans on Single Family homes may be used for alterations, repairs and site improvements. Loans on multifamily structures may be used only for building alteration and repairs. A property owner may apply at any Lender that is approved to make Title I Loans.

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