Loan Modification

Get an FHA Mortgage from an Approved FHA Lender

By Gina Pogol

FHA mortgages are more popular than ever, so of course everyone wants to originate them. But only FHA-approved lenders can fund FHA mortgages. Anyone else has to send your application to a firm approved to originate and fund FHA loans — this adds an extra layer between you and your mortgage, plus the person you’re working with has absolutely no control over the process, plus there’s an extra person in there who is not, after all, working for free. And finally, you don’t know or interact with the actual lender that funds your mortgage. Why deal with all this?

I worked as a loan officer for a mortgage broker once, and was told that we were FHA approved. In fact, we weren’t — the boss was in the process of getting approved, but we weren’t yet there. I had two unfortunate clients who still wanted to work with me, and after several weeks, we were unable to get FHA case numbers for them. I urged them to go elsewhere for their loans, and they finally did. Unfortunately, one client ended up with yet another lender that was not approved to originate FHA mortgages, and weeks later she still had no loan.

FHA lenders must all meet several requirements. First, they can’t be sole proprietors — no loners working from their garages. FHA lenders must be chartered financial institutions, partnerships, limited liability companies, corporations, or government entities. The owners cannot be disbarred, suspended, or otherwise ineligible, and must have at least three years’ experience in FHA loan operations. There must be at least two full-time, W-2 employees and an office. In addition, unsupervised correspondent lenders (as opposed to brokers) must provide business and personal credit reports, audited financial statements, quality control plans, sanctions letters and funding programs, and finally post a fidelity bond of at least $300,000 and carry at least $300,000 of errors and omissions insurance. This higher level of scrutiny assures you of a more professional organization and limits the chance that you’ll deal with a fly-by-night organization. You can find FHA lenders on this site or by checking online with HUD.

Full post as published by FHA Mortgage Guide on March 05, 2010 (boomark / email).