If your FHA loan is sitting in underwriting at Equity Prime Mortgage in Cleveland, Miami, or Phoenix, at American Financial Network in Baltimore, or at Sun West Mortgage in Houston, call today and ask exactly one question. We will get to the question.
All three just lost the right to underwrite FHA loans in those places.
HUD published the list on September 23 under the Credit Watch Termination Initiative. Read the dates and the first thing you notice is the lag. Sun West’s termination took effect August 3. The other two took effect August 19. The public notice landed five to seven weeks later.
Here’s what got them there, in HUD’s own words: a lender can be cut off when its “default and claim rate for loans endorsed within the preceding 24 months” runs above 200 percent of the rate in the area a HUD field office serves, and above the national rate too. Not a fraud case. Not a lawsuit. A performance number that got twice as bad as the neighbors.
Now the part that decides whether this is your problem.
The line that splits your file in two
HUD says loans that “closed or were approved” before the termination took effect can still go to FHA for insurance. Approved has a specific meaning here: already underwritten and signed off by a Direct Endorsement underwriter, or carrying a firm commitment issued by HUD.
Anything at an earlier stage cannot be submitted by the terminated lender at all. HUD’s fix is a transfer: those cases “may be transferred for completion of processing and underwriting to another mortgagee with DE Approval in that geographic area.”
So the question is this. Has a DE underwriter approved my file, or do I have a firm commitment from HUD? Yes means you’re fine. No means your loan needs a new home, and every day you spend waiting for someone to volunteer that news is a day off your rate lock.
If you already have an FHA loan with one of these three, you don’t need to do anything. Servicing is untouched. HUD says so directly.
The scorecard was public the whole time
Here’s what they don’t tell you at the closing table. HUD runs a free system called Neighborhood Watch, and it exists partly for you. HUD’s description: it’s meant to aid its own staff in monitoring lenders, “and to aid lenders and the public in self-policing the industry.”
Ask it for a lender’s compare ratio. HUD explains the scale in one sentence: 1 means that lender’s delinquent rate equals the area average, 2 means its rate is twice the average. Twice the average is the same threshold that ends careers in a Federal Register notice.
Nobody at a mortgage company is going to bring this up. Look it up yourself before you hand over a file, the same way you’d compare the rate. Ten minutes.
Then price the loan honestly. Our mortgage picks and the mortgage calculator will tell you what the payment does at each quote, and our mortgages hub covers the rest of the FHA rules worth knowing, including what happens when an FHA loan goes 120 days behind.
A terminated lender can come back. HUD requires at least six months, an independent CPA analysis of what went wrong, and a written corrective action plan with proof it was carried out. That’s a long road for a number that was public before anyone acted on it.
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