Laws and Regulations

Renewal OMB Control Number: 2502-0541, Multifamily Accelerated Processing (MAP) Guide, 4430.G
Department of Housing and Urban Development

Office of Assistant Secretary for Housing, HUD
all terms and conditions of the mortgage had been approved before the termination by the Direct Endorsement or
Lender Insurance mortgagee or were
covered by a firm commitment issued
by the Secretary; however, no other
mortgages originated by the mortgagee
shall be insured unless a new originated approval agreement is accepted
by the Secretary;
(B) A mortgagee’s obligation to continue to pay insurance premiums and
meet all other obligations, including
servicing, associated with insured
mortgages;
(C) A mortgagee’s right to apply for a
new origination approval agreement if
it continues to be an approved mortgagee meeting the general standards of
§ 202.5 and the specific requirements of
§§ 202.6. 202.7. 202.8 or 202.10, and 202.12,
if the mortgagee has had no origination approval agreement for at least 6
months, and if the Secretary determines that the underlying causes for
termination have been satisfactorily
remedied; or
(D) A mortgagee’s right to purchase
insured mortgages or to service its own
portfolio or the portfolios of other
mortgagees with which it has a servicing contract.
(d) Withdrawal and suspension of approval. Lender or mortgagee approval
may be suspended or withdrawn by the
Mortgagee Review Board as provided in
part 25 of this title.
[62 FR 20082, Apr. 24, 1997, as amended at 62
FR 30225, June 2, 1997; 62 FR 65181, Dec. 10,
1997]

§ 202.4 Request for determination of
compliance.
Pursuant to section 539(a) of the Act,
any person may file a request that the
Secretary determine whether a lender
or mortgagee is in compliance with
§ 202.12(a) or with provisions of this
chapter implementing sections 223(a)(7)
and 535 of the Act such as §§ 201.10(g),
203.18d and 203.43(c)(5) of this chapter
(only section 535 applies to lenders).
The request for determination shall be
made to the following address: Department of Housing and Urban Development, Office of Lender Activities and
Program Compliance, 451 Seventh
Street SW., Washington, DC, 20410. The
Secretary shall inform the requestor of

§ 202.5

the disposition of the request. The Secretary shall publish in the FEDERAL
REGISTER the disposition of any case
referred by the Secretary to the Mortgagee Review Board.
§ 202.5

General approval standards.

To be approved for participation in
the Title I or Title II programs, and to
maintain approval, a lender or mortgagee shall meet and continue to meet
the general requirements of paragraphs
(a)–(n) of this § 202.5 (except as provided
in § 202.10(b)) and the requirements for
one of the eligible classes of lenders or
mortgagees in §§ 202.6 through 202.10.
(a) Business form. The lender or mortgagee shall be a corporation or other
chartered institution, a permanent organization having succession or a partnership. A partnership must meet the
requirements of paragraphs (a)(1)
through (4) of this section.
(1) Each general partner must be a
corporation or other chartered institution consisting of two or more persons.
(2) One general partner must be designated as the managing general partner. The managing general partner
shall comply with the requirements of
paragraphs (b), (c) and (f) of this section. The managing general partner
must have as its principal activity the
management of one or more partnerships, all of which are mortgage lenders or property improvement or manufactured home lenders, and must have
exclusive authority to deal directly
with the Secretary on behalf of each
partnership. Newly admitted partners
must agree to the management of the
partnership by the designated managing general partner. If the managing
general partner withdraws or is removed from the partnership for any
reason, a new managing general partner shall be substituted, and the Secretary shall be immediately notified of
the substitution.
(3) The partnership agreement shall
specify that the partnership shall exist
for the minimum term of years required by the Secretary. All insured
mortgages and Title I loans held by the
partnership shall be transferred to a
lender or mortgagee approved under
this part prior to the termination of
the partnership. The partnership shall

127

VerDate mar<24>2004

03:38 Apr 20, 2004

Jkt 203077

PO 00000

Frm 00127

Fmt 8010

Sfmt 8010

Y:\SGML\203077T.XXX

203077T

§ 202.5

24 CFR Ch. II (4–1–04 Edition)

be specifically authorized to continue
its existence if a partner withdraws.
(4) The Secretary must be notified
immediately of any amendments to the
partnership agreement which would affect the partnership’s actions under the
Title I or Title II programs.
(b) Employees. The lender or mortgagee shall employ competent personnel trained to perform their assigned responsibilities in consumer or
mortgage lending, including origination, servicing and collection activities, and shall maintain adequate staff
and facilities to originate and service
mortgages or Title I loans, in accordance with applicable regulations, to
the extent the mortgagee or lender engages in such activities.
(c) Officers. All employees who will
sign applications for mortgage insurance on behalf of the mortgagee or report loans for insurance shall be corporate officers or shall otherwise be authorized to bind the lender or mortgagee in the origination transaction.
The lender or mortgagee shall ensure
that an authorized person reports all
originations, purchases, and sales of
Title I loans or Title II mortgages to
the Secretary for the purpose of obtaining or transferring insurance coverage.
(d) Escrows. The lender or mortgagee
shall not use escrow funds for any purpose other than that for which they
were received. It shall segregate escrow
commitment deposits, work completion deposits, and all periodic payments received under loans or insured
mortgages on account of ground rents,
taxes, assessments, and insurance
charges or premiums, and shall deposit
such funds with one or more financial
institutions in a special account or accounts that are fully insured by the
Federal Deposit Insurance Corporation
or the National Credit Union Administration, except as otherwise provided
in writing by the Secretary.
(e) Servicing. A lender shall service or
arrange for servicing of the loan in accordance with the requirements of part
201 of this chapter. A mortgagee shall
service or arrange for servicing of the
mortgage in accordance with the servicing responsibilities contained in subpart C of part 203 and in part 207 of this
chapter, with all other applicable regu-

lations contained in this title, and with
such additional conditions and requirements as the Secretary may impose.
(f) Business changes. The lender or
mortgagee shall provide prompt notification to the Secretary of all changes
in its legal structure, including, but
not limited to, mergers, terminations,
name, location, control of ownership,
and character of business.
(g) Financial statements. The lender or
mortgagee shall, upon request by the
Secretary, furnish a copy of its latest
financial statement, furnish such other
information as the Secretary may request, and submit to an examination of
that portion of its records which relates to its Title I and/or Title II program activities.
(h) Quality control plan. The lender or
mortgagee shall implement a written
quality control plan, acceptable to the
Secretary, that assures compliance
with
the
regulations
and
other
issuances of the Secretary regarding
loan or mortgage origination and servicing.
(i) Fees. The lender or mortgagee, unless approved under § 202.10, shall pay
an application fee and annual fees, including additional fees for each branch
office authorized to originate Title I
loans or submit applications for mortgage insurance, at such times and in
such amounts as the Secretary may require. The Secretary may identify additional classes or groups of lenders or
mortgagees that may be exempt from
one or more of these fees.
(j) Ineligibility. Neither the lender or
mortgagee, nor any officer, partner, director, principal or employee of the
lender or mortgagee shall:
(1) Be suspended, debarred or otherwise restricted under part 24 or part 25
of this title, or under similar procedures of any other Federal agency;
(2) Be indicted for, or have been convicted of, an offense which reflects
upon the responsibility, integrity or
ability of the lender or mortgagee to
participate in the Title I or Title II
programs;
(3) Be subject to unresolved findings
as a result of HUD or other governmental audits or investigations; or

128

VerDate mar<24>2004

03:38 Apr 20, 2004

Jkt 203077

PO 00000

Frm 00128

Fmt 8010

Sfmt 8010

Y:\SGML\203077T.XXX

203077T

Office of Assistant Secretary for Housing, HUD
(4) Be engaged in business practices
that do not conform to generally accepted practices of prudent mortgagees
or that demonstrate irresponsibility.
(k) Branch offices. A lender may, upon
approval by the Secretary, maintain
branch offices for the origination of
Title I loans. A branch office of a mortgagee must be registered with the Department in order to originate mortgages or submit applications for mortgage insurance. The lender or mortgagee shall remain fully responsible to
the Secretary for the actions of its
branch offices.
(l) Conflict of interest. A mortgagee
may not pay anything of value, directly or indirectly, in connection with
any insured mortgage transaction or
transactions to any person or entity if
such person or entity has received any
other consideration from the mortgagor, seller, builder, or any other person for services related to such transactions or related to the purchase or
sale of the mortgaged property, except
that consideration approved by the
Secretary may be paid for services actually performed. The mortgagee shall
not pay a referral fee to any person or
organization.
(m) Reports. Each lender and mortgagee
must
submit
a
yearly
verification report on a form prescribed by the Secretary. Upon application for approval and with each annual
recertification, each lender and mortgagee must submit a certification that
it has not been refused a license and
has not been sanctioned by any State
or States in which it will originate insured mortgages or Title I loans. In addition, each mortgagee shall file the
following:
(1) An audited or unaudited financial
statement, within 30 days of the end of
each fiscal quarter in which the mortgagee experiences an operating loss of
20 percent of its net worth, and until
the mortgagee demonstrates an operating profit for two consecutive quarters or until the next recertification,
whichever is the longer period; and
(2) A statement of net worth within
30 days of the commencement of voluntary or involuntary bankruptcy,
conservatorship, receivership or any
transfer of control to a Federal or
State supervisory agency.

§ 202.6

(n) Net worth. (1) Each supervised or
nonsupervised lender or mortgagee approved under §§ 202.6 and 202.7 shall
have a net worth of not less than
$250,000 in assets acceptable to the Secretary. Each Title II supervised or nonsupervised mortgagee, except a multifamily mortgagee, shall have additional net worth in excess of $250,000 of
not less than one percent of the mortgage volume exceeding $25,000,000 in
value, but total net worth is not required to exceed $1,000,000. Mortgage
volume is calculated as of the end of
the fiscal year being audited and equals
the sum of:
(i) The aggregate original amount of
insured mortgages that the mortgagee
originated and that were insured during the fiscal year, or that the mortgagee purchased as a sponsor from its
loan correspondent(s) during the fiscal
year; and
(ii) The aggregate principal amount,
as of the end of the fiscal year, of all
mortgages that are serviced by the
mortgagee at the end of the fiscal year
but were not counted as mortgages
originated by the mortgagee or purchased from its loan correspondent(s).
(2) Net worth requirements for loan
correspondent lenders or mortgagees
approved under § 202.8 are described in
that section.
[62 FR 20082, Apr. 24, 1997, as amended at 62
FR 65181, Dec. 10, 1997; 63 FR 9742, Feb. 26,
1998; 67 FR 53451, Aug. 15, 2002]

Subpart B—Classes of Lenders
and Mortgagees
§ 202.6 Supervised lenders and mortgagees.
(a) Definition. A supervised lender or
mortgagee is a financial institution
which is a member of the Federal Reserve System or an institution whose
accounts are insured by the Federal
Deposit Insurance Corporation or the
National Credit Union Administration.
A supervised mortgagee may submit
applications for mortgage insurance. A
supervised lender or mortgagee may
originate, purchase, hold, service or
sell loans or insured mortgages, respectively.
(b) Additional requirements. In addition to the general approval requirements in § 202.5, a supervised lender or

129

VerDate mar<24>2004

03:38 Apr 20, 2004

Jkt 203077

PO 00000

Frm 00129

Fmt 8010

Sfmt 8010

Y:\SGML\203077T.XXX

203077T