HUD Boots Bad Mortgage Lenders: FHA Loan Cleanup Underway
Published Date: 1/21/2026
Notice
Summary
HUD is ending the Direct Endorsement (DE) approval for certain mortgage lenders who didn’t do a good job with FHA-insured loans. This means those lenders can no longer approve loans on their own, helping protect borrowers and taxpayers. The changes affect lenders with high default rates over the past two years and take effect immediately, aiming to keep the housing market safer and stronger.
Analyzed Economic Effects
4 provisions identified: 1 benefits, 3 costs, 0 mixed.
HUD Ends DE Underwriting Rights
HUD terminated Direct Endorsement (DE) approval for specific mortgage lenders, preventing those lenders from underwriting FHA-insured single-family mortgages in the HUD field office jurisdictions listed. The notice lists Equity Prime Mortgage LLC and Residential Acceptance Corporation with terminations effective 12/24/2025.
Reinstatement Requires CPA Review
A terminated mortgagee may apply for reinstatement only after its DE Approval has been terminated for at least six months. The application must be submitted through the Lender Electronic Assessment Portal (LEAP) and include an independent CPA analysis prepared under Government Auditing Standards plus a written corrective action plan and evidence of implementation.
Clear Termination Trigger: 200% Threshold
HUD may terminate a mortgagee's DE Approval when that mortgagee's default and claim rate for loans endorsed in the preceding 24 months exceeds 200 percent of the default and claim rate in the geographic area served by the HUD field office and also exceeds the national default and claim rate.
Approved Loans Still Insurable
If a loan closed or was approved before a mortgagee's DE approval termination, that loan may still be submitted for FHA insurance endorsement even after the termination effective 12/24/2025. Loans at earlier stages cannot be submitted by the terminated mortgagee but may be transferred to another DE-approved mortgagee for completion.
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