HUD Fires Bad Lenders: No More Shady FHA Loans for You
Published Date: 9/23/2026
Notice
Summary
HUD is ending the Direct Endorsement (DE) approval for certain mortgage lenders who didn’t perform well on FHA-insured loans. This means those lenders can no longer underwrite and submit loans for FHA insurance. The changes affect mortgagees with high default rates over the past two years and take effect immediately, helping protect borrowers and taxpayers.
Analyzed Economic Effects
4 provisions identified: 0 benefits, 4 costs, 0 mixed.
DE Approval Ends When Defaults Hit 200%
HUD may terminate a mortgagee's Direct Endorsement (DE) approval if that mortgagee's default and claim rate for loans endorsed in the preceding 24 months exceeds 200 percent of the rate in the HUD field office area and also exceeds the national default and claim rate. If that threshold is met, the mortgagee can lose the authority to underwrite FHA-insured single-family mortgages in the affected HUD jurisdiction(s).
Reinstatement Requires 6 Months + CPA Report
A terminated mortgagee may apply for reinstatement only after the DE Approval in the affected area has been terminated for at least six months. The application (submitted through the Lender Electronic Assessment Portal, LEAP) must include an independent analysis by a Certified Public Accountant qualified under Government Auditing Standards and a written corrective action plan with evidence of implementation. The mortgagee must continue to meet the requirements of 24 CFR 202.5, 202.6, 202.7, 202.10 and 202.12.
Terminated Lenders Can't Underwrite FHA Loans
When HUD terminates a mortgagee's DE Approval, that mortgagee is prohibited from underwriting and submitting FHA-insured single-family mortgages in the HUD field office jurisdiction(s) listed in the notice. Mortgagees authorized to hold or service FHA loans may continue those activities. Loans that closed or were approved before the termination date may still be submitted for insurance; earlier-stage cases cannot be submitted by the terminated mortgagee but may be transferred to another DE mortgagee.
Three Mortgagees Had DE Approval Terminated
HUD has terminated DE Approval for specific mortgagees listed in the notice: Sun West Mortgage Co., Inc. (termination effective 2026-08-03) and Equity Prime Mortgage LLC and American Financial Network (terminations effective 2026-08-19). Those mortgagees may no longer underwrite FHA-insured single-family mortgages in the HUD field office jurisdictions shown in the notice.
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