Is the Test Case phase required for DE Approval following a merger, acquisition, or reorganization?

Unconditional Direct Endorsement (DE) authority may be granted, without the need for the test case phase, to the following categories of mortgagees created by merger, acquisition, or reorganization:

  •   surviving FHA-approved mortgagees; or
  •   new mortgagees resulting in new FHA lender IDs.

The following criteria must be met:

  •   Either or both institutions were unconditionally DE-approved prior to the merger, acquisition, or reorganization.
  •   If both institutions are unconditionally DE-approved, then the management and staff of at least one of the mortgagees involved with the mortgagee’s Unconditional DE authority prior to the merger, acquisition, or reorganization must continue to exercise those responsibilities for the new mortgagee. If only one institution is unconditionally DE-approved, then the management and staff involved with that mortgagee’s Unconditional DE authority prior to the merger, acquisition, or reorganization must continue to exercise those responsibilities for the new mortgagee.

  Both mortgagees have claim and default rates at or below the 150 percent national compare ratio. If only one institution is unconditionally DE approved, only that mortgagee’s claim and default rate is to be considered.

The mortgagee must submit a written application to the Jurisdictional Homeownership Center (HOC) for the state where their home office is located.

The application must contain:

  •   a letter signed by a corporate officer requesting Unconditional DE authority that specifies:

- the FHA-approved and non-approved Entities involved in the merger, acquisition, or reorganization;

- which entity is the surviving entity; and

- the effective date of the merger, acquisition, or reorganization; and

  •       supporting documentation evidencing that the mortgagee meets the exception criteria.

Handbook 4000.1 I.A.1 is available at http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/handbooks/hsgh.