Tuesday, October 4, 2011

FHA Expands Lending Areas

We have received many inquiries from clients, colleagues, and the media regarding the Federal Housing Administration's (FHA) recently issued Mortgagee Letter 2011-34 (September 23, 2011), specifically with respect to single family lending areas.

In order to provide some details regarding this revision, we are offering the outline contained herein.

There are other significant changes in ML 2011-34. To learn more about other important changes and guidance given in ML 2011-34, please download and review this mortgagee letter from our Library.

Brief Synopsis

Briefly put, the significant change through this issuance is that lenders can now originate FHA loans nationwide without each branch being approved, but lenders must comply with local and state licensing and loan origination requirements.

The change to the single family lending area became effective on September 23, 2011.

Single Family Loan Origination Lending Area

FHA has expanded the single family origination lending area of each home office and registered branch office to include all HUD field office jurisdictions. This origination lending area is also known as a lender's Area Approved for Business (AAFB). It is maintained at the HUD field office jurisdiction level in FHA's system for implementation with any Credit Watch Terminations.

As stated above, lenders must meet each state's origination requirements.

In actuality, then, the "Single Family Originating Lending Areas" of HUD Handbook 4155.2 is rescinded.

Geographical Restrictions Removed

For purposes of any Credit Watch Terminations, the AAFB will be maintained at the HUD field office jurisdiction level.

Thus, this change eliminates the geographical restrictions previously imposed upon approved lenders, which limited an approved lender's FHA origination activity to the designated lending areas for each home office and registered branch office.

Before and After

Before this issuance:
A specific HUD approved office could only make loans in a geographically designated lending area, provided that the lender met the loan origination requirements of each state in which the loans were made.
After this issuance:
An FHA single-family lender may originate loans nationally from a home or branch office, provided that the lender meets the loan origination requirements of each state in which the loans are made.

Law Library Image
Department of Housing and Urban Development
Revised Lender Approval Requirements
Federal Housing Administration
Mortgagee Letter 2011-34
September 23, 2011