II.A.7.d. Procedures for Endorsement (09/14/15)

© HUD Single Family Housing Policy Handbook 4000.1

To initiate the insurance endorsement process, the Mortgagee must complete the Insurance Application function in FHAC and compile the uniform case binder, with all of the necessary documents.

Instructions for specific requirements for data format and delivery to FHAC are found in the FHA Connection Guide.

The Mortgage must be current to be eligible for endorsement.

Either the sponsoring Mortgagee, principal or authorized agent must:

• complete the Mortgage Insurance Premium (MIP) Transmittal via FHAC or by batch;
• pay the Upfront MIP (UFMIP) to FHA in a lump sum within 10 Days after mortgage closing or the Disbursement Date, whichever is later;
• send the MIP to FHA, and receive payment status through FHAC or email communications;
• submit evidence of assignment of the case for endorsement in the name of the originating Mortgagee; and
• transfer the case number to another Mortgagee prior to closing, complete the Lender Transfer screen in FHAC, and complete the assignment of the Mortgage after endorsement to a new holding or servicing Mortgagee via FHAC.

Included in this section are:

i. Late UFMIP Payments
ii. Assembly of Case Binder
iii. Case Binder Submission – Direct Endorsement Non-Lender Insurance
iv. Ineligible for Endorsement – Non-Lender Insurance
v. Endorsement Processing – Lender Insurance
vi. Case Warnings – Lender Insurance
vii. Mortgagee with Conditional Direct Endorsement Approval (Test Case)

i. Late UFMIP Payments

(A) 10-30 Days LateA one-time late charge of 4 percent is assessed on an UFMIP payment received more than 10 Days after the mortgage closing or Disbursement Date, whichever is later. The Mortgagee must pay the late fee before FHA will endorse the Mortgage for insurance.

(B) More than 30 Days LateIf the UFMIP is paid more than 30 Days after mortgage closing or Disbursement Date, whichever is later, the Mortgagee will be assessed the late fee plus interest. The interest rate is the U.S. Department of the Treasury’s Current Value of Funds Rate in effect when the UFMIP payment is received. The Mortgagee must pay both charges before FHA will endorse the Mortgage for insurance.

ii. Assembly of Case Binder

The Mortgagee must prepare and submit a uniform case binder to the Jurisdictional HOC.

(A) Uniform Case Binder RequirementsThe Mortgagee must ensure that all case binders are complete, meet FHA specifications, and contain all required documents arranged in the correct stacking order.

(B) Uniform Case Binder FormatThe uniform case binder must be yellow for Mortgagees with Lender Insurance authority, manila for Mortgagees without Lender Insurance authority and green for Test Cases.The Mortgagee must complete the front of the binder, and write the case number on the side and bottom tabs of the binder.

(C) Uniform Case Binder Stacking OrderThe Mortgagee must ensure that all required documents, as applicable, are arranged in the stacking order chart below.All appraisals must be submitted through FHA’s EAD portal prior to endorsement. Complete instructions and data delivery format requirements for each appraisal form are found in the Appraisal Report and Data Delivery Guide.

iii. Case Binder Submission – Direct Endorsement Non-Lender Insurance

The case binder must be received by the Jurisdictional HOC no later than 60 Days after the Disbursement Date.

(A) Late SubmissionIf the case binder is submitted more than 60 Days after the Disbursement Date, the Mortgagee must submit a late endorsement request, certifying that:

• no Mortgage Payment is currently unpaid;
• all escrow accounts for taxes, hazard insurance and MIPs are current and intact, except for Disbursements that may have been made to cover payments for which the accounts were specifically established; and
• neither the Mortgagee nor its agents provided the funds to bring and/or keep the Mortgage current or to bring about the appearance of an acceptable payment history.

Each late endorsement request must:

• list the FHA case number;
• list the Borrower’s name;
• be dated and signed by the Mortgagee’s representative; and
• be printed on company letterhead with the Mortgagee’s address and telephone number.

(B) Assignee MortgageeThe assignee Mortgagee of a Mortgage may submit the Mortgage for endorsement in its name or the name of the originating Mortgagee. The assignee must also notify the Jurisdictional HOC of the assignment, and verify that the originating Mortgagee completed all certifications.The Purchasing Mortgagee may pay any required MIP, late charges, and interest.

(C) After Receipt of a Notice of ReturnIf the Jurisdictional HOC issues a Notice of Return (NOR), the Mortgagee may request reconsideration for insurance endorsement. All requests for reconsideration must be received by the Jurisdictional HOC within the 60-Day endorsement submission period or within 30 Days of the issuance of the NOR, whichever is longer. If the request for reconsideration is submitted after this time period, the Mortgagee must follow the guidelines for late submission.Mortgagees submitting paper case binders must submit the original case binder with any request for reconsideration.

iv. Ineligible for Endorsement – Non-Lender Insurance

(A) Notice of Return (NOR)If the Mortgage is ineligible for insurance endorsement, FHAC issues an electronic NOR, which states the reasons for non-endorsement and any corrective actions that the Mortgagee must take.If the Mortgage is permanently rejected for insurance endorsement, the Mortgagee must notify the Borrower that they do not have an FHA-insured Mortgage and of the circumstances that made the Mortgage ineligible for FHA insurance.

(B) Additional Requirements for Permanently Rejected MortgagesThe Mortgagee must obtain a refund of both the UFMIP and any periodic MIP paid by or on behalf of the Borrower, and apply the refund to the principal balance of the Mortgage.

(C) Excessive Mortgage AmountsAn excessive mortgage amount occurs when the Mortgagee closes a Mortgage in an amount higher than what is permitted by FHA requirements. The Mortgage is not eligible for insurance until the amount is reduced to within permissible limits. The Mortgagee may choose to either pay down the principal balance, or re-close the Mortgage to an insurable amount.The Mortgagee must provide a copy of the payment ledger showing that the principal balance has been paid down to an insurable amount.

v. Endorsement Processing – Lender Insurance

Once the Mortgagee has completed the entry of all required data, completed the pre-endorsement review, and satisfied itself that the Mortgage meets HUD requirements, it will click “yes” in the Insurance Decision field, enter the FHA Connection ID of the individual insuring the Mortgage, enter the insurance date on the Insurance Application screen and click “send.”

The Mortgagee must endorse the Mortgage no later than 60 Days after the Disbursement Date.

Late Submission

If the Mortgage is endorsed more than 60 Days after the Disbursement Date, the Mortgagee must complete a late endorsement certification stating:

• no Mortgage Payment is currently unpaid;
• all escrow accounts for taxes, hazard insurance and MIPs are current and intact, except for Disbursements that may have been made to cover payments for which the accounts were specifically established; and
• neither the Mortgagee nor its agents provided the funds to bring and/or keep the Mortgage current or to bring about the appearance of an acceptable payment history.

Each late endorsement certification must:

• list the FHA case number;
• list the Borrower’s name;
• be dated and signed by the Mortgagee’s representative; and
• be printed on company letterhead with the Mortgagee’s address and telephone number.

The Mortgagee must retain the certification in the case binder.

vi. Case Warnings – Lender Insurance

Case warnings are issued by FHAC based on system edits. They identify issues that must be addressed before the Mortgage can be insured. There are two kinds of case warnings: non-severe and severe.

(A) Severe Case WarningsSevere case warnings are case warnings that make the Mortgage ineligible for Lender Insurance (LI), which include:

• a Borrower failed or is pending SSN validation;
• a Borrower has a record in CAIVRS;
• the pre-endorsement delinquency status is delinquent; or
• a deficiency exists causing risks to HUD. The requesting HOC will add text to the case warning message screen identifying the reasons requiring submission of the case binder to the HOC for a pre-endorsement review.

Once the severe case warning is corrected, documentation in support of clearing the case warning and the case binder must be submitted to the Jurisdictional HOC for pre-endorsement review and endorsement processing.

(B) Non-severe Case WarningsNon-severe case warnings are warnings to provide guidance to the Mortgagee that conditions have been detected and must be researched before the Mortgage can be endorsed. If, after researching the matter, the Mortgagee determines that HUD requirements have not been violated, the Mortgagee may re-submit the Mortgage for insurance.By re-submitting the information, the Mortgagee is representing that the warning has been reviewed and the Mortgage is eligible for insurance endorsement. FHAC will then allow the Mortgage to be insured by the Mortgagee.

vii. Mortgagee with Conditional Direct Endorsement Approval (Test Case)

A Mortgagee who has not yet received unconditional Direct Endorsement (DE) approval must ensure that the required certifications are executed, assemble the closing package, and return the package to the Jurisdictional HOC that underwrote the Mortgage.

For Test Cases, the Mortgagee must:

• submit a complete closing package in the order specified in the Closing Documents Requirements Checklist that is provided to the Mortgagee during the Entrance Conference;
• include credit and property approval conditions (placed at the bottom of the closing package); and
• place a cover sheet identifying the Mortgage as a pre-closing Test Case, along with the FHA case number, as the top sheet inside the package and write “TEST CASE” in large letters on the front of a plain manila folder.

The Mortgagee is not required to resubmit documents previously submitted for approval.