source:
  type: guide
  id: hud-4000-1-i-a-title-ii-direct-endorsement-authority
  authority: FHA Single Family Housing Policy Handbook 4000.1, Part I — a. Title II
    Direct Endorsement Authority (04/10/2025)
  description: FHA Single Family Housing Policy Handbook 4000.1, Part I — a. Title
    II Direct Endorsement Authority (04/10/2025).
  coverage_tier: operative
obligations:
- id: hud-4000-1-i-a-title-ii-direct-endorsement-authority-full
  canonical_id: hud-4000-1-i-a-title-ii-direct-endorsement-authority-full
  section: FHA Single Family Housing Policy Handbook 4000.1, Part I — a. Title II
    Direct Endorsement Authority (04/10/2025)
  type: do
  tags:
  - regulator-direct
  - fha
  - hud-handbook
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: FHA Single Family Housing Policy Handbook 4000.1, Part I — a. Title
      II Direct Endorsement Authority (04/10/2025)
    source_class: hud-handbook
    source_url: https://www.hud.gov/hud-partners/single-family-handbook-4000-1
    snapshot_id: 8c03836f77f317e1
    fetched_at: '2026-05-23T00:28:40Z'
    content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
    paragraph_quote: 'a. Title II Direct Endorsement Authority (04/10/2025) i. Scope
      of Authority Approval to participate in FHA’s Direct Endorsement Program permits
      a Mortgagee to underwrite Title II Single Family Mortgages without FHA’s prior
      review and submit them directly for FHA insurance endorsement. The Mortgagee
      must obtain separate Direct Endorsement approval for forward mortgage and Home
      Equity Conversion Mortgage (HECM) programs. (A) Definitions (1) Conditional
      Authority Conditional Authority is the authority of a Mortgagee that has applied
      for and received basic FHA Mortgagee approval as a Supervised, Nonsupervised,
      or Government Mortgagee, and has not entered or completed the Test Case Phase.
      (2) Test Case and Test Case Phase Test Case refers to a Mortgage submitted to
      HUD by a Mortgagee during the Test Case Phase for Unconditional Direct Endorsement
      approval. These Mortgages must be processed per the Direct Endorsement eligibility
      requirements and reviewed by HUD for endorsement approval. The Test Case Phase
      is when a Mortgagee with conditional authority is approved by an FHA Homeownership
      Center (HOC) to submit one or more Test Cases for FHA underwriting review. (3)
      Unconditional Direct Endorsement Authority Unconditional Direct Endorsement
      Authority permits a Mortgagee to underwrite and close Title II Single Family
      Mortgages prior to submitting them to FHA for FHA insurance endorsement. (B)
      Standard To obtain Unconditional Direct Endorsement authority, the Mortgagee
      must successfully complete the Test Case Phase, which permits FHA to evaluate
      the Mortgagee’s qualifications, experience, and expertise to underwrite Mortgages
      that satisfy FHA requirements. (C) Exception Unconditional Direct Endorsement
      authority may be granted, without the need for the Test Case Phase, to the following
      categories of Mortgagees created by merger, acquisition, or reorganization:
      I. DOING BUSINESS WITH FHA A. FHA Lenders and Mortgagees (09/20/2021) 5. Supplemental
      Mortgagee Authorities Handbook 4000.1 29 Last Revised: 11/26/2025 • surviving
      FHA-approved Mortgagees; or • new Mortgagees resulting in new FHA Lender IDs.
      ii. Eligibility Requirements A Mortgagee must meet the following requirements
      in order to apply for and participate in FHA’s Direct Endorsement Program. (A)
      Standard (1) FHA Mortgagee Approval A Mortgagee must have FHA approval as a
      Title II Supervised, Nonsupervised, or Government Mortgagee to be eligible to
      participate in the Direct Endorsement Program. Mortgagees approved as Investing
      Mortgagees are not eligible to participate in the Direct Endorsement Program.
      (2) Origination Experience The Mortgagee must have: • at least five years of
      experience in the origination of Single Family Mortgages; or • a Principal Officer
      with at least five years of managerial experience in the origination of Single
      Family Mortgages. For the purposes of this Handbook 4000.1 a Principal Officer
      is the same as a Corporate Officer. (3) Personnel Requirements The Mortgagee
      must have a Direct Endorsement (DE) underwriter on its permanent staff. (B)
      Exception for Certain Mortgagees Created by Merger, Acquisition, or Reorganization
      Unconditional Direct Endorsement authority may be granted without the need for
      the Test Case Phase following a merger, acquisition, or reorganization, so long
      as the following criteria are met: • Either or both institutions, of the surviving
      FHA-Approved Mortgagee or the FHA-Approved Mortgagee resulting in a new FHA
      Lender ID, were unconditionally Direct Endorsement-approved prior to the merger,
      acquisition, or reorganization. • If both institutions are unconditionally Direct
      Endorsement-approved, then the management and staff of at least one of the Mortgagees
      involved with the Mortgagee’s Unconditional Direct Endorsement authority prior
      to the merger, acquisition, or reorganization must continue to exercise those
      responsibilities I. DOING BUSINESS WITH FHA A. FHA Lenders and Mortgagees (09/20/2021)
      5. Supplemental Mortgagee Authorities Handbook 4000.1 30 Last Revised: 11/26/2025
      for the new Mortgagee. If only one institution is unconditionally Direct Endorsement-approved,
      then the management and staff involved with that Mortgagee’s Unconditional Direct
      Endorsement 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 Direct Endorsement-approved, then
      only that Mortgagee’s claim and default rate is to be considered. iii. Application
      and Approval (A) First-Time Applicants (1) Application (a) Request to Enter
      into the Test Case Phase The Mortgagee must submit a written application for
      Unconditional Direct Endorsement authority to FHA by emailing the required documentation
      to the FHA Resource Center at answers@hud.gov. (b) Required Documentation The
      Mortgagee’s Direct Endorsement application must contain a letter signed by a
      Corporate Officer requesting entry into the Test Case Phase that contains the
      Mortgagee’s home office 10-digit FHA Lender ID and all underwriters’ names and
      the four-character FHA-assigned identification numbers issued to these underwriters.
      (2) Notification and Entrance Conference If the Mortgagee meets the requirements
      for conditional authority and submits the required documentation, the Mortgagee
      will receive a Test Case Phase approval letter from the HOC. The HOC will also
      provide reference materials and a list of the specific requirements that must
      be met for the Mortgagee to obtain Unconditional Direct Endorsement authority.
      The Mortgagee must participate in an in-person or telephone entrance conference
      with the HOC before it will be eligible to submit Test Cases. (3) Test Case
      Phase The Mortgagee must submit Test Cases to FHA for review during the Test
      Case Phase. FHA will review these cases for compliance with FHA’s origination,
      underwriting, and closing requirements. I. DOING BUSINESS WITH FHA A. FHA Lenders
      and Mortgagees (09/20/2021) 5. Supplemental Mortgagee Authorities Handbook 4000.1
      31 Last Revised: 11/26/2025 (a) Case Binder Submission Mortgagees who receive
      a Direct Endorsement Program Test Case approval letter from FHA must submit
      all Test Case binders for review post-closing. The Mortgagee must submit all
      Test Case files using the FHA Catalyst: Case Binder Module. The Mortgagee must
      ensure that: • all required certifications are executed; and • a complete case
      file post-closing is submitted that includes all required origination, underwriting,
      and closing documents as specified in the uniform case binder stacking order.
      The HOC will perform a review for compliance with FHA underwriting and closing
      guidelines. Review results will be documented in accordance with the Title II
      Loan Reviews Findings, and Mortgagees must respond to requests using the functions
      provided in the Loan Review System (LRS). The HOC will issue either a Firm Commitment
      (approval) or Firm Reject (denial) via a Notice of Return (NOR). Once a Firm
      Commitment is issued, the HOC will process the case for endorsement. If a NOR
      is issued, the Mortgagee must make all necessary corrections and provide all
      required documentation to the HOC using the LRS before the Mortgage can be endorsed.
      (b) Test Case Underwriting Report Mortgagees who receive a Direct Endorsement
      Program Test Case approval letter from FHA must review all Test Case results
      in the LRS. (c) Test Case Closing Documents The Mortgagee must ensure that all
      required certifications are executed and included with each complete case binder
      that is submitted to the HOC for endorsement processing. (4) Approval Decision
      (a) Approval of Unconditional Direct Endorsement Authority After the Mortgagee
      successfully completes the required Test Cases, FHA will grant the Mortgagee
      approval for Unconditional Direct Endorsement authority. The Mortgagee must
      receive a minimum of 15 Firm Commitments for forward mortgage authority or five
      Firm Commitments for HECM mortgage authority within a period of 12 consecutive
      months following the date of the Direct Endorsement Program Test Case approval
      letter in order to be granted Unconditional Direct Endorsement authority. I.
      DOING BUSINESS WITH FHA A. FHA Lenders and Mortgagees (09/20/2021) 5. Supplemental
      Mortgagee Authorities Handbook 4000.1 32 Last Revised: 11/26/2025 The Mortgagee
      will receive an approval letter and may then begin submitting Mortgages to FHA
      for endorsement without prior review by FHA. (b) Denial of Unconditional Direct
      Endorsement Authority The Mortgagee will be denied approval for Unconditional
      Direct Endorsement authority if, at any time during the Test Case Phase, FHA
      determines that the Mortgagee’s submissions demonstrate a lack of knowledge
      of FHA requirements, or if FHA identifies unacceptable practices. (i) Denial
      Decision FHA will provide the Mortgagee with written notice of a denial of Unconditional
      Direct Endorsement authority that specifies the reason for the denial. (ii)
      Denial Appeal The Mortgagee may appeal this denial by requesting an informal
      conference. The Mortgagee must submit its appeal in writing to the HOC that
      processed the Test Cases. The HOC must receive the appeal within 30 Days of
      the date of the notice of denial. (iii) Informal Conference FHA will conduct
      an informal conference with the Mortgagee and its counsel, if any, no later
      than 60 Days from the date of the denial. (iv) Determination FHA will issue
      a determination in writing following the informal conference stating whether
      Unconditional Direct Endorsement authority is approved or denied. (v) Appeal
      Following Informal Conference The Mortgagee may appeal a denial following the
      informal conference by submitting a written request to the Deputy Assistant
      Secretary (DAS) for Single Family Housing, or their designee, within 30 Days
      of the date of the denial determination. The Mortgagee is not entitled to any
      meeting or informal conference with the DAS or the designee. The Mortgagee will
      be notified in writing of the decision of the DAS or the designee. The decision
      of the DAS or the designee constitutes final agency action. I. DOING BUSINESS
      WITH FHA A. FHA Lenders and Mortgagees (09/20/2021) 5. Supplemental Mortgagee
      Authorities Handbook 4000.1 33 Last Revised: 11/26/2025 (c) Reapplication Following
      Denial Any Mortgagee who is denied Unconditional Direct Endorsement authority
      will not be permitted to re-apply until it has: • demonstrated appropriate remedial
      education or action; • supplied evidence to support such action; and • waited
      a minimum of 180 Days from the date of final agency action. (B) Applications
      from Mortgagees Created by Merger, Acquisition, or Reorganization (1) Standard
      The Mortgagee must submit a written application for Unconditional Direct Endorsement
      authority to the FHA Resource Center at answers@hud.gov. (2) Required Documentation
      The Mortgagee’s Direct Endorsement application must contain the following: •
      a letter signed by a Corporate Officer requesting Unconditional Direct Endorsement
      authority that specifies: o the FHA-approved and non-approved entities involved
      in the merger, acquisition, or reorganization; o which entity is the surviving
      entity; and o the effective date of the merger, acquisition, or reorganization;
      and • supporting documentation evidencing that the Mortgagee meets the exception
      criteria detailed above. iv. Principal/Authorized Agent Relationship (A) Definition
      A Principal/Authorized Agent Relationship is one in which a Title II Mortgagee
      with Unconditional Direct Endorsement authority permits another Unconditional
      Direct Endorsement-approved Title II Mortgagee to underwrite Mortgages on its
      behalf. (B) Standard A Title II Mortgagee with Unconditional Direct Endorsement
      authority (acting as the “principal”) can designate another Unconditional Direct
      Endorsement-approved Title II Mortgagee to act as its “authorized agent” for
      the purpose of underwriting Mortgages. I. DOING BUSINESS WITH FHA A. FHA Lenders
      and Mortgagees (09/20/2021) 5. Supplemental Mortgagee Authorities Handbook 4000.1
      34 Last Revised: 11/26/2025 (1) Required Authorities The authorized agent must
      have Unconditional Direct Endorsement authority to underwrite the type of Mortgage
      that is being underwritten. The Title II Mortgagees must be approved as follows.
      For a forward Mortgage: • the principal may have Unconditional Direct Endorsement
      authority for either forward Mortgages or HECM; and • the authorized agent must
      have Unconditional Direct Endorsement authority for forward Mortgages. For a
      HECM: • the principal may have Unconditional Direct Endorsement authority for
      either forward Mortgages or HECM; and • the authorized agent must have Unconditional
      Direct Endorsement authority for HECM. (2) Process The principal must originate
      the Mortgage and the authorized agent must underwrite the Mortgage. The Mortgage
      may close in either Title II Mortgagee’s name, and either may submit the Mortgage
      for endorsement. (C) Required Documentation The relationship must be documented
      in LEAP by the authorized agent, and the principal’s FHA Lender ID must be entered
      in the “Originator” field on the FHA case file and in FHAC. v. Sponsor/Sponsored
      Third-Party Originator Relationship (A) Definition A Sponsor/Sponsored Third-Party
      Originator (TPO) Relationship is one in which a Mortgagee (acting as the “sponsor”)
      permits another entity to act as an originator and originate Mortgages on behalf
      of the Mortgagee. (B) Standard Only a Mortgagee with Direct Endorsement authority
      may use sponsored TPOs. A Mortgagee must ensure its sponsored TPO meets all
      state license, registration, or equivalent approval requirements. A Mortgagee
      is responsible for the actions of its sponsored TPOs under 24 CFR § 202.8(a)(3).
      I. DOING BUSINESS WITH FHA A. FHA Lenders and Mortgagees (09/20/2021) 5. Supplemental
      Mortgagee Authorities Handbook 4000.1 35 Last Revised: 11/26/2025 A Mortgagee
      must ensure its sponsored TPO and the TPO’s officers, partners, directors, principals,
      managers, supervisors, loan processors, and loan originators are not ineligible
      under 24 CFR § 202.5(j). A sponsored TPO is authorized to originate Mortgages
      for sale or transfer to a Mortgagee with Direct Endorsement authority. A Mortgagee
      must ensure its sponsored TPO does not close Mortgages in their own name. (1)
      Exception for Mortgagees Acting as a Sponsored Third-Party Originator A Mortgagee
      may permit its sponsored TPO to close Mortgages in their own name if the TPO
      is also a Mortgagee. (C) Required Documentation A Mortgagee with Unconditional
      Direct Endorsement authority must confirm registration of its sponsored TPO
      on the Sponsored Originator Maintenance screen in FHAC. A Mortgagee must register
      its sponsored TPO on the Sponsored Originator Maintenance screen in FHAC if
      the sponsored TPO is not on the registry. The sponsored TPO’s legal name and
      Employer Identification Number (EIN) must be included.'
  judgment: false
