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FHA APPLICATION EXPLANATION
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Required Documents for your Mini-Eagle - Cheat Sheet Click Here

  • Sponsor cover letter – Provided by your mortgage wholesale lender
  • Fee - $1000
  • Application Form
  • Credit Reports – complete originals
  • Resumes
  • Financial statements (Audited)
  • Licenses
  • State DBA approval – if DBA is used
  • Facilities Letter
  • Sanctions letter
  • Partnerships, LLCs, and Not-for-profits require additional documentation

Explanation of Required Documentation (Mini-Eagle)

1. Sponsor Cover Letter.  An application from a mortgagee applying for approval as a loan correspondent must be accompanied by a letter from an approved direct endorsement mortgagee that will be its Sponsor, signed by an executive officer of the Sponsor, requesting approval of the loan correspondent.  The letter must contain the Sponsor's mortgagee Identification Number.  The letter may also state the mortgagee will fund all loans where it is the sponsor.

We are commonly asked if as a Mortgage Broker are you locked into only submitting loans to your sponsor, the answer is NO.  You still have the option of submitting FHA loans to other lenders once you are approved.  Your sponsor takes responsibility for your actions as a Loan Correspondent.

2. Application Fee.  You will not send your check or application fee in with your application.  It will be paid separate.  However, with your application you will have to send evidence that the application fee has been transmitted. Therefore you will need to send copies of the check, along with the HUD form "Application Fee for Title TT Mortgagee Approval".  Title II Mortgagee Approval will be sent to the HIC lock box.  To view and print this form Click Here  If a copy of the check is not included, a copy of the front and back of the canceled check will be requested.

3. Application Form.  HUD form 11701, Application for Approval--FHA Lender and/or Ginnie Mae Mortgage Backed Securities Issuer. 

To see some common mistakes made on the application 

4. Credit Reports.  When applying to HUD you must order and pay for credit reports and submit the complete originals, with the application, directly to the Lender Approval and Recertification Division, HUD Headquarters.

a. Required are:

(1) Personal credit reports for the principals of the applicant, including the chairman of the                board, president, vice presidents and any person or entity owning 25 percent or more of                  the mortgagee's voting stock or a controlling interest.  Personal credit reports must be                    either Residential Mortgage Credit Reports (RMCR) or three-merged reports.  Other                        types, e.g. in-file credit reports, are not acceptable.
(2)  A commercial credit report, or a Dun & Bradstreet report, if a principal owner is a                       business entity.
(3)  A commercial credit report or a Dun & Bradstreet report on the applicant.  This is                      required even if the applicant is a start-up company.

b. A written explanation must be submitted by the applicant for all negative items disclosed by         any credit report.  Credit Reports are evaluated pursuant to the FHA underwriting guidelines as         set forth at HUD Handbook 4155.1, including any updates and/or revisions.

5. Resumes. As an applicant you must submit the current resumes for all senior officers with qualifying mortgage origination or servicing experience covering at least the previous seven years of employment.  A Government Institution must provide resumes on the senior staff person or persons designated to meet staffing and experience requirements.

In determining the acceptability of an officer’s experience, the Department will consider:

  • Experience in originating single family and multifamily mortgages;
  • Experience in servicing single family and multifamily mortgages;
  • Experience in investing funds in real estate mortgages;
  • Experience in managing other individuals performing these services; and
  • Experience in real estate sales or brokerage does not qualify.

6. Financial Statements.

The Audited Financial's are usually the largest hurdle for most people. Mortgage Brokers need to show $63,000 in net worth and Mortgage lenders need to show $250,000. However, only 20% of the total net worth must be liquid, aka cash in the bank.  This is often confuse to mean that the individual who owns the company need to have this net worth. That is not the fact, it is actually the company not the individual owners.   Because of this, owners will often invest cash, cars, investment properties and put them under the company's name to show as net worth on the financial statement.  What is even more difficult about the net worth requirement is that the financial statement must be audited. Depending on the size of your company, CPAs may charge anywhere between $4,000 to $10,000 for this type of financial statement.

The guidelines for financial statements follow the guidelines of chapter 7 of the most recent version of HUD IG Handbook 2000.04.  All financial statements must be prepared in accordance with Generally Accepted Accounting Principles (GAAP).  The audit must be performed in accordance with Generally Accepted Auditing Standards (GAAS) by a Certified Public Accountant (or a Public Accountant licensed on or before Dec. 31, 1970) They must be licensed to perform audits in the state in which the applicant's home office is located and who has not been suspended, debarred, or otherwise excluded from performing audits of mortgagees.  The audit report must be complete, original and contain the auditor's report on the audit firm's letterhead stationery.

When you submit your applicant you must submit its with the most current CPA prepared audited financial statements for the period ended not more than 12 months prior to submission of the application. 

For an ongoing business concern, a full set of financial statements is required:

  • Balance sheet;
  • Income statement;
  • Cash flow statement;
  • Retained earnings statement;
  • Footnotes; and
  • Auditor's report containing an unqualified (clean) opinion.

New Company. If the applicant is a new company and has had no revenues or cash flow, the income statement and cash flow statement are not required.

Audited financial statements over six months old.  If the audited financial statements are for a period ended more than six months but less than 12 months prior to submission of the application, additional financial statements must be submitted.  This shall be in the form of a full set of financial statements (unaudited) and a computation of adjusted net worth.  The unaudited financial statements must be certified by management and be for the most recent interim accounting period, but not older than three months.

Corrected Deficiency in Adjusted Net Worth.  If the computation of adjusted net worth shows inadequate adjusted net worth at the date of the financial statements and the applicant has  corrected this deficiency prior to issuance of the auditor's report, then the auditor will report this as a subsequent event.  A new computation of adjusted net worth must be provided and the audit reports shall be dual dated, when subsequent events relate to adjusted net worth.  If the auditor's report has already been issued, the auditor must verify that the applicant subsequently met the net worth requirement and issue an opinion on it, including a new computation of adjusted net worth.

7. Licenses.  An applicant applying for approval as a non-supervised mortgagee or a non-supervised loan correspondent must obtain all required licenses prior to, or in conjunction with, approval as a FHA mortgagee.  Copies must be submitted with the application.  If the State does not require that mortgage lenders be licensed, the applicant must certify to that in writing.  If a State conditions the issuance of a State license upon the lender having a FHA approval, the Department can evidence its approval by signing the applicant’s HUD Form 11701 which can then be provided to the State.  However, the FHA ID number will not be issued until FHA receives a copy of the State license.

8. State Approval of “dba”.  If a mortgagee or any of its branch offices is using a “Doing Business As” (dba) name, it must submit one of the following with their application; a copy of its "Fictitious Business Name Statement", "Assumed Name Statement" to show the State has approved the use of a dba or a DBA Statement from the county clerks office.
a. If the Applicant is a Limited Liability Corporation (LLC) a copy of operating agreement must
be provided
b. If the Applicant is a Partnership it must provide a copy of a partnership agreement

9. Evidence of Acceptable Facilities.  An applicant applying for approval as a non-supervised mortgagee or a non-supervised loan correspondent must provide sufficient evidence that its facilities meet FHA requirements. The applicant must submit photographs of its facilities, including its entrance, with evidence of permanent identification to the public.  The applicant must submit a floor plan, which may be hand-drawn.  The applicant must also submit a certification, signed by a senior officer, that the facilities comply with FHA requirements.  These submissions are in lieu of an on-site visit by FHA to the mortgagee's office facilities; however, FHA may still conduct an on-site visit.  Evidence of acceptable facilities is not required for branch offices.

12. Quality Control Plan. The applicant must submit a copy of its Quality Control Plan.  See chapter 7 of HUD's handbook 4060.1 Rev-2 for details.  To purchase a fully compliant quality control plan from Fraudmit Click Here.

13. Funding Program.  The applicant must provide a letter or letters establishing or confirming acceptable funding arrangements totaling not less than $1 million, unless applying as a supervised mortgagee or Government Institution.  As a non-supervised Loan Correspondent to meet this qualification you must have a letter or written agreement from each of  your Sponsors that the Sponsor will purchase all FHA mortgages that the loan correspondent originates and that the Sponsor underwrites.

14. Sanctions Letter.  The applicant must certify that neither it nor any of its officers, directors, or principals, has been denied an operating license or otherwise sanctioned by any licensing or regulatory body.  A state-licensed mortgagee must submit with its application for approval, a letter certifying to the Department that the mortgagee sought and has not been refused a license, and has not been sanctioned by any State or States in which it will originate insured mortgages.  If the mortgagee or any of its officers, directors, or principals has been sanctioned or subject to an action by the State against its license, the applicant must submit a copy of the documents concerning the action together with a written explanation.

15. Documentation for Specific Business Forms

A. As a Partnership there will be additional documentation Requirements.  A partnership seeking approval as a mortgagee must include the following additional documentation with its application package:

1. Names and Employer Identification Numbers of all general partners.
2. Identity of the designated managing general partner.  The officers and directors of the
managing general partner must be listed, together with their Social Security Numbers, on the
application, HUD Form 11701.
3. Principal business activity of managing general partner.  Evidence that the principal
business activity of the managing general partner is the management of one or more
partnerships, all of which are mortgage lenders, property improvement or manufactured home
lenders; and that it has exclusive authority to deal with FHA on behalf of each partnership.
4. Partnership term of existence.  Evidence that the partnership will exist for a minimum
term of ten years and that in the event that a partner withdraws, the partnership is specifically
authorized to continue its existence.

If the mortgagee certifies that it meets the requirements for partnerships a copy of the Partnership Agreement does not have to be submitted, unless requested by FHA.

B. As a Limited Liability Company there will be additional documentation requirements.

1.         Names and Taxpayer Identifying Numbers of all members.
2.         Names of managing member and FHA contact.
3.         Copy of Operating Agreement.
4.         Copy of Articles of Organization.

HUD Does not allow single member LLC's unless they have been in business for 10 years.

16. What is HUD's turn-time on applications?>

The processing time for a complete application with the required exhibits is 30-45 days.  If you haven’t been contacted within 30 days of submission please send an email to info@fhaoutreach.com or call 800-225-5342 (All applications are logged and record by your company's TAX ID number and the applicant’s name, please include both in your email) The process may take longer if the application is not fully completed or the demand for approval is high at the time you submit your paperwork.

17. What is the process to submit my application?

Applications must be sent to the Lender Approval Division in Washington, DC.   As mentioned above, the Application fee is mailed to HUD’s lockbox in Atlanta, GA. 

Mailing an application to the Atlanta address will only delay its receipt in Washington by by around  30 days. 

Address to overnight to the FHA is: Lender Approval and Recertification Division - 490 L’Enfant Plaza East, SW, Suite 3214 Washington, DC  20024

Address to send USPS First Class Mail: Lender Approval and Recertification Division 451 7th Street, S.W., Room B133/P3214 Washington, DC  20410

18. FIND OUT IF YOU ARE APPROVED YET

Once you are approved the FHA will update their Lender Approval Website and then send you a letter.  Since the letter may take 4 to 5 days to reach you, it is possible you could be approved to originate FHA loans and not even know it.  One way to check to see if you are approved is by searching HUD's Licensing Website which is updated within 24 hours of being approved.  Click Here

19. Once Approved Now what?

FHA Title II Mortgagee Starter Kit - Click Here

The FHA offers many resources to help you do business with them.  The Starter Kit is an excellent place to start.

If you would like more information about FHA loans or the approval process, call Fraudmit your Quality Control and Risk Mitigation Specialists! (800) 610-6680 or email us at info@fraudmit.com


Information herein is for educational purpose only and is not meant to be a complete statement regarding licensing requirements. Additional  mortgage licensing requirements may be required. If you need further information, we would encourage you to contact us directly.