Post-Approval Changes

HUD Handbook 4000.1 >> Post-Approval Changes

Effective September 14, 2015

The Mortgagee has an ongoing requirement to notify FHA of any changes to the information outlined in its application for FHA approval or in FHA’s eligibility requirements.


a. Requirements for All Post-Approval Changes

i. Types of Notification

(A) Information Update An Information Update is any change to a Mortgagee’s basic institution or branch information in the FHA systems that can be directly managed by the Mortgagee.
(B) Notice of Material Event A Notice of Material Event is the method of submitting a required notice to FHA of a change to the information provided by the Mortgagee at application as evidence of approval eligibility, or a change that affects the Mortgagee’s standing as an FHA-approved Mortgagee.
(C) Change Request A Change Request is the method of submitting information and/or business changes to FHA that requires FHA review and approval before acceptance. Any update or change that cannot be made by the Mortgagee directly is submitted as a Change Request.

ii. Standard

The Mortgagee must submit all Information Updates, Notices of Material Event, and Change Requests to FHA using LEAP. All Information Updates, Notices of Material Event, and Change Requests must be submitted within 10 business days of the change, unless otherwise specified below.

Any change not specifically described in this SF Handbook that affects a Mortgagee’s approval status or conduct of business with HUD must be reported to FHA with a detailed explanation and supporting documentation.

iii. Required Documentation

The Mortgagee must:

  • include a cover letter signed by a Corporate Officer summarizing the business change(s); and
  • submit any required documents as specified in Application and Eligibility Requirements for Approval or as described in the LEAP User Manual.

b. Information Updates

The Mortgagee must submit Information Updates, as applicable, for the following information:

  • addresses for correspondence
  • point of contact
  • all other contact and identification information
  • branch office information
  • Corporate Officers
  • principal/authorized agent relationships
  • cash flow accounts

c. Change in Partnership or Principal Owners

The Mortgagee must submit a Notice of Material Event to FHA if it experiences a change in partnership or Principal Owners. This includes the addition or removal of partners or Principal Owners.


e. Relocation to a Different State

i. Home Office

If the Mortgagee is changing the geographic address of its home office to a different state, the Mortgagee must submit a Change Request to FHA through LEAP.

ii. Branch Office

If the Mortgagee is changing the geographic address of a branch office to a different state, the Mortgagee must terminate the branch FHA Lender ID for the original office and register the new location as a new branch office. The branch FHA Lender ID for the original branch office will remain active for approximately 45 Days to allow for the completion of processing of Mortgages in process under that identification number.

Mortgages that closed or were approved before the branch office termination became effective may be endorsed. Cases at earlier stages of processing cannot be submitted for insurance by the terminated branch. However, the cases may be transferred for completion of processing and underwriting to another branch office or Mortgagee authorized to underwrite FHA-insured Mortgages in that area.


f. Liquid Assets or Net Worth Deficiency

If at any time a Mortgagee’s adjusted net worth or liquidity falls below the required minimum, the Mortgagee must submit a Notice of Material Event to FHA within 30 business days of the deficiency. The Mortgagee must submit a Corrective Action Plan that outlines the steps taken to mitigate the deficiency and includes relevant information, such as contributions and efforts made to obtain additional capital.


g. Operating Loss

If a Mortgagee experiences an operating loss of 20 percent or greater of its adjusted net worth, the Mortgagee must submit a Notice of Material Event to FHA within 30 business days of the loss. The 20 percent threshold applies to losses in any quarter during the fiscal year or losses that exceed 20 percent on the financial statements submitted at recertification.

Following the initial notification, the Mortgagee must submit financial statements every quarter until it shows an operating profit for two consecutive quarters, or until it submits its financial reports as part of its recertification.


h. Fidelity Bond

The Mortgagee must submit a Notice of Material Event to FHA of any significant change(s) to its fidelity bond coverage. If a Mortgagee loses its fidelity bond coverage it must obtain a new policy within 30 Days.


i. Errors and Omissions Insurance

The Mortgagee must submit a Notice of Material Event to FHA of any significant change(s) to its errors and omissions insurance. If a Mortgagee loses its errors and omissions insurance it must obtain a new policy within 30 Days.


j. Principal Activity Change of Nonsupervised Mortgagee

If a Nonsupervised Mortgagee’s activities change such that it no longer meets the principal activity requirement, the Mortgagee must submit a Notice of Material Event to FHA and submit a Corrective Action Plan detailing the steps it will take to meet the principal activity requirement to maintain its eligibility.


k. Servicing for Investing Mortgagees

In order to service FHA Mortgages, an Investing Mortgagee must submit a Change Request after it has received FHA Mortgagee approval. With its Change Request, the Mortgagee must:

  • designate an Officer in Charge who meets the experience requirements for the Mortgagee’s servicing function;
  • provide a resume for the Officer in Charge;
  • provide a credit report for the Officer in Charge; and
  • provide an updated QC Plan.

FHA evaluates these requests on a case-by-case basis and reserves the right to request additional documents necessary to determine the Mortgagee’s servicing capabilities.


l. Fiscal Year End Date

The Mortgagee must submit a Change Request to FHA in order to change its fiscal year end date.

Before approving the change, FHA may require the Mortgagee to submit interim financial reports to ensure the Mortgagee’s next annual renewal financial reports cover no more than 18 months. Change Requests must be submitted at least 90 Days before the end of the Mortgagee’s current fiscal year, as reported to FHA.


m. Supervision Change

If there is a change to a Supervised Mortgagee’s supervising or regulatory agency, the Mortgagee must submit a Notice of Material Event to FHA and provide documentation of the change and the effective date.


n. Business Form

The Mortgagee must submit a Notice of Material Event to FHA if it reincorporates; changes its charter; changes the state where it is incorporated, organized or chartered; or completes any other equivalent business change.

i. Change Resulting in New Federal Taxpayer Identification Number

If a Mortgagee receives a different federal TIN as a result of a business change, the Mortgagee must submit a new application for FHA Mortgagee approval.

FHA will issue a new FHA Lender ID to the Mortgagee upon approval. When the new FHA Lender ID is issued, the old FHA Lender ID will remain active for approximately 45 Days to allow for completion of processing of Mortgages in process under that identification number.

ii. Change Not Resulting in New Federal Taxpayer Identification Number

If the Mortgagee does not receive a new federal TIN as a result of a business change, then the Mortgagee must submit the following documents to FHA:

a Notice of Material Event in the form of a letter signed by a Corporate Officer containing the following provisions:

  • providing a complete description of the business change;
  • confirming that there has been no change in the federal TIN or depositor insurance (in the case of a Supervised Mortgagee);
  • stipulating that the institution will continue to comply with all FHA approval and eligibility requirements; and
  • stipulating that the newly chartered Entity will continue to be responsible for the assets and liabilities of the former Entity, including any problems found subsequently by HUD in the origination or servicing of any Mortgages originated or serviced by the Entity prior to the business change; and
  • a copy of the Business Formation Documents.

o. Bankruptcy

i. Business

A Mortgagee that files a Chapter 7 bankruptcy petition must submit a Notice of Material Event to FHA.

A Mortgagee that files a bankruptcy petition under any other chapter of the United States Bankruptcy Code must submit a Notice of Material Event to FHA and submit with its notice, and quarterly thereafter, an internally prepared balance sheet and a statement of adjusted net worth for as long as the bankruptcy petition is active.

The Mortgagee must submit a Notice of Material Event to FHA of each change of status in the bankruptcy. FHA reserves the right to require the Mortgagee to submit additional information upon request in order to determine if the Mortgagee is eligible to maintain its FHA approval.

ii. Personal

The Mortgagee must submit a Notice of Material Event to FHA if any Corporate Officer or Principal Owner commences voluntary or involuntary bankruptcy. A current credit report for that Corporate Officer or Principal Owner must be submitted with the Notice of Material Event. FHA must be notified of each change of status in the bankruptcy proceedings.


p. Lending License(s)

The Mortgagee must submit a Notice of Material Event to FHA of any changes to its license(s). In the event of a lending license surrender or revocation, the Mortgagee must notify FHA which license(s) has been surrendered and provide an explanation of each action.


q. Mergers, Acquisitions, and Reorganizations

i. Merger or Consolidation

FHA’s treatment of an FHA-approved Mortgagee for approval purposes following a merger will depend on the prior approval status of the surviving Entity.

(A) Duties of a Non-Surviving FHA-Approved Mortgagee A non-surviving FHA-approved Mortgagee is required to do the following for any case in which they are merged or consolidated into another Entity.

(1) Standard A non-surviving FHA-approved Mortgagee that holds a portfolio of FHA-insured Mortgages must transfer the Mortgages within 45 Days to a Mortgagee approved by FHA to service FHA Mortgages. If a surviving FHA-approved Mortgagee acquires all of the non-surviving FHA-approved Mortgagee’s outstanding FHA Mortgages, all of these Mortgages will be transferred in FHA systems to the surviving Entity when the merger is processed. A non-surviving Mortgagee remains responsible for the payment of insurance premiums and compliance with all other obligations associated with the FHA Mortgages until the Mortgages are transferred and the mortgage record changes are reported accurately to HUD through FHAC, Electronic Data Interchange (EDI), or Business to Government (B2G). Once the non-surviving Mortgagee ceases to exist or its approval is terminated, whichever comes first, the non-surviving Mortgagee must not:

  • accept any new applications for FHA Mortgages;
  • hold FHA Mortgages;
  • service FHA Mortgages; or
  • submit claims to HUD.

(2) Required Documentation A non-surviving Mortgagee must submit a Change Request to FHA containing the following: a letter, signed by a Corporate Officer, that informs FHA of the merger.

The letter must include information that:

  • indicates which Entity will survive;
  • provides the FHA Lender IDs for each FHA-approved Mortgagee involved;
  • provides the date the merger occurred or will occur; and
    requests the withdrawal of the non-surviving Mortgagee’s FHA approval in accordance with FHA’s voluntary withdrawal procedures;
  • a copy of the legal document evidencing the merger;
  • if a Supervised Mortgagee, a copy of the letter from the Federal Banking Agency that approved the merger; and
  • if applicable, a letter describing how the non-surviving Mortgagee will dispose of the FHA-insured Mortgages that it held or serviced that have not been acquired by a surviving FHA-approved Mortgagee within 45 Days.

(B) Duties of a Surviving Entity

(1) FHA-Approved Mortgagee That Survives a Merger with a Non-Approved Entity

(a) Standard An FHA-approved Mortgagee that is the surviving Entity in a merger with a non-approved Entity must notify FHA of the merger. The surviving FHA-approved Mortgagee must register each of the non-surviving Entity’s branch offices that will remain open under the auspices of the surviving Mortgagee and pay the branch office registration fee(s).

(b) Required Documentation An FHA-approved Mortgagee that is the surviving Entity in a merger with a non-approved Entity must submit a Change Request to FHA containing the following:

  • a letter, signed by a Corporate Officer, describing the merger;
  • a copy of the legal document evidencing the merger; and
  • if a Supervised Mortgagee, a copy of the letter from the Federal Banking Agency or other supervisory authority that approved the merger.

(2) Two or More FHA-Approved Mortgagees Merge

(a) Standard An FHA-approved Mortgagee that is the surviving Entity in a merger with another FHA-approved Mortgagee must notify FHA of the merger. The surviving Mortgagee must register each of the non-surviving Mortgagee’s branch offices that will remain open under the auspices of the surviving Mortgagee and pay the branch office registration fee(s).

(b) Required Documentation An FHA-approved Mortgagee that is the surviving Entity in a merger with another FHA-approved Mortgagee must submit a Change Request to FHA containing the following:

  • a letter, signed by a Corporate Officer, describing the merger;
  • a copy of the legal document evidencing the merger; and
  • if a Supervised Mortgagee, a copy of the letter from the Federal Banking Agency or other supervisory authority that approved the merger.

(3) Non-Approved Entity That Survives a Merger with an FHA-Approved Mortgagee

(a) Standard A non-approved surviving Entity must become an FHA-approved Mortgagee in order to originate, underwrite, close, endorse, service, purchase, hold, or sell FHA-insured Mortgages, or to submit claims on Mortgages to FHA, including those previously held by the non-surviving Mortgagee. Immediately after becoming approved, the Mortgagee must register each of the non-surviving Entity’s branch offices that will remain open under the auspices of the surviving Mortgagee and pay the branch office registration fee(s). The FHA Lender IDs of the non-surviving Mortgagee’s branch offices will remain active for up to 45 Days to allow for the completion of processing of Mortgages in process under these identification numbers. When new FHA Lender IDs for these branch offices are issued, the surviving Mortgagee must cease originating cases under the non-surviving Mortgagee’s old FHA Lender ID numbers.

(b) Required Documentation A non-approved surviving Entity must submit an online application for FHA approval containing all information and documentation required to demonstrate eligibility for approval. The Entity must also submit with its application a letter signed by a Corporate Officer that describes the merger, and, if applicable, the surviving Entity’s intentions regarding the non-surviving Mortgagee’s outstanding portfolio of FHA Mortgages and indemnifications.

ii. Sale, Acquisition, or Disassociation

FHA’s treatment of a sale, acquisition, or disassociation of an FHA-approved Mortgagee depends on whether the FHA-approved Mortgagee dissolves, continues as a subsidiary or corporate affiliation of the acquiring Entity, or becomes an independent Entity.

(A) An FHA-Approved Mortgagee Is Acquired by Another Entity

(1) Dissolution of Acquired FHA-Approved Mortgagee

(a) Duties of Acquired FHA-Approved Mortgagee

(i) Standard If an FHA-approved Mortgagee being acquired will be dissolved into another Entity, it must voluntarily withdraw its FHA approval. The acquired Mortgagee must transfer any FHA-insured Mortgages in its portfolio to a Mortgagee approved to service FHA-insured Mortgages. The dissolving Mortgagee must continue to pay insurance premiums due and meet all other obligations associated with its FHA Mortgages until the Mortgages are transferred and the mortgage record changes are reported accurately to HUD in FHAC, EDI, or B2G.

(ii) Required Documentation The FHA-approved Mortgagee being acquired must submit a Change Request to FHA in the form of a letter, signed by a Corporate Officer, that informs FHA of the details regarding the acquisition and requests the withdrawal of its FHA approval. The Mortgagee must submit a copy of the articles of dissolution, a letter describing the acquisition, and, if applicable, how it will or has disposed of FHA Mortgages that it held or serviced.

(b) Duties of Acquiring Entity

(i) Standard If a non-approved Entity is acquiring and dissolving an FHA-approved Mortgagee, the non-approved Entity must become an FHA-approved Mortgagee to originate, underwrite, close, endorse, service, purchase, hold, or sell FHA-insured Mortgages, or to submit claims on FHA Mortgages, including those previously held by the dissolved Mortgagee. Immediately after becoming approved, the Mortgagee must register each of the dissolved Mortgagee’s branch offices that will remain open under the auspices of the acquiring Entity.

(ii) Required Documentation An FHA-approved Mortgagee that acquires and dissolves another FHA-approved Mortgagee is required to submit a Change Request to FHA through LEAP. A non-approved Entity must submit an online application for FHA approval containing all information and documentation required to demonstrate eligibility for approval. The Entity must also submit with its application a letter signed by a Corporate Officer that describes the acquisition, and, if applicable, the acquiring Entity’s intentions regarding the dissolved Mortgagee’s outstanding portfolio of FHA Mortgages.

(2) Continuation as Subsidiary or Corporate Affiliation

(a) Acquisition by an FHA-Approved Mortgagee

(i) Standard If the FHA-approved Mortgagee being acquired will continue to operate as a subsidiary or corporate affiliation of the acquiring FHA-approved Mortgagee, the acquired Mortgagee may continue to operate under its existing FHA Lender ID as a separately approved Mortgagee.

(ii) Required Documentation Acquired FHA-Approved Mortgagee – The acquired Mortgagee must submit a Change Request to FHA in the form of a letter, signed by a Corporate Officer, informing FHA that it has been acquired and will continue to operate as a subsidiary or corporate affiliation of the acquiring FHA-approved Mortgagee. Acquiring FHA-Approved Mortgagee – The acquiring FHA-approved Mortgagee must submit a Change Request to FHA in the form of a letter, signed by a Corporate Officer, that:

  • describes the transaction;
  • lists the names of all parties;
  • lists the FHA Lender IDs of all parties;
  • states the date of the acquisition; and
  • stipulates that the acquired Mortgagee will continue as a subsidiary or corporate affiliation of the acquiring FHA-approved Mortgagee.

(b) Acquisition by a Non-Approved Entity

(i) Standard If the acquired FHA-approved Mortgagee will continue to operate as a subsidiary or corporate affiliation of the acquiring Entity, it may continue to operate as an FHA-approved Mortgagee under its own name, whether or not the acquiring Entity becomes FHA-approved.

(ii) Required Documentation The Mortgagee must submit a Change Request to FHA in the form of a letter, signed by a Corporate Officer, describing the acquisition and its future operating status.

(B) An FHA-Approved Mortgagee Acquires a Non-Approved Entity

(1) Standard If an FHA-approved Mortgagee acquires a non-approved Entity, and the Entity is dissolved, the Mortgagee must notify FHA of the acquisition. If an FHA-approved Mortgagee acquires a non-approved Entity and the acquired Entity will operate as a subsidiary or corporate affiliation of the Mortgagee, the non-approved Entity must apply for separate approval to originate, underwrite, close, endorse, service, purchase, hold, or sell FHA-insured Mortgages.

(2) Required Documentation If an FHA-approved Mortgagee acquires a non-approved Entity, and the Entity is dissolved, the Mortgagee is required to submit a Change Request to FHA in the form of a letter, signed by a Corporate Officer, describing the acquisition. If an FHA-approved Mortgagee acquires a non-approved Entity and the acquired Entity will operate as a subsidiary or corporate affiliation of the Mortgagee, the non-approved Entity must submit an online application for FHA approval containing all information and documentation required to demonstrate eligibility for approval. The Entity must also submit with its application a letter signed by a Corporate Officer that describes the acquisition.

(C) An FHA-Approved Mortgagee Becomes Independent

(1) Standard When an FHA-approved Mortgagee that has been a subsidiary or part of a larger Entity becomes independent, the Mortgagee must notify FHA of the disassociation. If the disassociation results in changes to the Mortgagee’s Corporate Officers or Principal Owners, the Mortgagee must submit the proper notifications to FHA as described in this SF Handbook.

(2) Required Documentation When an FHA-approved Mortgagee that has been a subsidiary or part of a larger Entity becomes independent, the Mortgagee must submit a Change Request to FHA in the form of a letter, signed by a Corporate Officer, describing the details of the disassociation.


r. Conservatorship, Receivership, or Transfer of Control

The Mortgagee must submit a Change Request to FHA if it goes into conservatorship, receivership, or is subject to a transfer of control to a federal or state supervisory agency.

The Mortgagee must submit a Change Request to FHA of a change of status in any of these situations and FHA reserves the right to require the Mortgagee to submit additional information in order to determine if the Mortgagee is eligible to maintain its FHA Mortgagee approval.


s. Cease Operations

The Mortgagee must submit a Notice of Material Event to FHA if it ceases operations. If the Mortgagee ceases operations, it must also submit a Change Request for voluntary withdrawal of FHA approval.


t. Unresolved Findings or Sanctions

A Mortgagee must submit a Notice of Material Event to FHA and provide relevant documentation if it or any officer, partner, director, principal, manager, supervisor, loan processor, loan underwriter, or loan originator employed or retained by the Mortgagee is subject to any sanctions or Unresolved Findings contained in a lawsuit or report produced in connection with an investigation, audit, or review conducted by HUD (including those conducted by the HUD OIG), another federal, state, or local governmental agency, or by any other regulatory or oversight Entity with jurisdiction over the matter.

A Mortgagee must submit a Change Request to FHA of a change of status in any Unresolved Finding or sanction previously reported.