Three mortgage lenders lost the authority to approve FHA-backed home loans in parts of the country this summer because too many of their borrowers fell behind or went to claim. In a notice published Sept. 23, the Department of Housing and Urban Development said Equity Prime Mortgage, American Financial Network and Sun West Mortgage had their Direct Endorsement approval terminated in specific HUD field-office areas. The cutoffs took effect Aug. 3 and Aug. 19.
The question for anyone with an application in the pipeline at one of the three is whether the loan can still close with FHA insurance. The notice answers it: loans that were already underwritten and approved before the termination date can still be submitted for insurance, and earlier-stage cases can move to another approved lender in the same area. A borrower who already has an FHA loan from one of these companies sees no change, since the lenders keep servicing what they hold.
The six-month mark after the Aug. 3 and Aug. 19 cutoffs is the first date any of the three lenders can apply to win back FHA approval in the affected areas.
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Which lender lost which area
The notice, signed by Paul M. Olin, HUD’s acting general deputy assistant secretary for housing, lists each company and the field offices where its approval ended. The authority is local, not national, so each lender remains approved elsewhere.
- Equity Prime Mortgage LLC, based in Atlanta: terminated Aug. 19, 2026, in the Cleveland, Miami and Phoenix field-office areas.
- American Financial Network, based in Brea, California: terminated Aug. 19, 2026, in the Baltimore field-office area.
- Sun West Mortgage Co Inc, based in Cerritos, California: terminated Aug. 3, 2026, in the Houston field-office area.
The Federal Register notice at 91 FR 60389 also names the HUD homeownership centers that oversee those offices: Philadelphia, Atlanta and Santa Ana for Equity Prime, Philadelphia for American Financial Network, and Denver for Sun West.
The 200 percent test behind the cutoffs
HUD’s Credit Watch rule lets it end a lender’s approval when the share of its recently endorsed loans that default or lead to an insurance claim runs too high. The measure covers loans endorsed in the preceding 24 months. Two conditions must both be met: the lender’s default and claim rate has to exceed 200 percent of the rate in the area served by the HUD field office, and it also has to be higher than the national rate for FHA-insured mortgages.
In plain terms, a lender in a given area has to have borrowers failing at more than double the local norm to be cut off there. The notice does not publish the actual rates for Equity Prime, American Financial Network or Sun West, only that each crossed the line in the listed areas.
What the termination stops, and what it leaves alone
According to the official edition posted by the Government Publishing Office, the termination precludes the lender from underwriting FHA-insured single-family mortgages in the listed areas. Several things stay the same:
- Lenders may keep holding or servicing the FHA-insured mortgages they already have.
- Loans closed or approved before the termination date, meaning underwritten and approved by a Direct Endorsement underwriter or covered by a HUD firm commitment, can still be submitted for insurance.
- Cases at an earlier stage cannot be submitted by the terminated lender but can be transferred to another approved lender in that area.
- The lender must keep paying existing insurance premiums and meeting its other obligations on insured loans.
HUD adds that the termination is separate from any action by its Mortgagee Review Board, so a different enforcement track could still apply.
How a lender gets approval back
A terminated lender cannot simply wait out the clock. It may apply for reinstatement only after its approval in the affected area has been terminated for at least six months, and only if it still meets HUD’s basic requirements for approved mortgagees. The application has to include an independent analysis of the terminated office’s operations and production, covering the FHA loans cited in the notice and identifying the cause of the high default and claim rate. An independent CPA qualified under government auditing standards must prepare it.
The lender also has to submit a written corrective action plan that addresses each issue the CPA found, with evidence the plan has been put into effect, all through HUD’s Lender Electronic Assessment Portal. Six months from Aug. 3 puts Sun West’s earliest reinstatement date in early February 2027, and six months from Aug. 19 puts the other two lenders in mid-February.
Shopping for an FHA loan after the cutoffs
Buyers in the Cleveland, Miami, Phoenix, Baltimore and Houston areas who are comparing lenders can ask a loan officer directly whether the company currently holds Direct Endorsement approval for their HUD field-office area. HUD’s notice is the public record of who lost it, and the Federal Register’s list of recent HUD documents shows the agency’s newest notices as they are published.
A borrower who started an application with one of the three should ask for the status of the file in writing: whether it was approved before the termination date, and if not, which approved lender it can move to. Comparing the loan estimates from at least two lenders matters either way, since a transfer can change the rate and fees.
HUD’s contact for the notice is John Higgins, director of the Quality Assurance Division in the Office of Housing, at (202) 402-6730. The three terminations are set out in HUD’s notice at 91 FR 60389, published Sept. 23, 2026.
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This article was produced with AI assistance and reviewed by The Financial Wire’s editorial team.
David M. Keller is a finance writer based in Columbus, Ohio, covering personal finance and consumer-focused economic topics. He earned his degree in journalism from Ohio University and began his career reporting on local business and economic trends for a regional media outlet. Since then, he has contributed to a variety of online publications, focusing on clear, practical coverage of topics such as cost of living, debt, and everyday financial decision-making.
