The U.S. Department of Housing and Urban Development (HUD) has revoked the Federal Housing Administration (FHA) loan approval authority of Equity Prime Mortgage (EPM) in several regions after EPM’s loans showed default and claim rates well above local and national averages.The action, announced Thursday in the Federal Register, is part of HUD’s Credit Watch Termination Initiative, which monitors mortgage lenders’ performance.

In the notice, HUD said Equity Prime is losing its ability to independently approve FHA loans in New York, Jacksonville, Orlando and Louisville, Kentucky, although loans approved before Aug. 22 remain eligible for endorsement and are not affected.

Moving forward, EPM can’t approve new FHA loans in these areas unless another FHA-approved lender handles the process. The company may reapply for direct endorsement (DE) authority after six months if it submits an independent analysis of its loan performance and a corrective action plan.

Direct endorsement authority lets lenders underwrite single-family mortgages themselves and submit them to the FHA for insurance approval. HUD can terminate that authority if a lender’s default and claim rates in a given market exceed 200% of the regional average and are also higher than the national average.

On the day this story published, a spokesperson for EPM told HousingWire that the company did not have a comment. The next day, EPM issued a press release with more information about their corrective steps following HUD’s action.

“We respect the role of accountability, but we also know numbers alone can’t tell the story,” Philip Mancuso, president and partner at EPM, said in the release. “Statistics don’t capture the resilience of families fighting to stay in their homes. This is what matters, and that is what we stand behind…It’s easy to lend money to people who don’t need it…”

The release also included a quote from Eddy Perez Jr., CEO of EPM. “How do we say no to the people who need help the most? That isn’t the American way.”

EPM’s press release further states: “EPM has already taken decisive steps to ensure that this situation will not happen again. The company has transitioned to new servicing partners, implemented updated overlays and guideline adjustments around gift funds and debt-to-income ratios, retired its first down payment assistance program and built a new one to ensure adjustments, and terminated broker relationships that did not align with its credit standards. EPM also appointed Frank Razi, a former HUD leader, as Chief Credit Officer to oversee credit policy and portfolio performance moving forward.”

Ed note: This story was updated on Sept. 12 with new information from a press release.

More: