Open Mortgage has FHA direct endorsement authority terminated in Iowa

The U.S. Department of Housing and Urban Development (HUD) has terminated the Federal Housing Administration (FHA) direct endorsement approval for Open Mortgage in Iowa. 

“HUD placed Open Mortgage on credit watch for the Des Moines HOC [homeownership center], which only impacts our loans in Iowa,” Christopher D’Auria, president and CEO of Open Mortgage, told HousingWire.  

“Our direct endorsement authority remains unchanged outside of that HOC. We have worked with HUD to address the issues associated with this situation and are working to resolve so that we can reapply for authority in Iowa later this year.”

Texas-based multichannel lender Open Mortgage has originated about $400 million in mortgages over the past 12 months, per mortgage tech platform Modex. 

Most of its loans during the past year were in Kansas (12.5%), Mississippi (11.4%) and Florida (9.7%). Iowa was responsible for 3.4% of the total, Modex data shows. 

In practice, the direct endorsement authority allows lenders to underwrite single-family mortgages and submit them to FHA for insurance endorsement. Open Mortgage’s termination is based on the “poor performance” of these loans, HUD stated.  

HUD’s decision on Open Mortgage will be published in the Federal Register on Wednesday. The effective termination date is May 20. Inside Mortgage Finance first reported on the topic. 

According to its current rule, HUD can terminate the direct endorsement approval of any lender whose default and claim rate in the past 24 months exceeds 200% of the geographic area served by a HUD field office, or the national default and claim rate for insured mortgages. 

Following the decision, FHA loans already underwritten and approved by a Direct Endorsement underwriter, as well as cases with a firm commitment issued by HUD, may be submitted for insurance endorsement. Cases in the early stages may be transferred to other lenders with an FHA approval. 

Open Mortgage had 67 sponsored loan officers and 23 active branches as of Tuesday, per the Nationwide Multistate Licensing System (NMLS). 

In November 2023, the company closed its reverse mortgage origination division after lower origination volumes combined with lower pull-through rates to make its cost to close reverse mortgages too high. Open Mortgage has continued to operate in the forward lending space.  

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