FHA Lender Requirements

• The FHA grants lending institutions different types of approvals based on a lender's industry qualifications and the size of the business in terms of staff numbers. According to MortgageLoan.com, the FHA requires lending institutions to structure their businesses as corporations, LLC's partnerships or chartered institutions, and does not grant approvals to businesses run as sole proprietorships. Once a business becomes FHA approved, the U.S. government insures any mortgages issued according to FHA approval guidelines. As a result, FHA lenders can offer lower interest rates and terms because each loan carries a government guarantee of payment.
  
  

Non-Supervised Lenders

• The FHA approves non-supervised lenders to originate, underwrite, service and own mortgage loans depending on the types of roles a company wishes to fill. According to MortgageLoan.com, mortgage brokers can originate Title I, or home improvement loans and Title II loans for new home purchases. Loan originators handle the start of the application process when applicants submit their financial information for processing and review. Non-supervised mortgagees are another lender type qualified to work with FHA loans. Correspondent mortgage lenders fall within this category. Correspondent lenders not only originate FHA loans, but underwrite, own and service them as well. Underwriting tasks involve the actual approving or declining of a loan application.
  
  

Supervised Lenders

• Supervised FHA lenders fulfill many of the same roles that non-supervised lenders do. Supervised lenders can only work with Title II single-family loans as opposed to the Title I/Title II designations granted to non-supervised lenders, according to MortgageLoan.com. Much like unsupervised correspondents, supervised loan correspondents operate as banks, credit unions, and savings and loan businesses. Supervised correspondents can also sell mortgage loans to larger lending institutions, which makes up the secondary mortgage market. In these cases, the larger lender handles the actual servicing of the loans. Supervised mortgagees are another FHA-approved lender category. Mortgagees also operate as banks, savings and loans, and credit unions; however, these institutions hold memberships within the Federal Reserve System, Federal Deposit Insurance Corporation or National Credit Union Administration.
  
  

Direct Lenders

• Direct FHA lenders operate through USDA Service Centers, which are state-run government offices managed by the Rural Development Housing & Community Facilities Programs, a department within the U.S. Department of Agriculture. According to GovLoans.gov, these lenders service families with low to moderate income levels who lack adequate housing. Borrowers can use direct loans to buy a home or renovate an existing property. Direct lenders offer significantly reduced loan rates with loan repayment periods running anywhere from 33 to 38 years. In some cases, direct lenders offer additional payment assistance based on a family's annual income level.