8.4.5 Rejection Due to Unacceptable Character and Credit

A. The Lender’s professional judgment is required in approving or rejecting Principals on the basis of character and credit.

• B. The Principal should be a credit rejection if:

1. The Principal has a history of late payment or non-payment of creditors or has defaulted on debt without making reasonable attempts to remedy or cure the default. The Lender’s Underwriter may not recommend approval of a Principal with a history of default without contacting the defaulted Lender to determine the circumstances surrounding the default with a summary of these discussions included in the Lender’s narrative.

2. Delinquent federal debt has not been resolved or satisfactory arrangements made for repayment.

3. There are judgments or actions against the party, that:

   • Could significantly impact the financial position of the individual/ firm or corporation; or

   • Result in a determination that the individual/firm or corporation is an unacceptable credit risk.

4. The Principal is insolvent or is the subject of a pending bankruptcy or insolvency proceeding at the time of application, issuance of the Firm Commitment, or at the time of loan closing.

5. Active Principals are currently flagged in the Active Partners Performance System (APPS) for FHAinsured mortgage defaults or other financial improprieties as determined by HUD.

C. The MAP Lender is responsible for amending or withdrawing the Commitment application if there is a material adverse change in the Borrower’s credit after application submission.

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Chapter 8 Mortgage Credit 8.5 Evaluating Financial Capacity

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D. Principals with repaired credit may be considered for approval provided that a positive credit history has been established and sustained for a period of time encompassing both favorable and unfavorable economic conditions and that the principal has during that time been engaged in financial transactions and/or business enterprise comparable in scale to the proposed insured mortgage transaction. It is unlikely that this period would be less than 7 years.

E. Departmental Enforcement Center (DEC) Referrals. The MAP Lender should discuss with the Borrower and its Principals to ensure that any matters pending with the DEC relating to the Borrower, the Management Agent and/or the Project have been resolved.