August 14, 2020

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Participating FHA Lenders: Direct Endorsement Versus Conditional Approval Authority


There are two types of participating FHA lenders. One has “automatic authority” or “direct endoresement” (DE) authority to approve your FHA loan application in most cases, and the other has “conditional approval” authority which requires the lender to submit your FHA loan paperwork to the FHA for final review before the loan can be closed.

FHA loan rules for these two different types. Found in HUD 4155.2 Chapter One Section A, we learn the following:

“Under FHAs Direct Endorsement (DE) program, approved lenders may underwrite and close mortgage loans without FHAs prior review or approval. This includes all aspects of the mortgage loan application, property analysis, and borrower underwriting.”

Chapter One includes a note, adding: “This assumes that the lender is a DE lender with unconditional
approval. If the lender has only conditional FHA approval, and is in the Pre-Closing Review phase, then the lender must submit the loan to FHA for approval prior to closing the loan.”

Most FHA home loans are available for DE or direct endorsement by the lender, with two exceptions described in Section A:

–the Section 203(n), Single Family Cooperative program, and
–Mortgage loans for HUD employees, with the exception of streamline refinances

This explains why some borrowers might have their FHA loans referred back to the FHA for review before closing time, but there are other situations that may require the same thing even if the lender has DE authority. These may be referred back to the FHA on a case-by-case basis, so it’s important to understand that each application is unique and processed individually.

Do you have questions about FHA home loans? Ask us in the comments section. All comments are reviewed prior to appearing on the site.

Joe Wallace - Staff Writer

By Joe Wallace

August 6, 2015

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for for (8) years and is currently the Associate Editor for

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About was launched in 2010 by seasoned mortgage professionals wanting to educate homebuyers about the guidelines for FHA insured mortgage loans. Popular FHA topics include credit requirements, FHA loan limits, mortgage insurance premiums, closing costs and many more. The authors have written thousands of blogs specific to FHA mortgages and the site has substantially increased readership over the years and has become known for its “FHA News and Views”.

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