FHA Neighborhood Watch – Mortgage Net Branch

FHA Neighborhood Watch Can Affect Your  Net Branch

  • What is it?
  • What is your number (Compare Ratio)?
  • Why is it important?

If your branch has poor numbers in Neighborhood Watch  you could lose the ability to originate FHA loans. The Neighborhood Watch System is a web-based software application that displays loan performance data for lenders and appraisers, by loan types and geographic areas using FHA-insured single family loan information.

What is it?
The loan information is displayed for a two-year origination period and is updated on a monthly basis. The default data includes current defaults, and defaults within the first year and first two years from endorsement. A defaulted loan is one that is 90 or more days delinquent. First defaults are when the loan went into default the first time and could have been subsequently cured. Current defaults are loans that were 90 days or more delinquent as of the date reported and have an active FHA insurance status. These loans are displayed in the statistics because it is important to note that a loan went into early default within the first 24 months of its origination. The loan performance data is HUD’s method for grading and monitoring the performance of a company’s loan production.

Compare Ratio
Compare ratio is the value that reveals the largest discrepancies between the subject’s default percentage and the default percentage to which it is being compared. The percentages being compared are the percentages of originations that first defaulted during a selected period (e.g., defaults within the first two years). A higher ratio is indicative of an area (or lender) that has an unusually high default percentage in comparison with that region or lender’s surrounding area. For example, if a lender has an 8% default rate in California and 4% of all California loans defaulted, then the lender’s compare ratio equals 200%.

What is your number?
Looking up your number is very easy. You go to the HUD link, search your company name, locate your office if your company has more than one office. You can filter by branch, institution or by originator.

The Compare Ratio is shown as a percentage. Higher numbers over 100% are bad, lower numbers below 100% are good. Many wholesale investors will not accept loans from offices with numbers over 150%.

Companies that operate as a centralized operation instead of licensing each branch with HUD run the risk of losing their authority company wide if their numbers are very high.

Companies that license each branch separately are minimizing their risk.


neighbor hood watch

Net Branch and Neighborhood Watch

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