We audited Independent Bank, a Federal Housing Administration (FHA) supervised direct endorsement lender.  We selected Independent Bank for review based on its overall compare ratio of nearly 200 percent for loans originated in our jurisdiction for a 2-year FHA performance period. The audit was part of the activities in our fiscal year 2013 audit plan.  Our audit objectives were to determine whether (1) Independent Bank’s quality control plan, as implemented, met HUD’s requirements and (2) Independent Bank complied with HUD’s regulations, procedures, and instructions in the underwriting of FHA-insured loans.
Independent Bank’s quality control plan, as implemented, generally complied with HUD’s requirements.  Further, Independent Bank generally complied with HUD’s regulations, procedures, and instructions for underwriting FHA-insured loans with the exception of 1 of the 11 loans reviewed.  Specifically, it did not ensure that the borrowers’ payoff statements were maintained in the FHA case binder and provided to the servicer upon transfer or sale of servicing.  Independent Bank was later able to obtain the payoff statements from the settlement agent, and we determined that the loan did not contain material underwriting deficiencies.  
This report does not contain recommendations; therefore, no action is needed.