The Department of Housing and Urban Development terminated the ability of a JPMorgan Chase (JPM) branch on Long Island to originate mortgages insured by the Federal Housing Administration. The action took place Monday against the branch at 900 Stewart Avenue in Garden City, N.Y. in Nassua County. Also Monday, HUD stripped another 20 mortgage companies of their ability to write FHA-approved mortgages. HUD terminates approvals if enough FHA-insured loans originated at one branch no longer perform. If a branch's FHA defaults exceed 200 within two years, the approval can be stripped. Lenders who lose origination approval can still purchase, hold, or service the loans. A terminated lender can apply for reinstatement after six months if it has maintained certain requirements. HUD did not release the default rate of the JPMorgan Chase branch on Long Island. But a recent letter from HUD discontinued FHA approval for loan correspondents beginning Dec. 31. Loan correspondents cannot reapply after that date if they lose their approval before. Three lenders -- Ally Financial (GJM), JPMorgan Chase, and Bank of America (BAC) -- may have their FHA approval process reviewed in the wake of the robo-signing controversy. When Moody's Investors Service put $7.6 billion of residential mortgage-backed securities affected by the Ally Financial, formerly GMAC, procedural defects up for a possible downgrade, the agency also placed the rating of Class A notes issued by GMAC Mortgage Loan trust 2010-1 for review as well. This is a transaction that includes FHA-backed mortgages. In order to qualify for the insurance benefits provided by the federal government, HUD requires Ally to meet certain underwriting and servicing standards, which have been called into question. "As the collateral consists of non-performing mortgage loans, the FHA transaction has significant exposure to claim denials," according to Moody's. This means robo-signers have put HUD approval for these three banks at risk. Write to Jon Prior. The author holds no relevant investments.