On Wednesday, April 14, HUD emailed an advance copy of the final rule on FHA Reform and Strengthening Risk Management.  This release continues the theme announced in the press release 2 weeks ago, dated April 5, 2010. 

Loan Correspondents and 2009 Audits

This advance copy continues the theme that loan correspondents will no longer be approved by FHA.  Approved loan correspondents must maintain their approval through  December 31,  2010.  Despite this requirement, the Rule makes no comment regarding whether an audit will be required for 2009.  There has been no change from the March 19th email from HUD that stated: "These loan correspondents must continue to comply with existing requirements for the submission of their Annual  Certifications and renewal fees, but will be given  until April 30, 2010, to submit audited financial  statements.  Again, the deadline for the  submission of the Annual Certification and  renewal fee has not been changed.  Loan correspondents that do not complete their renewal  in accordance with the deadlines as  specified above will no longer be FHA-approved  as of the effective date of the final rule that follows the November 30, 2009, proposed rule."   Questions to FHA employees regarding the necessity of the 2009 audit have not been answered directly.  HUD personnel have indicated that additional guidance will be issued after the Final Rule is published.  Until then, practitioners and clients have two choices: 1) Complete the audits for 2009 and file them in LASS to ensure approval through December 31,2010; or 2) Do not file and hope that HUD will issue guidance indicating that such audits are not required or at least hope HUD takes no action on removing lenders who do not file for 2009.

Nonsupervised Lender Net Worth Requirements

Within one year of the unannounced effective date of the Rule, nonsupervised lenders with revenues in excess of $7 million shall have a minimum net worth of $1,000,000 of which 20% must be in liquid assets.  Lenders with less than $7 million in revenues will be required to have a minimum of $500,000 in net worth with a minimum of 20% in liquid assets.

For 2013 (three years beyond the unannounced effective date) and beyond, ALL lenders shall have a minimum net worth of $1 million, plus 1% of total loan originations in excess of $25 million up to a maximum of $2.5 million.  The liquidity requirement will remain at 20% of required net worth. 

Multifamily lenders must meet the $1 million net worth requirement.  For lenders that  also engage in servicing of multifamily mortgages, an additional 1% of the total loans originated, purchased or serviced in excess of $25 million will be required.  If servicing is not performed, an additional net worth of .5% in excess of $25 million will be required.  The maximum net worth for both types of multifamily lenders remains at $25 million.  Liquidity is 20% of net worth.  If a lender originates both single family and multifamily mortgages, then the lender will be required to use the 1% of mortgage volume in excess of $25 million.