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                                               FHA Proposes New Rules:
                                    Loan Correspondents and DE Mortgagees

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Overview

On September 18, 2009, the FHA proposed specific rule making that is meant to focus on ensuring "responsible lending and risk management" for FHA-approved lenders. The intent of the changes is to assure that lenders have "long-term interest in the performance of the loans they originate." The new rule making proposals, if promulgated, will be effective on January 1, 2010.
 
Effective, if promulgated: January 1, 2010.
Highlights

Mortgagee Approval  & Loan Correspondents

Loan Correspondents (mortgage brokers) will continue to be able to originate FHA-insured loans through their relationships with approved mortgagees; however, they will no longer receive independent FHA approval for origination eligibility. In effect, these policy changes will require the FHA approved mortgagee to assume responsibility and liability for the FHA insured loan underwritten and closed by the approved mortgagee.
Highlights

Increased Net-Worth Requirements

for DE Mortgagees

The current net worth requirement for mortgagees is currently at $250,000. HUD is proposing an initial increase of approximately $1,000,000 that would be in place within one year of the enactment of this rule. HUD may propose that the net worth requirements be increased further in future years to a level comparable to those required by GSEs and other market institutions.
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