The final rule is today published in the Federal Register. The rule adopts changes pertaining to the approval of mortgage lenders by the Federal Housing Administration (FHA) that are designed to strengthen FHA by improving its management of risk.
This final rule increases the net worth requirement for FHA-approved mortgagees. This final rule also provides for elimination of the FHA approval process for loan correspondents. Loan correspondents will no longer be approved participants in FHA programs. Loan correspondents, however, will continue to have the opportunity to participate in FHA programs as third-party originators (TPOs) through sponsorship by FHA-approved mortgagees, as is currently the case, or through application to be approved as an FHA-approved mortgagee.
In eliminating FHA's approval of loan correspondents, FHA-approved mortgagees assume full responsibility to ensure that a sponsored loan correspondent adheres to FHA's loan origination and processing requirements.
Finally, this final rule updates FHA's regulations to incorporate criteria specified in the Helping Families Save Their Homes Act of 2009 (HFSH Act) designed to ensure that only entities of integrity are involved in the origination of FHA insured loans.
HUD also takes the opportunity afforded by this final rule to solicit comment, by no later than May 20, 2010, on whether to adopt additional net worth requirements for FHA-approved mortgagees that originate multifamily mortgages of $25 million or more.
EFFECTIVE DATE: MAY 20, 2010
Net Worth Requirements
- Effective one year following the enactment of this final rule:
- Current FHA approved lenders - with the exception of small businesses - must possess a minimum net worth of $1 million;
- Current FHA approved small business lenders must possess a minimum net worth of $500,000.
- Effective three years following the enactment of this provision:
- Approved lenders and applicants to FHA single-family programs must have a net worth of $1 million plus 1% of total loan volume in excess of $25 million.
- Approved lenders and applicants to FHA multifamily programs must have a minimum net worth of $1 million.
- Multifamily lenders that also engage in mortgage servicing must have an additional 1% of total volume in excess of $25 million.
- Multifamily lenders that do not perform mortgage servicing must have an additional 0.5% of total loan volume in excess of $25 million.
Streamline Lender Approval
- While mortgage brokers will continue to be able to originate FHA-insured loans through their relationships with approved lenders, they will no longer receive independent FHA eligibility approval. Mortgage brokers or other third-party originators, already approved by FHA, will be authorized to continue to originate FHA-insured loans through the end of the calendar year without sponsorship of an FHA-approved lender. Commencing January 1, 2011, however, the origination authority will end.
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Continuation of FHA Reform - Strengthening Risk Management through Responsible FHA-Approved Lenders
FR Vol. 75, No. 75, 20718-20735 [2010-8837]
April 20, 2010
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