On Sept. 18, 2009, the Federal Housing Administration (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 Jan. 1, 2010. If promulgated, the bill would take effect Jan. 1, 2010.
Mortgagee approval and 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.
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 the government-sponsored enterprises (GSEs) and other market institutions.
Jonathan Foxx, former chief compliance officer for two of the country’s top publicly-traded residential mortgage loan originators, is the president and managing director of Lenders Compliance Group, a mortgage risk management firm devoted to providing regulatory compliance advice and counsel to the mortgage industry. He may be contacted at (516) 442-3456.