HUD has implemented some changes to strengthen its risk management through its approved FHA-approved lenders. There are many changes, but we wanted to make special note of three.
- Increasing Net Worth Requirements. HUD has increased the net worth requirements for current FHA-approved mortgagees and applicants from $250,000 to $2.5 million over a three year period. To be eligible for renewal in 2011, current FHA-approved mortgagees will need to have a minimum net worth of $1 million and 20% of that must be in cash reserves.
- Limiting the approval to Mortgagees. HUD is now limiting its approval to mortgagees who underwrite, originate, service and own FHA-insured loans. Loan correspondents (Third Party Originators) may still participate in the origination of FHA mortgage loans though the association with an FHA-approved mortgagee. FHA-approved mortgagees are now fully responsible to ensure their sponsored TPO’s adhere to FHA requirements. Essentially, everything will remain the same except for the TPO no longer being approved directly by FHA.
- Use of HUD Registered Business Name and Business Changes. HUD has ruled that all advertisements and promotional material must now only be in the name of the HUD registered business names. DBAs can be used if they are on file with FHA.