FHA Proposes Strengthened Risk Management Rules

The Federal Housing Administration (FHA) has proposed increasing the net-worth requirements of FHA-approved lenders, strengthen lender approval criteria, and make lenders liable for the practices of their correspondent mortgage brokers.

The proposed rule will permit FHA to more effectively focus its resources on lenders that pose the greatest potential threat to its insurance funds, the agency says. FHA is soliciting comment for 30 days on its proposals, and the comments received will be considered in the development of a final rule.

‘We are taking a number of aggressive steps to ensure that we are able to continue to support the housing market in the short term and provide access to homeownership to the underserved in the long term, while minimizing the risk to the American taxpayer," says FHA Commissioner David Stevens.

According to the rule proposals, lenders seeking approval to originate, underwrite or service an FHA loan would have to meet the eligibility criteria for a supervised or non-supervised mortgagee. FHA-approved mortgagees would assume liability for all the loans they originate and/or underwrite, and while mortgage brokers would continue to be able to originate FHA-insured loans through their relationships with approved mortgagees, they would no longer receive independent approval for origination eligibility.

These changes would align FHA with Fannie Mae and Freddie Mac and potentially increase the number of loan correspondents (mortgage brokers) who are eligible to participate in the origination of FHA-insured loans, the agency adds.

FHA's minimum net-worth requirement for mortgagees of $250,000 has remained unchanged since 1993. Under the new rules, mortgagees would be required to maintain at least $1 million in net worth within the first year and at least $2.5 million of net worth within three years of the effective date of the rule.

SOURCE: Federal Housing Administration


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