April 20, 2010

On April 20, HUD published a final rule increasing net worth requirements for FHA lenders and establishing other risk management standards.  The final rule responds to NCSHA’s concerns that the proposed rule’s $2.5 million net worth requirement for all single-family lenders might exclude small lenders that are important resources for many underserved home buyers and areas.  The final rule is effective May 20 unless otherwise indicated.

Effective June 21, all new applicants for FHA lender approval must have a minimum net worth of $1 million.  Effective May 20, 2011, lenders approved as of May 20, 2010, must have a minimum net worth of $1 million ($500,000 for small businesses). 

Effective May 20, 2013, all FHA-approved single-family lenders and lenders seeking approval to participate in FHA single-family programs must have a net worth of $1 million, plus an additional net worth of 1 percent of the total volume in excess of $25 million of FHA single-family insured mortgages originated, underwritten, purchased, or serviced during the prior fiscal year, up to a maximum required net worth of $2.5 million. 

Existing FHA-approved multifamily lenders and lenders seeking approval to participate in FHA multifamily programs must have a minimum net worth of $1 million.  Servicing multifamily lenders must have an additional net worth of 1 percent of the total volume in excess of $25 million of FHA multifamily mortgages originated, purchased, or serviced during the prior fiscal year, up to a maximum required net worth of $2.5 million.  Non-servicing lenders must have an additional net worth of one-half of 1 percent of the total volume in excess of $25 million of FHA multifamily mortgages originated during the prior fiscal year, up to a maximum required net worth of $2.5 million.

The new final rule also states that for loans originated and insured under a Principal-Authorized Agent relationship, the Principal must originate and the Authorized Agent must underwrite the loans.  This reversal of current requirements may interfere with some HFAs’ table-funded loan programs.  NCSHA is working with HFAs to discuss this newly added change with FHA officials, and FHA staff have said they are looking into it.  If your agency table-funds your loans and you have comments on this provision, please contact NCSHA’s Garth Rieman.