The Federal Housing Administration today announced new regulations to further protect itself from depletions in its insurance funds, including raising the minimum net worth requirement of all FHA-approved lenders from $250,000 to $1 million.
The new requirement is effective immediately for all new lender applicants for FHA programs.
In about one year, current FHA approved lenders – with the exception of small businesses – must have a minimum net worth of $1 million. FHA approved small business lenders must possess a minimum net worth of $500,000.
FHA’s net worth minimum has been at $250,000 since 1993.
FHA said this will more effectively focus its resources on lenders “that pose the greatest potential threat to its insurance funds.” And it forces lenders to have sufficient capital for providing all financial services.
The FHA said it is also strengthening lender approval criteria and making lenders liable for the oversight of mortgage brokers.
“These changes support quality mortgage lenders while excluding organizations that are ill-equipped to handle the risk associated with market variations,” said FHA Commissioner David H. Stevens. “That is particularly important now when a robust, competitive mortgage finance market is a crucial element in rebuilding the American economy.”
In addition, beginning Jan. 1, 2011, mortgage brokers or other third-party originators will require sponsorship from an FHA-approved lender. Mortgage brokers will no longer receive independent FHA eligibility approval.
The rule change aligns FHA more closely with primary mortgage financing giatns, Fannie Mae and Freddie Mac.
The revisions have the “potential to increase the number of mortgage brokers eligible to originate FHA-insured loans while providing for more effective oversight of brokers by FHA-approved lenders,” FHA said.
Approximately three years from now, the following additional lender requirements will take effect:
- Approved lenders and applicants to FHA single-family programs must have a net worth of $1 million, plus 1 percent 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 percent of total volume in excess of $25 million.
- Multifamily lenders that do not perform mortgage servicing must have an additional 0.5 percent of total loan volume in excess of $25 million.