Herb Thomas Mortgage License News http://www.thomas-law.com

HUD Final Regs Published-Effective Date 5-20-2010 for Increase of Net Worth and Elimination of HUD Loan Correspondent

Effective May 20, 2010, the Department of Housing AND Urban Development has adopted its final rule that increases the net worth requirement for FHA-approved mortgagees to $1 million and also provides for elimination of the FHA approval process for loan correspondents. Loan correspondents will no longer be approved participants in FHA programs. Loan correspondents, however, will continue to have the opportunity to participate in FHA programs as third-party originators (TPOs) through sponsorship by FHA approved mortgagees, as is currently the case, or through application to be approved as an FHA-approved mortgagee. In eliminating FHA’s approval of loan correspondents, FHA approved mortgagees assume full responsibility to ensure that a sponsored loan correspondent adheres to FHA’s loan origination and processing requirements. Finally, this final rule updates FHA’s regulations to incorporate criteria specified in the Helping Families Save Their Homes Act of 2009 (HFSH Act) designed to ensure that only entities of integrity are involved in the origination of FHA insured loans. HUD also takes the opportunity afforded by this final rule to solicit comment on whether to adopt additional net worth requirements for FHA-approved mortgagees that originate multifamily mortgages of $25 million or more.

HUD Increases Net Worth to $1M-Final Regs About to be Published

II. This Final Rule – Policies Adopted

In consideration of issues raised by the commenters and HUD’s own further consideration of issues related to this final rule, HUD is making the following changes at the final rule stage:

Net Worth Requirements for Applicants for Approval to Participate in FHA Single Family or Multifamily Programs and for FHA-Approved Mortgagees: 2010 to 2011

The following net worth requirements are effective on

[insert effective date of final

rule

], for new applicants for FHA approval to participate in FHA single-family or multifamily

programs, and effective on [

insert date one year from effective date of final rule], for all

approved supervised and nonsupervised lenders and mortgagees, and all approved investing

lenders and mortgagees with FHA approval as of

[insert effective date of final rule]:

•

Applicants for FHA Approval and Existing Non-Small Business Approved Lenders and

Mortgagees. An applicant for FHA approval or an approved lender or mortgagee that exceeds

the size standards for its industry classification as established by the Small Business

Administration (SBA) at 13 CFR 121.201, Sector 52 (Finance and Insurance), Subsector 522

(Credit Intermediation and Related Activities) shall have a net worth of not less than

$1,000,000, of which no less than 20 percent must be liquid assets consisting of cash or its

equivalent acceptable to the Secretary.

•

Existing Small Business Approved Lenders and Mortgagees. An approved lender or mortgagee

8

that meets the SBA size standards for its industry classification shall have a net worth of not

less than $500,000, of which no less than 20 percent must be liquid assets consisting of cash or

its equivalent acceptable to the Secretary. The net worth requirements for small business

lenders and mortgagees remain applicable as long as the mortgagee continues to meet the SBA

size standard for a small business. If, based on the audited financial statement prepared at the

end of its fiscal year and provided to HUD at the commencement of the new fiscal year, a small

business lender or mortgagee no longer meets the SBA size standard of a small business, the

mortgagee shall meet the net worth requirements for a non-small business mortgagee by the last

day of the fiscal year in which the audited financial statements were submitted.

Net Worth Requirements for Applicants for Approval to Participate in FHA Single Family or

Multifamily Programs and FHA-Approved Mortgagees: 2013 and After

The following net worth requirements are effective on [

insert date three years from effective

date of final rule

], for new applicants for FHA approval to participate in FHA single-family or

multifamily programs, for all approved supervised and nonsupervised lenders and mortgagees, and for

all FHA-approved investing lenders and mortgagees:

•

Single Family Mortgagees. Irrespective of size, all FHA-approved mortgagees and applicants

for approval to participate in FHA single family programs shall have a net worth of $1 million,

plus an additional net worth of one 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. No less than 20 percent

of the mortgagee’s required net worth must be liquid assets consisting of cash or its equivalent

acceptable to the Secretary.

•

Multifamily Mortgagees. Irrespective of size, all existing FHA-approved mortgagees and

9

applicants for approval to participate in FHA multifamily programs shall have a minimum net

worth of $1 million. For those multifamily mortgagees that also engage in multifamily

mortgage servicing, an additional net worth of one 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, is required. For multifamily

mortgagees that do not perform multifamily mortgage servicing, an additional net worth of one

half of one 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, is

required. No less than 20 percent of the mortgagee’s required net worth must be liquid assets

consisting of cash or its equivalent acceptable to the Secretary.

•

Single Family and Multifamily Mortgagees. Irrespective of size, all existing FHA-approved

mortgagees and applicants for approval to participate in both FHA single family and

multifamily programs must meet the net worth requirements for a single family mortgagee.

Therefore, if a mortgagee is a participant in both the multifamily

and single family programs, it

is required to meet the greater net worth requirements for single family mortgagees.

FHA Proposed regulations: Eliminate Loan Correspondent Approval Process & Increase Net Worth for Full Eagles to $2.5M

HUD No. 09-216 Lemar Wooley (202) 708-0685

FOR RELEASE Monday November 30, 2009

FHA PROPOSES NEW RULES TO STRENGTHEN RISK MANAGEMENT
Proposed regulations to boost lender oversight, tighten controls and streamline lender approval

WASHINGTON – The Federal Housing Administration (FHA) today proposed new regulations to further reduce risks to its single-family insurance fund as it continues to play a critical role in today’s housing market.  FHA proposes to increase 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 and to ensure that lenders possess the resources appropriate for the financial services they deliver.  FHA is soliciting comment for 30 days on its proposals and the comments received will be considered in the development of a final rule.

 “With FHA’s crucial role in today’s housing market, it is critically important that we are able to manage risk and to ensure that our reserves are adequate to cover future losses,” said FHA Commissioner David Stevens.  “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 home ownership to the underserved in the long term, while minimizing the risk to the American taxpayer.” 

 On September 18th, Stevens announced a set of credit policy changes that will enhance FHA’s risk management function, including the hiring of a Chief Risk Officer for the first time in the agency’s 75-year history.  In addition, Stevens announced his intent to propose new regulations to further strengthen FHA’s risk management.   The proposed rule published today makes good on that promise and would:

• Strengthen and Streamline Lender Approval – Lenders seeking approval to originate underwrite, or service an FHA loan must meet the eligibility criteria for a supervised or non-supervised mortgagee.  FHA-approved Mortgagees must assume liability for all the loans they originate and/or underwrite.  While loan correspondents (mortgage brokers) will continue to be able to originate FHA-insured loans through their relationships with approved mortgagees, they will no longer receive independent approval for origination eligibility. This will require the FHA-approved mortgagee to assume responsibility and liability for the FHA-insured loan underwritten and closed by the approved mortgagee. These changes align FHA with Fannie Mae and Freddie Mac and will potentially increase the number of loan correspondents (mortgage brokers) who are eligible to participate in the origination of FHA-insured loans while providing for more effective oversight of loan correspondents through the FHA approved mortgagees.
  
  
• Strengthen the Capacity of FHA-Approved Mortgagees – Since 1993, FHA has required approved mortgagees have a net worth of at least $250,000.  To strengthen the financial capacity of FHA counterparties to ensure they can meet their obligations, the proposed rule would require mortgagees maintain a minimum of $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.   These changes are consistent with industry standards and will ensure that FHA lenders are sufficiently capitalized to meet potential needs, thereby permitting FHA to mitigate losses and decrease risks to its insurance fund.

###

HUD is the nation's housing agency committed to sustaining homeownership; creating affordable housing opportunities for low-income Americans; and supporting the homeless, elderly, people with disabilities and people living with AIDS. The Department also promotes economic and community development ad enforces the nation's fair housing laws. More information about HUD and its programs is available on the Internet at www.hud.gov and espanol.hud.gov.

HUD Net Worth Still $250,000

Here is the actual HUD News Release and if you look at the language below, the increase by $1,000,000 is contingent upon a Proposal being made [which has not occurred yet] and that it would not become effective until one year after the Proposal is adopted as Final.  Therefore, it should be at least a year before the HUD Full Eagle net worth requirement increases above the $250,000 amount. 

HUD No. 09-177 Melanie Roussell (202) 708-0685 www.hud.gov/news/

For Release Friday September 18, 2009

 

Increase Net-Worth Requirements for Mortgagees

The FHA plans to propose to increase the net worth requirement for approved mortgagees to meet industry standards. The requirement is currently at $250,000 and has not been increased since 1993. 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. To maintain consistency with industry standards, HUD may propose that the net worth requirements be increased further in future years to a level comparable to those required by GSEs and other market institutions. These changes will help to ensure that FHA lenders are sufficiently capitalized to meet potential needs, thereby permitting HUD to mitigate losses and decrease risks to the FHA insurance fund.

 

HUD Revises FAQs on Revised RESPA Rule

On October 23, the U.S. Department of Housing and Urban Development (HUD) again revised its "Frequently Asked Questions" regarding its 2008 amendments to Regulation X, the Real Estate Settlement Procedures Act's  (RESPA) implementing regulation. Link:
http://www.hud.gov/offices/hsg/ramh/res/resparulefaqs.pdf

MORTGAGEE LETTER 2009-42 dated 10-19-2009 says all mortgagees that service FHA insured mortgages must be FHA –approved, and this includes sub-servicing mortgagees

MORTGAGEE LETTER 2009-42 dated 10-19-2009: Summary: An FHA-approved servicer may enter into a sub-servicing agreement to perform loss mitigation services on behalf of another FHA-approved servicer, however,  all mortgagees that service FHA insured mortgages must be FHA –approved, and this includes sub-servicing mortgagees.

MORTGAGEE LETTER 2009-42

 

 

TO:      ALL APPROVED MORTGAGEES

      ALL APPROVED SERVICERS

 

SUBJECT:    Sub-Servicing of FHA-insured Mortgages

 

 

    The recent mortgage crisis, and the Administration’s response to this crisis, has increased the demand for loss mitigation services.  In many instances, the need for loss mitigation services may have outpaced many servicers’ capacity to process defaulted borrowers requests in a timely manner.  To ensure that FHA approved mortgagees and their servicers can respond to all loss mitigation requests, this Mortgagee Letter summarizes things that mortgagees and servicing mortgagees need to keep in mind if they need to expand their servicing capacity including loss mitigation processing capacity. As a reminder, the servicing of FHA-insured loans must be performed by a mortgagee that is approved by FHA pursuant to FHA regulations.  See 24 CFR §§202.5 and 203.502.  The regulations do not preclude an FHA approved from performing servicing actions on behalf of another FHA-approved servicer or at the direction of an FHA-approved mortgagee.  For example, an FHA-approved servicer may enter into a business arrangement to perform loss mitigation services on behalf of another FHA-approved servicer.  Within the industry, those business arrangements are often referred to as sub-servicing agreements.  As stated in Mortgagee Letter 93-03, issued January 7, 1993, all mortgagees that service FHA insured mortgages must be FHA –approved, and this includes sub-servicing mortgagees. Although sub-servicers presently are neither specifically identified nor tracked in any FHA system, holding mortgagees and servicing mortgagees that decide to use sub-servicing mortgagees must ensure that the sub-servicer  is an FHA approved mortgagee .  Under FHA’s regulations 24 CFR §203.502, “The mortgagee shall remain fully responsible to the Secretary for proper servicing, and the actions of the servicer shall be considered to be the actions of the mortgagee.  The servicer shall also be fully responsible to the Secretary for its actions as a servicer.”  In turn, the holding mortgagee is responsible for the actions of the sub-servicer, and the sub-servicer is responsible to the Secretary as an approved mortgagee for its actions in servicing the FHA mortgages. In summary, to meet the increased need for loss mitigation, the Department has no objection to mortgagees entering into subservicing agreements with other FHA- approved servicers to perform loss mitigation functions.  As a reminder, the costs associated with subservicing are treated the same as for outsourcing in that the costs of such services may not be imposed on the FHA mortgagor or passed along to the Department on any subsequent claim for mortgage insurance benefits.  This prohibition also extends to independent contractors that often target mortgagors in distress and then charge for their services.  Too many distressed mortgagors have been taken advantage of by so-called loss mitigation or foreclosure avoidance “counselors”.  FHA-approved mortgagees and mortgage servicers must not assist in legitimizing the services of those individuals that prey on distressed mortgagors.  Questions regarding this Mortgagee Letter may be directed to HUD’s National Servicing Center (NSC) at 888-297-8685 or hsg-lossmit@hud.gov.  Persons with hearing or speech impairments may access this number via TDD/TTY by calling 1-877-TDD-2HUD (1-877-833-2483).  Sincerely,  David H. Stevens, Assistant Secretary for Housing –Federal Housing Commissioner

 

 

FHA/HUD Exemption Are Near Extinction

HUD Full Eagle States for Exemption

LICENSE EXEMPTIONS DUE TO STATUS AS: FULL EAGLE HUD Approved Non-supervised Mortgagees with Direct Endorsement Underwriting Authority

A. Exemption Registrations Texas - 1st Broker & Lender Registration -Requires HUD FULL EAGLE WITH Direct Endorsement B. Exemption Not Verifiable Hawaii - Broker & Lender NOT VERIFIABLE -State will not provide Written Confirmation Ohio - Broker & 1st Lender (Limited Exemption) NOT VERIFIABLE -Requires OH Direct Endorsement to be HUD Approval Area & limited to HUD underwriting criteria loans C. Exemptions Eliminated Missouri - Lender Registration RECENTLY ELIMINATED Oklahoma - Broker & 1st Lender RECENTLY ELIMINATED Alabama- RECENTLY ELIMINATED Indiana-ELIMINATED 7/1/08 Kentucky- Broker & Lender SEVERELY RESTRICTED -Effectively eliminated by new rule requiring HUD approval for 5 previous yrs. to qualify Mississippi- RECENTLY ELIMINATED Montana-1st Lender ELIMINATED -license required as of 10/1/08 Tennessee - HUD Registration RECENTLY ELIMINATED -200,000 Surety Bond Required Now

HUD Mini Eagle States for Exemption

LICENSE EXEMPTIONS DUE TO STATUS AS: MINI EAGLE HUD Approved Correspondent Lenders

A. Exemption SEVERELY RESTRICTED Kentucky- Broker SEVERELY RESTRICTED -Effectively eliminated by new rule requiring HUD approval for 5 previous yrs. to qualify B. Exemption Not Verifiable Hawaii - Broker & Lender NOT VERIFIABLE -State will not provide Written Confirmation C. Exemptions Eliminated Missouri - Broker- RECENTLY ELIMINATED Oklahoma - Broker RECENTLY ELIMINATED Alabama- RECENTLY ELIMINATED Indiana-ELIMINATED 7/1/08 Mississippi- RECENTLY ELIMINATED Tennessee - RECENTLY ELIMINATED -90,000 Surety Bond Required Now

Fannie Increases Net Worth Requirement according to Mortgage Chronicle.com

Mortgage Industry News Headlines Summary of stories published by | Mortgage Statistics

Last Updated Wednesday, September 17, 2008 02:33 PM CST

According to the 9-17-2008 issue of Mortgage Chronicle.com, Fannie Mae issued a bulletin indicating it updated its lender eligibility and contractual requirements. The revisions were prompted by "extraordinary circumstances occurring in the mortgage industry over the past several months," Announcement 08-23 stated. Beginning on Dec. 31, 2008, new lenders will be required to have a $2.5 million net worth, excluding goodwill and other intangible assets.