A timeline outlining the implementation of new net worth requirements for originators of loans insured by the Federal Housing Administration has been released.
The revised requirements are tied to the implementation of the final rule, “Federal Housing Administration: Continuation of FHA Reform-Strengthening Risk Management through Responsible FHA-Approved Lenders.”
One of those revisions is a $1.0 million net worth requirement for all new FHA applicants as of May 20, according to Mortgagee Letter 2010-20 from the U.S. Department of Housing and Urban Development. At least 20 percent of the net worth must be liquid assets.
As of May 20, 2011, the $1.0 million requirement applies to lenders that were approved as FHA mortgagees as of May 20, 2010, and exceed the size standards for a small business as defined by the Small Business Administration. But mortgagees that do meet the SBA definition will only be required to maintain an $0.5 million net worth.
However, by May 20, 2013 — all applicants and existing mortgagees will be subject to the $1.0 million minimum net worth requirement. Furthermore, mortgagees that originate more than $24 million a year will need additional net worth in the amount of 1 percent of annual volume in excess of $24 million. But the maximum net worth requirement will be limited to $2.5 million.
Multifamily lenders are already subject to the excess volume net worth requirement — though it is only 0.50 percent for companies that don’t service.
Loan correspondents have until Dec. 31 to retain their approval, and no new applications were accepted after May 20. After this year, correspondents — who are also known as sponsored third-party originators — will need to establish a relationship with an FHA-approved direct endorsement mortgagee.
