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HUD Proposes to Increase the Mortgagee Net Worth Requirement and Eliminate the Loan Correspondent Approval Requirement

On November 30, 2009, the U.S. Department of Housing and Urban Development (HUD) published in the Federal Register a proposed rule that will increase the net worth requirement for approved mortgagees and those applicants seeking approval as mortgagees from $250,000 to $2.5 million.  In addition, HUD proposes to require investing mortgagees to comply with the new net worth requirements.  In order to provide mortgagees with time to adjust to the new requirements, the proposed rule would phase in the net worth increases over a 3-year period.  HUD also proposes to no longer approve loan correspondents as approved participants in FHA programs. Mortgagees would be required to ensure that their loan correspondents meet applicable requirements.  The FHA approved mortgagee will, in turn, act as sponsor as it has in the past.  However, in using a sponsor/correspondent relationship, the sponsoring mortgagee must agree to assume responsibility for any loan correspondent that works with the mortgagee in the FHA insured loan, and assume liability for the FHA insured loan underwritten and closed in the name of the FHA-approved mortgagee.  Click here for a copy of the proposed rule.

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