Archive

September 18, 2009

FHA: Brokers No Longer Have to Register with Them

The Federal Housing Administration has decided that "direct endorsement" lenders should be fully liable for the mortgages they originate through loan brokers while saying that these third-party salesmen no longer need to register or meet the agency's net worth requirements. The new policy change appears to be a major boost for brokers, whose ranks have been decimated during the housing and mortgage crisis. "Mortgage brokers will continue to originate FHA-insured mortgages through their relations with approved mortgagees," the agency said. "However, they will no longer receive independent FHA approval for origination eligibility." The new policy relieves brokers from filing audited financial statements with FHA and basically mirrors the hands-off approach that Fannie Mae and Freddie Mae follow with respect to brokers. FHA is making this change as part of a risk reduction effort and refocusing of its resources. However, the agency is adopting a policy that prohibits brokers and commission-based lender staff from ordering appraisals. FHA commissioner David Stevens stressed that FHA is adopting appraisals policies that are consistent with the Home Valuation Code of Conduct but not the entire HVCC that Fannie and Freddie have adopted.