HUD Broker Approval Rule Issued

The Department of Housing and Urban Development has issued its long-awaited final rule that eliminates the Federal Housing Administration's approval process for mortgage brokers starting Jan. 1, 2011. The final rule increases the net worth requirement for FHA-approved lenders and requires those lenders to be fully accountable for the loans they purchase from brokers. "Mortgage brokers already approved by FHA will be authorized to continue to originate FHA-insured loans through the end of the calendar year," HUD said. Brokers appear to be divided over these changes which essentially mirror the way Fannie Mae and Freddie Mac require their lenders to underwrite and approve broker-originated loans. Some brokers are preparing to qualify as FHA-approved "small business" lenders, according to National Association of Mortgage Brokers executive vice president Roy DeLoach. The final rule creates this new category of FHA-approved lenders, which requires a minimum net worth requirement of $500,000. The final rule raises the net worth requirement from $250,000 to $1 million for other FHA-direct endorsement lenders starting a full year after the final rule goes into effect.