MELVILLE, NY—Formerly approved loan correspondents will not have access to nonpublic Federal Housing Administration systems, as of Jan. 1, 2011, including FHA Connection. All other lenders need to meet the increased net-worth requirement of $1 million. “That sounds quite significant and it is,” said Joe Amoroso, director of national sales for Real Estate Mortgage Network, one of the largest private wholesalers in the country. “What it’s done is separate the men from the boys in the lender category for people who want to be a true correspondent lender.”
At the New York Association of Mortgage Broker’s annual meeting here, Amoroso told conference attendees the Federal Housing Administration has gone and put all of the onus upon the lenders—“guys like us, guys like Wells Fargo, people with deep pockets so they could do business with people and not have to worry about the broker level. They realize brokers are our business and that’s what we are all about.”
The Federal Housing Administration no longer wants to “watch over” or “have a hand over” the broker.
Lenders should be able to “sponsor them and to take the fall” if something goes wrong.
“That shift in power is a really big change for the way wholesalers, big and small, do business going forward.”
In his office, 34 extra people are in operations today compared to a year ago in order to handle quality control and due diligence issues. None of these positions generate revenue, he said.
Like many other lenders, Real Estate Mortgage Network has put in place different tiers to deal with brokers who have never done Federal Housing Administration loans before.
The company’s four-prong approach includes upfront due diligence in the broker approval process.
“We use a system now called Comergence that is quickly becoming the industry standard right now.
“There are 40 or 50 lenders on it nationally. It’s a portal that you go into where you get apply to get approved,” Amoroso said.
“They prepare a report for us, which is basically a risk-based report based on any experience, length of time that are on the resumes, the financial aspects, and they pull a soft credit report.
“This information all comes together. It does not approve or disapprove that broker, but it presents us in a very simple, easy-to-read format, what our risk is by accepting this non-HUD-approved broker.”
The lender offers an educational webinar that lasts about two hours and offers the basics of doing an FHA loan.
“The brokers sit through it and get a certificate. After that there is field training that we implement.
“Lastly, based on the risk analysis of that broker we set up what we call a QC factor on the first group of loans that are submitted by that broker. The program is specific for non-HUD approved.”
Some of the larger lenders have added net-worth requirements while others have “gone beyond what we have done in regards to education,” Amoroso said.
“Others have just gone out and said they are not doing business with people who are not FHA approved. It’s all over the map right now.”
