Lenders Catch a Break on FHA Capital Minimum

The Department of Housing and Urban Development is raising the net-worth requirement for FHA-approved lenders-but by not as much as expected. HUD had originally proposed raising the $250,000 net-worth requirement to $2.5 million within three years. A final rule, expected to be released shortly, raises it to $1 million starting next year-but there are breaks for firms that are considered "small business" lenders. "Current FHA-approved small business lenders must possess a minimum net worth requirement of $500,000," HUD said. This means an independent mortgage-banking firm with less than $7 million in total annual receipts will qualify as an FHA small business lender. One source said an FHA lender that funds roughly $250 million in loans annually should qualify for the lower $500,000 net-worth requirement. Depository institutions with less than $175 million in assets also can qualify as an FHA-approved small business lender. The final rule also eliminates FHA's approval process for mortgage brokers.