New FHA Proposal: $2.5M Minimum Capital for MBs

The Federal Housing Administration on Monday unveiled new proposals to strengthen its depleted insurance fund, including a mandate for all FHA lenders to maintain minimum capital of $2.5 million within three years. Since 1993, FHA has required lenders that use its insurance program to have a net worth of at least $250,000. But with its new proposals, lenders will need to have $1 million of capital within 12 months of implementation of the final rule, and then $2.5 million two years later. FHA is soliciting public comment for 30 days on its proposals, telling the industry that "comments received will be considered in the development of a final rule." Fannie Mae and Freddie Mac have announced similar minimum capital standards for their seller/servicers. At the end of September FHA had roughly $3.6 billion in cash left to cover a $685 billion book of business, leaving the fund with a capital ratio of just over 0.5%. Under the new proposals, mortgage brokers would no longer need to be FHA certified, but table funders that accept their loans would be financially responsible for them.