FHA Issues Guidance for Lender Approvals


On June 11, 2010, the Department of Housing and Urban Development (HUD) issued Mortgagee Letter 2010-20, which provided the long-awaited guidance regarding the implementation of its Final Rule. The Rule adopted changes pertaining to the approval of mortgage lenders by the Federal Housing Administration (FHA) that are designed to strengthen FHA by improving its management of risk.

This Final Rule, among other things, has increased the net worth requirement for FHA-approved mortgagees and also provided for elimination of the FHA approval process for loan correspondents. Loan correspondents will no longer be approved participants in FHA programs, but they will continue to have the opportunity to participate in FHA programs as third-party originators (TPOs) through sponsorship by FHA-approved mortgagees, as is currently the case, or through application to be approved as an FHA-approved mortgagee.

In eliminating the FHA's approval of loan correspondents, FHA-approved mortgagees assume full responsibility to ensure that a sponsored loan correspondent adheres to the FHA's loan origination and processing requirements.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Jonathan Foxx, Lenders Compliance Group | Attorney Advertising

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