HUD Moves Up Net Worth Requirement Implementation Date

The US Department of Housing and Urban Development corrected a final rule that appeared in the Federal Register to increase net worth requirements for Federal Housing Administration mortgagees.

Originally scheduled to be implemented on June 21, 2010, the correction published by HUD states the implementation date is now May 20, 2010.

The final rule increases minimum the net worth requirement for mortgagees from $250,000 to $1 million.  For companies that meet the size to be classified as a small business, the minimum net worth requirement will move to $500,000, with no less than 20 percent of the net worth must be in liquid assets consisting of cash or its equivalent acceptable to HUD.

FHA said it will provide current lenders one year following the enactment to increase net worth.  Effective May 20, 2013 all mortgagees must have a net worth of $1 million plus 1% of total loan volume in excess of $25 million.

“These changes support quality mortgage lenders while excluding organizations that are ill-equipped to handle the risk associated with market variations,” said FHA Commissioner David H. Stevens. “That is particularly important now when a robust, competitive mortgage finance market is a crucial element in rebuilding the American economy. Lenders bear the overall risk of FHA-endorsed loans, therefore it makes sense for them to approve their counterparties and have sufficient capital to operate.”

In addition, FHA is eliminating the approval of reverse mortgage correspondents as of January 1, 2011. Reverse mortgage brokers will still have the ability to originate FHA insured loans through their relationships with approved lenders but will no longer receive independent FHA eligibility approval.


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