The Effects of HUD's Announcement from September 18, 2009

On September 18, 2009, HUD published a press release announcing numerous changes that are either proposed or already implemented, which affect FHA lenders and FHA loans. The most sweeping proposed change is that HUD/FHA will approve only Sponsor (investor, full eagle) lenders. FHA will then have the Sponsors approve the FHA brokers with whom they are willing to do business. Within one year, HUD intends to require an increase in the Sponsor’s net worth of $1,000,000 (increased from the present $250,000).

While the final rules are not yet in effect, it appears they will be implemented after a “notice and comment period.” Although these changes raise many questions which will require upcoming information from HUD/FHA, the following reflects our views on how this will affect lenders and brokers.

It is clear from the language of the press release that HUD is trying to make it easier for brokers to do FHA business, while at the same time putting more responsibility and accountability on both the broker and the Sponsor to make justified loans. HUD stated in the press release that “these lenders must have skin in the game,” which seems a clear indication that brokers and Sponsors will be held more accountable for loans produced than in the past.

Given the apparent intent of this new rule, it seems that the Sponsor will now be responsible to see that brokers are in compliance with the Quality Control expected by FHA, and presumably desired by the Sponsor. These Quality Control programs help ensure loans that comply with all regulations and laws, as well as minimize losses from bad loans. It is likely that even though the net worth requirements for brokers will be reduced or eliminated, Sponsors will continue to require Quality Control Plans and Quality Control audits in order to do business with them.

As HUD/FHA comes out with further announcements, we will keep you updated through our newsletter and social networks. Visit HUD's website to read the entire press release from September 18, 2009.


Keeping up with changing regulations can be a daunting task. Mortgage Compliance Advisors offers lending manuals for FHA, VA, and HECM that are easy to use and updated quarterly. For more information, visit www.MortgageComplianceAdvisors.com or call 877-226-3152.

Summary of FHA's guidelines for quality control plans

If you're just starting out with FHA or you'd like to know FHA's guidelines for quality control plans, check out our article summarizing FHA's requirements for QC plans.