Thanks for stopping by RCG. FHA is a government sponsored program. What purpose does it serve, if any, to have businesses worth at least $63,000 originating mortgage loans?

Said another way, would having these capital reserves protect the taxpayer? The borrower? The integrity of the FHA program?

(http://www.nationalmortgagenews.com) Yesterday the National Mortgage News report contained an article titled, “Lenders Oppose Broker Surety Bonds. To read the entire article you must subscribe and search the archives under the article title listed above.

The bottom line, five leading lender groups that are supporting quick passage of the FHA reform bill want the House & Senate banking committee leaders to drop a provision that would allow mortgage brokers to purchase a $50,000.00 surety bond in lieu of meeting the current FHA net-worth and audited financials requirements. They argue that there is no federal oversight of brokers and I quote, “it is critical that they continue to submit the annual audited financial statements to the FHA in order to participate in the program, more importantly, protect the integrity of the FHA.” Are you kidding me? Who are these born again, holier than thou lending groups who’s existence is predicated on the maintenance of FHA integrity? Same lender groups that just lead us down the path of credit destruction? Someone pass me a bag, it’s gonna get messy around here. This is about market share and keeping brokers from shopping the lenders/banks for their clients. Frankly I don’t give a hoot about the audit, it can be done for around $3,000.00. This integrity based mortgage broker finds the net worth requirements to be the problem. In today’s environment how does a new MBB owner establish and maintain a $63,000.00 business net worth, 20% of that mandated to be liquid. The NAMB has countered that surety bond provisions in the House-passed bill have, “belts and suspenders to protect the FHA program. NAMB executive vice president Roy DeLoach said, he stressed that the FHA commissioner can control the number of brokers using surety bonds. In addition, EVERY broker HAS TO be coupled with an FHA-Approved direct endorsement lender, who reviews every loan before the closing! AMEN to that!

Signing the letter were; The Mortgage Bankers Association, The Lenders One/National Alliance of Independent Mortgage Bankers, The Independent Community Bankers of America, The American Bankers Association, The American Financial Services Association, and the American Institute of Certified Public Accountants.

This just goes to show its worth keeping back issues of your favorite magazines!

Just finished reading your article and the excellent comments.

1. Someone asked if you could revisit this in a few months. Great idea!.. Looks like Congress has put the bill on the back burner. Any news? Are FHA originations truly up?

2. I attended my first all day training on FHA this week (don’t flame me please, for not having done an FHA before!). Everyone has to have a first time somehow, but I do not think I will be practicing on a purchase, probably a refi w/ a 60 day lock!

3. At the training the presenter was somewhat less than emphatic about the W-2 requirement. I’m baffled: the FHA written guidelines could not be more specific…an FHA LO MUST be an employee. His after training explanation was that the penalties for violation were minimal, while the rewards could be considerable. Having gone thru several gyrations to be with a broker that would go W-2 (while allowing me to retain the independence I require, to do the right thing), I found the ambiguity frustrating.