July 18 -- HUD proposes to revise the requirements for investing lenders and investing mortgagees to gain or maintain status as a Federal Housing Administration (FHA) approved lender or mortgagee. This proposed revision would make FHA's approval requirements consistent with investing mortgagees' and investing lenders' risk, reduce barriers to FHA approval for new investing mortgagees and investing lenders, and increase access to capital for all FHA-approved mortgagees and lenders. HUD also proposes to make clarifying edits to ensure that certification language is applicable to investing lenders and investing mortgagees. In addition, HUD proposes to define the Government-Sponsored Enterprises (GSEs) separately from other governmental-type entities to ensure that FHA requirements specific to loan origination do not improperly apply to the GSEs. Finally, HUD proposes to eliminate obsolete language related to lender and mortgagee net worth requirements. Comment Due Date: September 18, 2023.
Current HUD regulations at 24 CFR part 202, subpart A, establish minimum standards and requirements for approval by the Secretary of lenders and mortgagees to participate in FHA's Title I and Title II programs. Subpart B identifies the classes of lender and mortgagee eligible to participate in FHA's Title I and Title II programs and outlines additional class-specific requirements for participation in FHA's Title I and Title II programs.
In 2010, HUD amended 24 CFR part 202, subpart A, to include investing lenders and investing mortgagees as a class of lender and mortgagee subject to HUD's net worth requirements currently found at § 202.5(n). At the time the investing lender and investing mortgagee net worth requirement change was made in 2010, HUD also incorporated new financial reporting, audit, and quality control plan requirements for investing lenders and investing mortgagees into various HUD handbooks; however, no corresponding updates were made to 24 CFR part 202, subpart B, to reflect these investing lender and investing mortgagee requirements. Additionally, in 2010, FHA increased the minimum net worth requirements applicable to certain classes of lenders and mortgagees in 24 CFR part 202. These new net worth requirements were phased in over a period of three years, beginning on May 20, 2010, and becoming fully phased in by May 20, 2013. The net worth requirements during that three-year transition period are now obsolete, but the phased-in net worth requirements language remains in HUD's regulations.
Current HUD regulations in § 202.10 also identify the class of lenders and mortgagees that qualify as governmental institutions, Government-Sponsored Enterprises, public housing agencies, and State housing agencies. Currently, the various GSEs are included in the same definition as Federal, State, or municipal governmental agencies and Federal Reserve Banks at § 202.10(a). For several years, certain GSEs have contended that they do not have the infrastructure that other lenders and mortgagees listed in § 202.10 have in place to ensure compliance with FHA requirements related to loan and mortgage origination because they cannot originate loans or mortgages. FHA has reviewed the mission and structure of the GSEs and determined that they should not be subject to FHA requirements specific to loan and mortgage origination because the GSEs do not originate loans or mortgages.
Through this proposed rule, HUD proposes to make multiple changes to 24 CFR part 202. HUD's proposed changes are described more fully in each of the below sections.
A. Requirements for Investing Lenders and Investing Mortgagees
HUD proposes to state that investing lenders and investing mortgagees must comply with applicable audit and financial statement requirements by adding language to § 202.9 that incorporates audit report, financial statement, and other financial information requirements, similar to the requirements for supervised and nonsupervised lenders and mortgagees found in §§ 202.6(b)(4) and 202.7(b)(3), respectively. These proposed audit and financial statement requirements would also include adding investing lenders and investing mortgagees as types of lenders and mortgagees that must comply with HUD's uniform financial reporting standards, as described in § 5.801(a)(5).
HUD is also proposing to make explicit that investing lenders and investing mortgagees must comply with FHA's annual certification requirements at § 202.5(m). Currently, FHA's annual certification regulation contains language primarily directed at lenders and mortgagees that originate insured mortgages or Title I loans. HUD proposes to update the annual certification requirement language in § 202.5(m) to reference any lender or mortgagee, including investing lenders and investing mortgagees, that originates, purchases, holds, sells, or services insured mortgages or Title I loans.
HUD is also proposing to clarify at § 202.5(h) that investing lenders and investing mortgagees without servicing authority do not have to implement a written quality control plan.
B. Government-Sponsored Enterprises
HUD proposes to separately define the GSEs from other Federal, State, or municipal governmental agencies and Federal Reserve Banks as described in § 202.10(a). This proposed change is appropriate because, unlike the other governmental-type institutions listed in § 202.10(a), the GSEs do not originate loans or mortgages. By separately defining the GSEs, it would be clear that the GSEs do not perform loan or mortgage origination activities and therefore are not subject to FHA requirements specific to loan or mortgage origination.
Specifically, HUD proposes to individually define the term GSE by creating a separate paragraph (b) in § 202.10. The GSEs would be identified as the Federal Home Loan Banks, the Federal Home Loan Mortgage Corporation (commonly known as Freddie Mac), and the Federal National Mortgage Association (commonly known as Fannie Mae). The proposed GSE definition would make clear that GSE lenders or mortgagees may purchase, service, or sell, but not originate, loans and mortgages. The proposed GSE definition would also make explicit that the GSE lenders or mortgagees must meet the general approval requirements in § 202.5, but that GSE lenders or mortgagees are not required to meet the net worth requirement provided in § 202.5. . . .
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https://www.federalregister.gov/d/2023-15033 [5 pages]
