REMINDER: Phase 2 of HUD Adjusted Net Worth Requirement Goes Into Effect 5/20/13

If you cannot comply:

If at any time the net worth or liquid asset requirements fall below the required minimum, the lender or mortgagee must notify the Lender Approval and Re-certification Division within 30 days, and provide a Corrective Action Plan describing steps taken to correct the net worth or liquid asset deficiency.  Lenders and mortgagees non-compliant with net worth or liquidity asset requirement must notify HUD by sending an e-mail to recert@hud.gov. The e-mail should contain a letter signed by a corporate officer describing the corrective action that has been taken to correct the net worth or liquid asset deficiency.  The e-mail should also contain a copy of the lender or mortgagee’s un-audited financial statements for the most recent quarter certified by management.  The letter should be addressed to:

Director, Lender Approval and Recertification Division

451 7^th St SW, Room B133/P3214

Washington, D.C. 20410

Failure to comply is grounds for an administrative action by the Mortgagee Review Board.  

Phase Two of the net worth requirement was published in Mortgagee Letter 2010-20 dated June 11, 2010.  The requirement is provided below:

·         Participation in Single Family Programs. The final rule provides that, irrespective of size, all applicants for approval and lenders and mortgagees with FHA approval as of or after May 20, 2010, that wish to participate in FHA single family programs must possess a minimum net worth of not less than $1,000,000 plus an additional net worth of one percent of the total volume in excess of $25 million of FHA single family insured mortgages originated, underwritten, purchased, or serviced during the prior fiscal year, up to a maximum required net worth of $2.5 million.  Not less than 20 percent of a mortgagee’s required net worth must be liquid assets consisting of cash or its equivalent acceptable to the Secretary.

·         Participation in Multifamily Programs with Engagement in Mortgage Servicing. The final rule provides that, irrespective of size, all applicants for approval and lenders and mortgagees with FHA approval as of or after May 20, 2010, that wish to participate in FHA multifamily programs, and that engage in mortgage servicing, must possess a minimum net worth of not less than $1,000,000 plus an additional net worth of one percent of the total volume in excess of $25 million of FHA multifamily insured mortgages originated, underwritten, purchased, or serviced during the prior fiscal year, up to a maximum required net worth of $2.5 million. Not less than 20 percent of a mortgagee’s required net worth must be liquid assets consisting of cash or its equivalent acceptable to the Secretary.

·         Participation in Multifamily Programs without Engagement in Mortgage Servicing. The final rule provides that all applicants for approval and lenders and mortgagees with FHA approval as of or after May 20, 2010, that wish to participate in FHA multifamily programs, and that do not engage in mortgage servicing, must possess a minimum net worth of not less than $1,000,000 plus an additional net worth of one half of one percent of the total volume in excess of $25 million of FHA multifamily insured mortgages originated, underwritten, or purchased during the prior fiscal year, up to a maximum required net worth of $2.5 million. Not less than 20 percent of a mortgagee’s required net worth must be liquid assets consisting of cash or its equivalent acceptable to the Secretary.