Financial Freedom sent out a notice earlier this week announcing it was increasing net worth requirements for wholesale correspondents. According to the notice:
Beginning 2010 you will be required to maintain a minimum net worth of $100,000 (with 50% liquidity) to continue to be eligible. In addition, Financial Freedom will also be implementing minimum production requirements.
The announcement comes days after the Federal Housing Administration (FHA) proposed a rule which increases net worth requirements of reverse mortgage lenders and would make them liable for the practices of their correspondent brokers.
The proposed rule would also eliminate independent approval for origination eligibility which they said “will potentially increase the number of loan correspondents (mortgage brokers) who are eligible to participate in the origination of FHA-insured loans”.
Prior to the proposed rule, in order to qualify as an FHA approved correspondent, mortgage brokers needed to provide audited financials showing a net worth of $63,000 and 20% of assets had to be liquid.
Not all wholesale reverse mortgage lenders will be increasing their requirements for loan correspondents. “We’re staying at what HUD currently requires,” said Sherry Apanay, Senior VP of Generation Mortgage in an email to RMD. As far as other wholesalers go, it’s not so clear.
RMD contacted another four lenders and one said it expected to join Generation by staying at HUD’s current net worth requirement but had not made a final decision. Others have yet to respond to our request for comment.
Assuming the proposed rule is approved, loan correspondent requirements could get more difficult, the exact opposite of what FHA had hoped if others follow Financial Freedom’s lead.