High Costs Make Table-Funding a Struggle for Small Lenders

It’s not easy for small lenders to table-fund Federal Housing Administration-insured loans, due to the high costs of being FHA-approved that may climb still higher in the near future, says an Origination News article. This has caused the Independent Community Bankers of America (ICBA), American Bankers Association (ABA), and the Mortgage Bankers of America (MBA) to seek a legislative fix, but they haven’t made much headway.

In July, says Origination News, some banks will have to add direct-endorsement underwriters to their staffs, something that will likely put a strain on budgets as many small banks only insure a handful of FHA-insured loans each year.

“Having a DE underwriter on staff is expensive,” Ron Haynie, president of ICBA Mortgage, said in the article. “They are difficult to find and it is a big cost.”

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There are other additional costs related to table-funding detailed in the Origination News article, which reports HUD officials as saying they’re working on a mortgagee letter that may relax some of its requirements for community banks.

Although the FHA says it’s trying to accommodate small banks, Haynie says many are being forced to  “drop their FHA eagle,” meaning they’ll lose the ability to table-fund and instead would have to close a loan in the investor’s name. This has prompted the ICBA, ABA, and MBA to work toward legislation that would yield lesser requirements for FHA-insured funding.

HUD, along with the trade groups, says Origination News, are supporting an amendment to the National Housing Act in the interests of non-approved lenders who want to table-fund FHA loans, but a lobbyist for the amendment reported minimal progress after the FHA reform bill died in the Senate.

Read the full Origination News article here.

Written by Alyssa Gerace

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