The FHA plans to propose to increase the net worth requirement for approved mortgagees to meet industry standards.

The requirement is currently at $250,000 and has not been increased since 1993. HUD is proposing an initial increase of approximately $1,000,000 that would be in place within one year of the enactment of this rule.

To maintain consistency with industry standards, HUD may propose that the net worth requirements be increased further in future years to a level comparable to those required by GSEs (Fannie Mae and Freddie Mac) and other market institutions.

These changes will help to ensure that FHA lenders are sufficiently capitalized to meet potential needs, thereby permitting HUD to mitigate losses and decrease risks to the FHA insurance fund.

As with anything the government does, this proposed networth requirement is both good and bad.

GOOD: It potentially eliminates many small lenders who lack the proper knowledge, experience, and oversight.

BAD: It eliminated many small lenders who do a great job, and gives more power and control to the BIG BANK lenders. As the big banks continue to gain more control, the consumer options drop, competion drops, and ultimately, the consumer will end up paying more and get less as they deal with the application takers versus knowledgable mortgage professionals.