HUD Approval for FHA loans – becoming a Loan Correspondent

With loan programs disappearing each day, many mortgage brokers and lenders are starting to look at FHA loans as a way to get borrowers to a closing. Nothing has been more frustrating in the past few months than getting an application and not being able to close the loan.

Mortgage brokers can only get approval from the Department of Housing and Urban Development (HUD) as a Loan Correspondent (also known as a “mini-eagle”). The requirements are a bit onerous for new companies but not as difficult if you have been in business for a while. The first requirement is that the applicant be an entity, either a corporation, limited liability company or a partnership. No sole proprietorships are allowed. Your company must be licensed in your home state and every state where you maintain a branch office. Part of the application is your company’s certified, audited financial statement showing at least $63,000 in net worth for one office and an additional $25,000 in net worth for each branch office (up to a maximum of $250,000 in net worth). At least 20% of your assets must be liquid (cash or securities that can easily be converted to cash). The financial statement cannot be more than one year old. The owner that is designated to supervise all FHA loan activity must have at least 3 years of mortgage origination experience. Your company cannot share office space with anyone else (you will submit photos of the inside and outside of your offices, including a photo of signage showing your company name). The offices must be staffed by at least 2 employees and must be furnished with typical office furniture and furnishings (chairs, desks, computers, phones, fax machines, etc.). You must have a sponsor who will send a certification letter that it will fund all FHA loans originated by your company. Your company and its principals must have satisfactory credit histories and you will be submitting credit reports as part of the application package. You must also certify on the application that neither the company nor its principals have been restricted, suspended, or otherwise sanctioned by any state or federal licensing department and HUD conducts background checks. And you must send in a HUD-approved Quality Control Plan. The application fee is $1,000.00 which is non-refundable.

FHA loans are more useful in certain parts of the country than others because of their restrictions but you should investigate whether you want to offer FHA loans to your customers and whether you meet the approval requirements.