The Federal Housing Administration (FHA) should give lenders five years, instead to three years, to meet a higher $2.5 billion net worth requirement, according to the Mortgage Bankers Association (MBA).
The current net worth requirement for FHA-approved lenders is $250,000. "MBA supports limiting the approval process to qualified mortgagees and increasing the net worth requirement," MBA president and chief executive John Courson said in a comment letter to the Department of Housing and Urban Development (HUD).
"However, we strongly believe market conditions merit an increased phased-in period," MBA said, "with lenders meeting a minimum net worth of $1 million by the end of year one."
HUD wants to raise the minimum to ensure the financial strength of lenders that endorse FHA-insured mortgages.
"Based on MBA analysis, it will take companies with a current net worth of approximately $1 million five years to retain enough earnings to reach the $2.5 million threshold," the trade group said.