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FHA Removes Mandatory Mortgage Branch Registration Requirement

The Federal Housing Administration (FHA) on Friday announced that it has published a new final rule that eliminates a current requirement for lenders to register the branch offices where they conduct FHA Title I or Title II mortgage loan originations.

By removing these requirements, FHA hopes to involve more community-based entities in its Title I and II programs, including smaller loan originators and credit unions, the agency explained.

The rule, originally proposed in March 2023, takes into consideration stakeholder comments. The agency will publish a Mortgagee Letter (ML) in the near future outlining how this new rule will be implemented.

“As the mortgage industry has evolved to better leverage technology and remote service delivery, FHA believes that requiring a mortgagee or lender to register all branches is an unnecessary administrative and cost impediment to program participation,” the agency said in its notice.

It wants smaller loan originators, credit unions and others “to offer FHA-insured loan products in branch offices that they did not previously register due to business volume considerations, thus expanding the availability of FHA programs to underserved communities,” the notice said.

The new final rule allows mortgagees and lenders the option to register all branch offices, and makes “fees applicable only to branch offices that mortgagees or lenders register with FHA, rather than applying fees to each branch authorized to originate Title II mortgages or Title I loans,” the notice said.

The U.S. Department of Housing and Urban Development (HUD) is not reducing its oversight of the housing finance ecosystem, the notice said.

“Removing the requirement to register branch offices will not affect HUD’s monitoring of lenders and mortgagees,” the notice reads. “HUD will continue to maintain oversight and risk management of lenders and mortgagees that remain responsible to FHA for the actions of its branch offices and employees.”

With application for all FHA Title I and Title II programs, this rule encompasses both forward mortgage lending and the FHA-sponsored Home Equity Conversion Mortgage (HECM) program. The National Reverse Mortgage Lenders Association (NRMLA) distributed a member alert on Friday with the news.

The final rule goes into effect on March 4, 2024 with the Mortgagee Letter outlining implementation expected to come sometime before then.

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