The Federal Housing Administration proposed changes Monday to reduce the risk to its insurance funds, which have fallen below the congressionally mandated capital reserve ratio of 2%.

The FHA wants to raise the minimum-net-worth requirement for FHA-approved lenders to $1 million within the first year and to $2.5 million within three years. The current requirement is $250,000.

The FHA's proposal, which is open for comment for 30 days, also calls for lenders to assume liability for all the loans that they originate and underwrite. The FHA would no longer approve the credentials of mortgage brokers and instead pass oversight of mortgage brokers to lenders.

In September, the Department of Housing and Urban Development proposed increasing the minimum-net-worth requirement for FHA-approved lenders to $1 million, from $250,000. HUD also proposed that wholesalers and correspondent lenders would be on the hook for any losses caused by broker-sourced loans.

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