The FHA wants a bigger stick for keeping mortgage lenders in line

Now that the Federal Housing Administration's cash reserves are below the legally required 2% of loans outstanding, the FHA has proposed new regulations to increase the net worth requirements of FHA-approved lenders and strengthen lender criteria. The agency will also make lenders liable for the practices of their correspondent mortgage brokers.

That's a relief for taxpayers because the FHA could become a financial black hole without improved risk management. In a related case, the FHA withdrew its approval of Ideal Mortgage Brokers, doing business as Lend America and Lending Key, and is seeking $512,000 in civil penalties related to its lending practices.