Community Banks Face Higher Costs on FHA

It's becoming costly for small community banks to continue originating FHA-backed loans, and come July costs will increase even more when all government lenders will be required to have a direct endorsement underwriter on staff... FHA-approved lenders also must submit annual financial and compliance audits to the Department of Housing and Urban Development, another added cost.

HUD currently is drafting a mortgagee letter that will waive the audit requirement for community banks with less than $500 million in assets, but the Independent Community Bankers of America hopes the waiver is longer than one year and that HUD will relax the compliance audit, too.