Reminder: HUD Reporting Requirements Concerning Net Worth, Liquidity, and Operating Losses

Mortgagees are required to notify HUD within 30 business days if their adjusted net worth or liquidity falls below the required minimums or if they experience an operating loss of 20% or more of their adjusted net worth.

According to Handbook 4000.1, if a mortgagee’s adjusted net worth or liquidity falls below the required minimums, the mortgagee must submit: (i) a Notice of Material Event; and (ii) a Corrective Action Plan.  A mortgagee must also submit a Notice of Material Event if it experiences an operating loss of 20% or more of its adjusted net worth.  If a mortgagee submits a Notice of Material Event in connection with operating losses of 20% or more, it must also “submit financial statements every quarter until it shows an operating profit for two consecutive quarters, or until it submits its financial reports as part of its recertification.”

In addition, certain states impose various notification requirements regarding minimum net worth and changes in financial condition. 

Mortgagees should take care to meet both federal and state financial condition reporting requirements even during these difficult times.  WBK regularly assists clients located throughout the country with federal and state reporting requirements.