The Fed­eral Hous­ing Ad­min­is­tra­tion is look­ing to stream­line its sin­gle-fam­ily loan ser­vic­ing re­quire­ments to align them with in­dus­try stan­dards and up­grade out­dated tech­nol­ogy.

National Mortgage News - - Contents - By Han­nah Lang

Re­duc­ing gap be­tween FHA and con­ven­tional mar­ket is pri­or­ity

The Fed­eral Hous­ing Ad­min­is­tra­tion is seek­ing to nar­row dis­par­i­ties be­tween mort­gages in­sured by the govern­ment and con­ven­tional loans, said FHA Com­mis­sioner Brian Mont­gomery.

For ex­am­ple, the FHA is plan­ning to stream­line its sin­gle-fam­ily loan ser­vic­ing re­quire­ments in or­der to align them with in­dus­try stan­dards. These ef­forts are part of the Trump ad­min­is­tra­tion’s ob­jec­tive to ease reg­u­la­tory bur­dens, Mont­gomery said dur­ing a speech at the Mort­gage Bankers As­so­ci­a­tion’s an­nual con­fer­ence in Wash­ing­ton last month.

“We re­main cog­nizant of the chal­lenges for ser­vicers, which HUD gen­er­ally re- lies upon to carry out such func­tions, and are com­mit­ted to iden­ti­fy­ing re­forms that would help re­lieve some of the cost bur­dens,” he said, re­fer­ring to the De­part­ment of Hous­ing and Ur­ban De­vel­op­ment.

The Fed­eral Hous­ing Ad­min­is­tra­tion is also tak­ing steps to re­duce tech­no­log­i­cal dis­par­i­ties, which has be­come a main pri­or­ity un­der Mont­gomery. Un­like the con­ven­tional mar­ket, the FHA still re­lies on pa­per case files and an out­dated legacy in­for­ma­tion sys­tem. The FHA’s fore­clo­sure fee sched­ules also de­vi­ate from other types of mort­gages.

Dur­ing his re­marks, Mont­gomery re­peat­edly em­pha­sized the need to mod- ernize tech­nol­ogy at the FHA, which he has pin­pointed as one of his top pri­or­i­ties as com­mis­sioner.

The Fed­eral Hous­ing Ad­min­is­tra­tion re­lies on a COBOL ( com­mon busi­ness- ori­ented lan­guage) com­puter op­er­at­ing sys­tem that was in­vented in 1959, which is main­frame- based.

In­creas­ingly, more govern­ment agen­cies are mov­ing to a cloud-based sys­tem, which of­fers more se­cu­rity and al­lows a sin­gle op­er­at­ing sys­tem to move seam­lessly be­tween com­put­ers.

The De­part­ment of Hous­ing and Ur­ban De­vel­op­ment has been lob­by­ing for years to re­ceive fund­ing to up­date its com­puter sys­tems, but Con­gress has failed to pro­vide it.

“Some of our key sys­tems are over a quar­ter of a cen­tury old,” Mont­gomery said. “They’re very ex­pen­sive to main­tain, and some are based on pro­grams and lan­guages built for ob­so­les­cence years ago.”

If the Fed­eral Hous­ing Ad­min­is­tra­tion can­not uti­lize shared tech­nol­ogy be­tween other agen­cies like the De­part­ment of Agri­cul­ture or the De­part­ment of Vet­er­ans Af­fairs, the agency will move to us­ing “mod­ern, off-the-shelf soft­ware that is com­monly used in the con­ven­tional mar­ket,” Mont­gomery said.

This soft­ware would cost $ 80 mil­lion over a four-year pe­riod, he said.

Ac­cord­ing to Mont­gomery, the agency is look­ing to adopt three key fea­tures based on in­dus­try best prac­tices to im­prove its tech­nol­ogy: an au­to­mated un­der­writ­ing sys­tem, pa­per­less pro­cess­ing ca­pa­bil­i­ties and an au­to­mated col­lat­eral val­u­a­tion sys­tem to man­age ap­praisal qual­ity and val­u­a­tion risk.

“We al­ready have a track record of suc­cess with build­ing these mod­ern­ized sys­tems, in­clud­ing the elec­tronic ap­praisal de­liv­ery sys­tem and the loan re­view sys­tem, which have al­lowed many lenders to do busi­ness with FHA that’s eas­ier,” Mont­gomery said.

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