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| Lending procedure updates and innovations by the Federal Housing Administration will foster FHA mortgage originations and allow better business management, according to Federal Housing Commissioner John C. Weicher.
One innovation is the Technology Open to All Lenders (TOTAL) scorecard, which works with automated underwriting systems and evaluates the credit worthiness of a potential FHA loan borrower, Weicher said at the Mortgage Bankers Association of America annual convention in October. The scorecard lets lenders know if FHA automatically accepts a loan or if manual underwriting is required. “Good high-risk” and “bad high-risk” borrowers can be differentiated with TOTAL, although credit will not be denied solely on its analysis. “That means we can reach a little farther down in the risk spectrum,” said Weicher. “Certain borrowers would otherwise not qualify.” TOTAL has been tested with major lenders and will soon be available to all FHA lenders, added the commissioner. FHA eliminated 40 loan data entry items that were required for the Computerized Homes Underwriting Management System (CHUMS). The shortened process, not only benefits lenders, it betters FHA’s monitoring and tracking of manufactured housing, planning and development, said Weicher. New data input changes require lenders to record a property’s current sale date and previous sale date, added Weicher. FHA will not insure a resold mortgage until after a 90-day period. Additionally, second sales between 90-180 days after the first, require a second appraisal if the resale price is 75% above the price of the first sale. FHA completed a revision of the handbook 4155.1 mortgage credit analysis — the first comprehensive update of all FHA credit policies announced by mortgagee letters since 1995, said Weicher. The use of the handbook will be mandatory on loan applications as of Jan. 1. Included in the handbook are updated mortgage amount calculation procedures based on the Downpayment Simplification Act of 2002. The revision streamlines mortgage amount calculation procedures for most refinancings, eliminates the need for a face-to-face interview with the borrower and reaffirms that lenders must verify all mortgage applicants’ identities and social security numbers, Weicher said.
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