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Carol Galante has a challenge: Spur lenders to take more care when originating Federal Housing Administration loans, without scaring them away or causing them to hike pricing to cover the additional risk.
March 27 -
The increased scrutiny, mortgage bankers complain, would end recent attempts to provide home loans to borrowers with weaker credit, something the FHA has been trying to spur for years.
March 5
The Federal Housing Administration
The update on the agency's efforts to expand access to mortgage credit came a day after
In the "blueprint" published Tuesday, the FHA said it is "developing a new methodology for evaluating underwriting defects" that could require a lender to indemnify the agency against losses. "The new criteria will be more descriptive identifying a limited number of specific defects, their related causes, and levels of severity." This should give lenders a better handle on the risk posed by any given flaw in a loan file, the FHA said.
"Lenders must be able to quantify the risk of making a mortgage loan," the FHA said. "Lenders tell us they add credit overlays" requirements above and beyond agency guidelines "for a variety of reasons. Fear of back-end enforcement actions is often cited."
The FHA's Homeowners Armed with Knowledge program, or Hawk, which Commissioner Carol Galante
After two years without serious delinquency, borrowers would get another 15 basis points shaved off the annual bill. These reductions add up to nearly $9,800 in savings for the average FHA loan balance of $180,000, and would reflect the lower risk to the agency's insurance fund of lending to borrowers who have gone through counseling.
Hawk will be a two-year pilot program. The FHA said it will publish more information in the Federal Register this summer and may tweak the details depending on public comments before commencing the program in the fall.
The FHA announced its quality assurance framework in March as part of the administration's budget proposal. Housing and Urban Development Secretary Shaun Donovan said it was designed to "decrease uncertainty" among originators although many lenders at the time feared it would
The FHA reiterated Tuesday that it intends to expand its evaluation of loans "to include random sampling of performing loans closer to the time of endorsement" rather than focusing narrowly on loans that have already gone bad.
This summer, the FHA said, it plans to post online a draft of a performance metric that will complement the compare ratio. Unlike that ratio, which compares a lender's default rate to those of its peers, the new metric will compare an originator's performance to a target set by FHA.