home subscribe advertise reprints e-mail help RSS about us LOG IN

Mortgage News

 

Mortgage News

HOT Topics

production

servicing

compliance

legal

fraud

secondary

jobs

appraisal

site map

www.loan-academy.com/
twitter linkedin
facebook google+
Search:

Mortgage News

News by Subject
Complete list of specialty news sections.

Purchase Subscription
Subscribe to MortgageDaily.com and get immediate access to all news, statistics and archives.

Mortgage Advertising
Reach mortgage executives, loan originators and other people tied to mortgage industry.

Consumer Mortgage News
Free mortgage news for prospective borrowers.

Mortgage Newsletter
Free e-mail newsletter with the latest headlines from MortgageDaily.com.

Mortgage News Reprints
Put entire MortgageDaily.com stories in your online or printed newsletter or publication.

Mortgage Feedget RSS code
Condensed MortgageDaily.com stories free on your Web site or for your RSS reader.

News Archives
Archive of MortgageDaily.com stories by month going back to 1999.

Press Releases
Reports and announcements from MortgageDaily.com.

Mortgage Statistics
Data and statistics for real estate finance.

Mortgage Directories
Directories of lenders, branch operators and mortgage service providers.

Mortgage Graphs
Directories of lenders, branch operators and mortgage service providers.

FHA News | Government Resources | M o r t g a g e e Letters | FHA Statistics
FHA, VA and HECM mortgage news. HUD and G i n n i e news also. Originations, servicing and FHA approval.



Report Blasts FHA Scorecard

GAO says data outdated or missing

May 22, 2006

By COCO SALAZAR


photo of Coco Salazar

In a report to Congress, the Department of Housing and Urban Development was blasted for using outdated data and for excluding important data altogether from its automated evaluation of FHA lenders.

Recent questions and concerns regarding the effectiveness of the TOTAL Scorecard prompted the General Accountability Office to evaluate the way the Federal Housing Administration developed and uses the tool.

While acknowledging the scorecard has provided lenders with less paperwork and more consistent underwriting decisions, the report GAO issued to the Subcommittee on Housing and Community Opportunity Committee on Financial Services emphasized FHA made some choices during the development process that could affect TOTAL's effectiveness.

FHA neither developed a formal plan for updating TOTAL on a regular basis nor included all the important variables that could help explain expected loan performance, it selected a type of model that limits how the scorecard can be used, and did not base cut points on the loan data used to develop TOTAL, according to the report.

"For example, the data that FHA and its contractors used to develop TOTAL were 12 years old by the time FHA implemented the scorecard" in 2004, the auditing office wrote. "The market has changed significantly since 1992, in part because many borrowers have lower credit scores and receive down payment assistance," and there are new mortgage products that have allowed borrowers who would previously have needed an FHA-insured loan to seek conventional mortgages.

"FHA's TOTAL does not take these market changes into account," the auditors added.

The use of down payment assistance in the FHA program has grown rapidly over the last five years and research shows FHA loans without assistance have had lower delinquency and insurance claim rates than loans with such assistance, GAO said. Additionally, "HUD contractors, HUD's Inspector General, and us have all identified the source of a down payment as an important indicator of risk, yet the source of the down payment is not included in the scorecard."

Among other variables, TOTAL, an acronym for Technology Open to Approved Lenders, does not assign higher risks to adjustable rate loans than to fixed-rate loans nor does it include indicators for property type.

"The fact that FHA's scoring system does not consider the extra risk inherent in ARMs or distinguish between different types of properties, while competitors' systems do, could have important consequences," the office said. "If marginal applications that are ARMs or multiunit properties are rejected by competitors' systems, but accepted by FHA's, then FHA's share of these riskier loans may increase."

By not developing and implementing policies and procedures for routinely updating TOTAL, as best practices call for, the scorecard may become less reliable, and, therefore, less effective at predicting defaults, the office said.

"With a relatively current scorecard, FHA could monitor market changes and TOTAL's effectiveness at predicting defaults in the current climate," and could strengthen the insurance fund through development of new products and could improve the transparency of the secondary mortgage market, according to the report.

In response, the Department of Housing and Urban Development reportedly told the Federal Housing Commissioner "that TOTAL was working exactly as envisioned."

HUD informed it does intend to re-analyze all available variables, including the source and amount of down payment assistance.

HUD's current plan calls for one update to TOTAL to be completed by 2007 but there is no provision for subsequent updates, GAO said, reemphasizing that it continues to believe that HUD should develop policies and procedures for updating TOTAL on a regular basis.


Coco Salazar is an assistant editor and staff writer for MortgageDaily.com.

e-mail: [email protected]


Mortgage Technology news
Technology news for originators, executives and servicers. Coverage of LOS systems, loan product and p r i c i n g engines and other technology offered to the mortgage industry.



SUBSCRIBERS: Edit Subscription | Subscription Help | or call 214.521.1300

Subscribe Contact Us Site Map

Copyright © 2017 Mortgage Daily, D a l l a s
Subsribers Only:

AMC directory

ARM indexes

mortgage company directory

mortgage regulations

net branch directory

p r i c i n g engine directory

wholesale lender directory

More Mortgage News Resources (full site map):

advertising news

appraisal news

bank news

biggest lenders

commercial mortgage news

corporate mortgage news

credit news

FHA news

financial regulation news

foreclosure news

GSE news

jumbo mortgage news

interest rates

loan modification news

loan originator survey

LOS Newsletter

MBS

mortgage associations

mortgage-backed securities

mortgage books

mortgage brokers

mortgage compliance

mortgage conferences

mortgage directories

mortgage education

mortgage employment

mortgage employment index

mortgage executives

mortgage fraud

mortgage fraud blog

mortgage fraud local news

Mortgage Fraud Index

Mortgage Graveyard

mortgage insurance news

mortgage lawsuits

mortgage leads

mortgage lender ranking

mortgage licenses

mortgage litigation

Mortgage Litigation Index

Mortgage Market Index

mortgage mergers

mortgage news

mortgage politics

mortgage press releases

mortgage production

mortgage public relations

mortgage rates

mortgage servicing

mortgage statistics

mortgage technology

mortgage video

mortgage Webinars

net branch

net branch directory

nonprime news

origination news

originator tools

real estate news

refinance news

reverse mortgage news

secondary marketing

social media

servicing news

subprime news

wholesale lenders