|HUD Allows Lenders to Cut Red Tape
WASHINGTON D.C. (April 18, 2002) -- The U.S. Department of Housing and Urban Development (HUD) announced today that as a result of an agreement between the Federal Housing Administration (FHA) and Ginnie Mae, issuers may provide evidence of FHA insurance to Ginnie Mae by using on-line endorsement data found on the FHA Connection website. By choosing this option, issuers will no longer be required to provide mortgage insurance certificates (MICs) to Ginnie Mae for loans held in the agency's Mortgage-Backed Securities (MBS) program.
The change in policy, which is effective for loans pooled after April 1, 2002, will ease the reporting requirements on Ginnie Mae issuers and reduce operating costs to the FHA, Ginnie Mae and their business partners.
According to Ginnie Mae President Ronald Rosenfeld, "The change is also expected to help meet the Administration's goal of increasing homeownership rates, especially among minorities, by continuing to drive down the costs of buying a home. This is but one of many activities we have undertaken to review our costs and requirements."
Previously, MICs were used by Ginnie Mae as proof that mortgages were insured by the FHA, and as the basis for claims to the FHA in the event that the loans fell into default. FHA and Ginnie Mae officials agreed to the change because of enhancements to the FHA's electronic records system.
Under the new policy, FHA lenders, in order to satisfy Ginnie Mae certification requirements, now have the option of presenting the MIC to their document custodian for review or directing the custodian to review endorsement information electronically by accessing the FHA Connection.
The change in policy only applies to claims submitted to the FHA by Ginnie Mae. Mortgagees are still required to submit to the FHA the original or duplicate MIC when submitting a claim for mortgage insurance.
"This agreement will eliminate the need for issuers to request duplicate MICs, which now numbers some 900,000 annually," said Assistant Secretary of Housing/FHA Commissioner John Weicher. "Once the change is fully operational," Weicher added, "FHA employees, who now process the requests in our four Homeownership Centers, will instead be able to focus on helping families become homeowners. In addition, issuers will be able to focus on more value added work."
FHA officials also estimate that the change in policy will save the agency more than $3 million annually in reduced costs. Similarly, Ginnie Mae officials say that its issuers will save nearly $2 million annually as a result of the reduced certification requirements.
Ginnie Mae officials will provide more specific information in a memorandum to all of its MBS program participants.