WASHINGTON — 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 Monday.
“We remain cognizant of the challenges for servicers, which HUD generally relies 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 FHA 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 Unlike the conventional market, the FHA still relies on paper case files and an outdated legacy information system.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 modernize technology at the FHA, which he has pinpointed as one of his top priorities as commissioner.
The FHA 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.
HUD 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 FHA cannot utilize shared technology between other agencies like the Department if 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.