The Federal Housing Administration appears to have made progress in improving how loans are evaluated for minor defects, possibly removing an obstacle to growth of the FHA single-family program.
Among the factors holding back FHA growth has been lenders’ fear of liability for underwriting mistakes and other errors in the wake of high-profile enforcement actions.
But the agency has earned praise for changes unveiled in May to its loan defect taxonomy, which alerts lenders to mistakes that could subject them to penalty. The prior system was criticized for flagging too many potential errors on loans, thereby discouraging lenders from participating. But the improvements, including a new automated loan review system, are seen as providing a more streamlined method for identifying defects.
Scott Olson, executive director of the Community Home Lenders Association, said the new FHA automated loan review system is "clearly an improvement from our member's perspective."
Read more in American Banker.