The Department of Housing and Urban Development has streamlined the process for originating Federal Housing Administration (FHA) mortgages with a new Lender Insurance Program.

The new program enables high-performing lenders to endorse FHA mortgage loans for insurance without a pre-endorsement review by HUD, the agency said Monday.

This expedited procedure is part of HUD’s overall effort to make FHA loan processing easier and more cost-efficient so that lenders will be better able to offer FHA-insured loans and expand the affordability of affordable financing for potential home buyers, according to the agency.
“We’re taking a giant leap forward in creating a more user-friendly loan origination process for our lending community,” said Assistant Secretary for Housing-Federal Housing Commissioner, Brian D. Montgomery.

“We can cut costs and processing time for lenders and give more homebuyers the opportunity to choose FHA mortgages when, in many cases, they are a better fit for their circumstances,” Montgomery said.
“The Mortgage Bankers Association (MBA) congratulates Secretary Jackson and FHA Commissioner Montgomery on the announcement implementing the Lender Insurance initiative, a goal we have all been working toward in our efforts to modernize FHA,” said Kurt Pfotenhauer, senior vice president for government affairs at the MBA.

“Lender Insurance will significantly lower costs and streamline the process for originating FHA loans, making it easier for lenders to offer affordable FHA financing to more American families.” Currently, when lenders apply for FHA insurance, they must transmit insuring data as well as mail paper case binders to HUD’s Homeownership Centers before loans are insured. With the Lender Insurance program, companies would instead handle the endorsement themselves and be required to send electronic case binders to HUD only when requested, the agency said.

This new, re-designed process would reduce processing time by one third and decrease direct insuring expense by as much as 25 percent, according to the agency.

Wells Fargo Home Mortgage, the nation’s largest FHA lender, participated with HUD in a pilot procedure prior to finalizing this program. Michael Levine, senior vice president, Wells Fargo Home Mortgage, said: “Lender Insurance is an innovative and revolutionary change to the FHA insuring process, which brings tremendous industry-wide benefits to HUD and lenders alike.”

HUD’s “FHA Connection” Web site link will enable the Department to verify that the lenders carry out the process correctly. Lenders must have an acceptable default rate in order to participate and must be re-approved each year to remain in the program.


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