HUD, VA Tout Risk Management Improvements

MIAMI–The government, it’s been said, moves slowly. But sometimes, the results are worth the wait.

Take for example, HUD’s Loan Review System. Glenn Dumont, deputy director of the Atlanta Homeownership Center with HUD, said implementation of HUD’s Loan Review System was a “long time coming,” but ultimately successful.

The LRS, implemented this past May, was “designed to make it easier for you to do business with FHA,” Dumont said here at the Mortgage Bankers Association’s Risk Management, QA and Fraud Prevention Forum. “It’s the system we needed to improve our loan defect taxonomy.”

RMQAHUDOne of the benefits of the taxonomy, Dumont said, was simplifying the review process. In fiscal 2017, FHA conducted nearly 50,000 loan-level reviews, a substantial improvement over recent years. Preliminary data for LRS reviews reflected similar results to previously reviewed post-endorsement technical reviews.

“Previously, in our initial review, 50 percent of our loan review are unacceptable,” Dumont said. “After review, 90 percent of those loans were resolved. What this tells us is that we need to do a better job in communicating in the initial stages,” he said.

Dumont said he hoped FHA has become better in working with lenders. “Our focus in communicate, communicate, communicate,” he said. “I think we’ve been doing a pretty good job at this and we’re getting better. And most of our information is now online.”

Alberto Planas, assistant director of oversight with the VA Loan Guarantee Service, said the VA had a record year in fiscal 2017, totaling more than 730,000 loans totaling $1.87 billion. Foreclosure and delinquency rates continue to be among the lowest in the industry, which he attributed to an aggressive pre-loan review process.

“These are good quality loans,” Planas said. “If you aren’t making VA loans, you should be.”

Sharvon Jackson, assistant loan production officer with the Department of Veterans Affairs, noted the average age of a VA borrower was 49 years old with a credit score of 713; the average loan limit was $254,483 with a debt-to-income ratio of just under 40 percent. Loans averaged a 3.675% interest rate.

However, VA continues to find a high percentage of loans with deficiencies–nearly 59 percent. Jackson said missing documentation ranks highest. “We can’t really evaluate your loan if we can’t see the documentation,” she said.

Planas said VA is starting to see “a lot” of unapproved underwriters. “We keep track of your approved underwriters, and if we find a loan that’s using an unapproved underwriter, we can consider that to be ‘egregious’ and that can have ramifications,” he said. “It could mean that the reps and warranties are on your dime.”