Rural Housing Service Eyes Tech Upgrade for Direct Endorsements
The Rural Housing Service is trying to catch up with the Federal Housing Administration by developing a direct endorsement program.
As part of its fiscal year 2015 budget proposal, RHS is seeking congressional approval to move away from its manual loan approval process and allow qualified lenders to approve RHS-guaranteed loans.
"This will make RHS more efficient and allow the single-family housing staff to refocus on other program needs," RHS administrator Tony Hernandez told a House appropriations subcommittee on April 4.
Hernandez testified that RHS has been working to automate the approval process, and lenders have agreed to pay a $50 per loan to cover the cost of the new system.
"They will pay a fee so it is easier for them to close more loans, and get more people into homeownership," Hernandez told the subcommittee. He stressed that the $50 fee will continue to cover the cost of this RHS initiative and the U.S. Department of Agriculture will not have to come back to Congress for more funds.
Currently, RHS personnel have to manually review and approve every loan. "We have to look it and give them a decision—going back and forth—via fax. We are doing this manually," the RHS administrator said.
As a result, it takes much longer to get a RHS-guaranteed loan approved than a FHA loan. The FHA is in the midst of its own technology transformation effort, including plans to replace antiquated systems and build a portal to collect electronic appraisal reports.
Many lenders shun the RHS program because of the antiquated approval process. And certain real estate agents steer their clients away from RHS loans because the turnaround time is so long.
"One of the things we hear in the field is that it takes so long to process RHS loans. This budget proposal would hugely speed that up," said Megan Booth, a senior policy representative at the National Association of Realtors.
NAR and the Mortgage Bankers Association support the USDA's proposal to modernize the RHS program.
"The FHA direct endorsement program has brought significant efficiencies to FHA lending. Properly implemented, a delegated underwriting program for RHS would bring similar benefits to RHS lenders and borrowers," said Pete Mills, a MBA senior vice president for residential policy and member services.
RHS lenders originated 163,000 federally guaranteed mortgages in FY 2013 totaling $22.4 billion, up from $19.2 billion in 2012, but was hit with a setback after its automated underwriting system was disabled during the fall 2013 federal government shutdown.