FHA launches an automated underwriting system for mortgage lenders

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The Federal Housing Administration has launched a new automated underwriting system through its new FHA Catalyst single-family origination module.

Unveiled Friday by the Department of Housing and Urban Development, the technology aims to provide lenders with immediate and expanded responses related to insurance eligibility based on FHA policy. These responses include instant error codes and feedback reports.

To get mortgage insurance eligibility indicators directly from the FHA, lenders need to build an interface that connects their loan origination system to the module.

Loan eligibility scoring will come from the TOTAL (Technology Open to Approved Lenders) scorecard, as it does with other automated underwriting systems.

The new AU system, which is optional for lenders to use, is the first functionality the FHA is introducing through the FHA Catalyst single-family origination module. The module was designed to help lenders submit, manage and monitor data from applications and other sources used in the origination process for insured loans.

The FHA has been working to update its legacy systems so that it can offer lenders more modernized automation such as validation services technology. That technology would give lenders access to third-party verification of borrower information such as income, assets and employment.

FHA Catalyst modernization efforts are part of a multi-year effort supported by a $40 million appropriation from Congress.

FHA and government-sponsored enterprise loans are the main types of loans currently being originated and sold into the U.S. secondary mortgage market.

To date, the FHA has been slower to modernize its systems than the GSEs.

File formats in the FHA system will use the MISMO (Mortgage Industry Standards Maintenance Organization) 3.4 dataset and the Uniform Residential Loan Application that the GSEs plan to make available in March of next year.

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Mortgage technology FHA LOS Originations Underwriting Secondary market Capital markets MISMO