FHA May Update Automated Underwriting Engine

The Federal Housing Administration is working on the first update of its automated underwriting scorecard, TOTAL, since it was introduced in 2004, according to a report by congressional auditors.The General Accountability Office takes FHA to task for failing to have policies in place to routinely update TOTAL (Technology Open to Approved Lenders), noting that the scorecard may have lost some of its effectiveness in predicting defaults. The GAO also raises concerns about the fact that FHA loans with downpayment assistance or "gifts" from nonprofit groups have higher default and claim rates than other FHA loans, but the scorecard does not include variables for the source of the downpayment. In response, the FHA says the scorecard is "working exactly as it was envisioned" and the contractors and loan data have been secured for the update of the technology. FHA is "revisiting" the issue of downpayments and whether the "source and amount of gifts for the downpayment should be added to the algorithm."