Rural Housing Service Moving Toward Delegated Underwriting
It may take several years, but the Rural Housing Service is on a path to modernize its single-family program and give lenders more responsibility for approving and closing loans.
In late July, Congress passed a housing reform bill that authorizes the agency to implement a delegated underwriting program.
This will expedite the approval of RHS-guaranteed loans and give lenders more control over the closing process.
"We are very excited about that new authority," said Joaquin Tremols, the director of single-family loans for RHS, at a Ginnie Mae summit this week.
Currently, RHS lenders have to send loan applications and closing documents to the RHS in Washington for loan approval.
The agency has already submitted a regulatory plan to the Office of Management and Budget. After the OMB reviews it, the plan will have to go out for formal comment, a process that could take some time.
Tremols said he would like to see the roll-out of the delegated underwriting program by the end of 2018, if not earlier. "We will push very hard for that."
While the regulatory process can be daunting, another hang-up is funding. For fiscal year 2017, RHS will request $2.5 million from Congress to cover the costs of new technology to implement a delegated underwriting system. Overall, the transition to delegated underwriting is expected to cost $4.5 million.
To get the ball rolling, RHS is seeking OMB approval to charge RHS lenders a $25 fee for using the agency's current underwriting system, which is known as the Guarantee Underwriting System or GUS. There is currently no charge for using GUS.
"If we can implement that user fee quickly, we can start funding our technology investments," Tremols said at the Ginnie Mae summit.
RHS is reducing its premiums on single-family loans effective Oct. 1. The RHS upfront fee will drop to 1% from 2.75% of the loan amount. And the annual fee will drop to 35 basis points from 50 basis points.
"This makes it a very affordable program for low- and moderate-income rural households," Tremols said.