The Federal Housing Administration plans to relax requirements for direct endorsement underwriters.
In a draft mortgagee letter, the FHA said it is mulling changes to allow underwriters with part-time positions at FHA-approved mortgage companies to underwrite loans in the FHA Title II forward and Home Equity Conversion Mortgage programs.
Previously only full-time underwriters were given the green light to work on FHA-endorsed loans.
However, the administration is considering nixing this standing requirement in recognition that some mortgage lenders may not have the financial wherewithal to employ full-time underwriters.
But also with the understanding that this requirement may be keeping some smaller lenders from participating in the FHA program.
“FHA recognizes that the financial landscape for smaller lending institutions and Community Development Financial Institutions [CDFIs] has evolved significantly over the past decade, presenting both opportunities and challenges in sustaining growth and meeting customer needs,” wrote Julia Gordon, FHA commissioner, in the draft mortgagee letter published Oct. 24. “To reduce operational barriers, provide greater flexibility, and encourage participation in FHA programs, FHA is updating its policies to permit mortgagees to employ DE underwriters on a part-time basis.”
Apart from the part-time status change, all other requirements will stay the same, the administration said.
Mortgage lenders must ensure that underwriters are employed by one lender and are not contracted out. Also, DE underwriters must have a minimum of three years of experience reviewing credit applications and one-to four-unit property appraisals within the past five years.
The industry has until Nov. 25 to give its feedback on the future change.
Other changes that will have an impact on FHA-approved lenders include the administration’s cyber attack response requirements. A draft mortgagee letter in September outlined that the FHA wants to implement a 36-hour window of time for companies to report a cyber incident to the agency.
These requirements are in line with timelines set by the government-sponsored enterprises. Fannie Mae requires lenders to report within 72 hours if a potential hack has taken place, while Freddie Mac requires lenders to report within 48 hours of detection.
The administration’s move to implement data breach timelines for lenders comes during a time of increased cyber crime. In the past year, numerous megalenders have had their systems hit. In some cases, the attacks have been carried out at third-party vendors.
Loandepot, Mr. Cooper, Academy Mortgage and Planet Home Lending are among mortgage shops impacted by such incidents. Title companies have also been hit, including First American and Fidelity National Financial.
