New system will speed FHA filing process Computer program uses Freddie Mac's technology in loan applications

Nation's Housing

July 14, 1996|By Kenneth R. Harney

WASHINGTON -- If you automatically associate the words FHA (Federal Housing Administration) home mortgage with bureaucratic paperwork hassles at application and glacial processing times before closing, you may need to update your image.

This summer, thousands of mortgage applicants across the country will get the first glimpse of a new, electronic FHA, where you don't have to carry stacks of your most personal records to your loan officer's desk, and where the average mortgage processing time drops from six weeks to six days.

As part of a series of steps to streamline itself, FHA has just joined with Freddie Mac -- the private sector mortgage giant -- to use Freddie Mac's highly acclaimed "Loan Prospector" computerized underwriting system to originate FHA loans.

In a pilot program, an estimated 4,000 to 6,000 FHA applicants will be evaluated with the same technology Freddie Mac uses for conventional borrowers.

They'll get a preliminary go or no-go decision on the credit portions of their application within about 1 1/2 to four minutes of submitting their basic data -- probably while they're still seated with a loan officer. More important, they'll also get a shot at what FHA applicants rarely have been permitted -- the opportunity to waive certain of the standard paperwork submissions or ironclad rules the agency traditionally has required be fulfilled before approving a mortgage.

For example, applicants who obtain a preliminary credit green light by computer may be allowed exceptional flexibility in such areas as debt-to-income ratios, asset and employment verifications, tax returns and credit reports.

Rather than having to meet FHA's 41 percent rule on maximum total monthly debt compared with total monthly income, applicants with higher debt-to-income ratios may be waved through if they're identified by Loan Prospector as solid credit risks.

Other waivers of standard FHA rules that applicants may get by using the computerized underwriting system:

Borrowers receiving alimony or child support won't have to present court documents or other official papers to "prove" this income. All they'll need is to show three months of bank statements indicating regular receipt of the funds.

Applicants with credit dings won't necessarily have to submit detailed written explanations for late payments on their consumer debt accounts.

Self-employed applicants won't need to haul in their business tax returns, or to produce year-to-date profit-and-loss balance sheets.

Tenants won't need to produce documentary verification of rent payments if their credit reports over the past four years show at least four open or active credit accounts.

Pub Date: 7/14/96

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