Page 57 - September October 2018 Disruption Report Flip Book

GINNIE MAE
SEJPATN.U-AORCYT.20210818
During the first three quarters of 2018, FHA has seen a risk in rising home prices, triggering “imbalances in the housing market, especially when there’s a severe discrepancy between the supply and demand for housing.” Montgomery also discussed the changes that his agency has made to the Home Equity Conversion Mortgage program (HECM), which drained $14.5 billion from the mutual mortgage insurance fund and continues to be heavily subsidized. His staff discovered that inflated appraisals were “more common than we initially thought,” said Montgomery. FHA’s staff discovered that 37% of HECM appraisals were inaccurate by at least 3%. “So beginning October 1, we put measures in place to try and correct these biases,” he said. “We will be looking at all HECM appraisals submitted and we may require a second appraisal if our reviews showed that there was an inflated value.”
FHA is also planning to streamline its single-family loan servicing requirements to align with industry standards, according to Montgomery. “We remain cognizant of the challenges for servicers, which HUD generally relies upon to carry out such functions, and are committed to identifying reforms that would help relieve some of the cost burdens,” he said. In contrast to the conventional market, FHA still relies on paper case files and an outdated legacy information system.
Montgomery also discussed the need for state-of-the-art technology and data analytics at FHA. “Some of our key systems are over a quarter of a century old. They’re very expensive to maintain, and some are based on programs and languages built for obsolescence years ago. ...Ensuring we have the right technology to manage the risk of our portfolio I think is just good governance. My highest priority has been to move FHA into the 21st century and beyond to ensure that we are able to serve the people who rely on us.” (DS News, Radhika Ojha, 10/24/18; American Banker, Hannah Lang, 10/15/18; DS News, Radhika Ojha, 10/22/18; HousingWire, Jessica Guerin, 10/01/18)
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