Who Should Pay for FHA Technology Upgrades?

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Everyone agrees that the use of technology can increase productivity while decreasing costs to operate. This is true in just about any business, including mortgage lending.

So, FHA is looking to upgrade their risk management systems and requesting new administrative fees totaling $30 million to be assessed to cover some of the cost.

Lenders are up in arms as they say although these upgrades are needed, and long overdue, the industry, nor the consumer, should be required to pay for them. These are just of a cost of doing business.

Further, once implemented, these upgrades should improve FHA’s efficiencies, streamlining their operations, thus reducing their expenses.

As lenders have been told, these are not expenses; these are investments in technology that should pay dividends down the road. Will they?

FHA says with their budget being cut by the current administration, they require the funds to implement the much-needed, and long overdue, technology to bring their systems into the current age.

Although they are projected to make some pretty hefty profits, they say, the additional money is still required to properly operate a successful FHA. A program critical to first time and low to moderate income home buyers, lenders, and the overall stability and health of the housing market.

It all comes down to who should pay for the much-needed technology upgrades? Let’s be real, in the end, the consumer will pay. If the fee is passed by Congress it will increase the cost of an FHA loan, which will ultimately be a cost borne by the consumer. The very party the FHA programs are intended to benefit. Is that fair?

As an alternative, maybe the FHA can cut their upfront and annual MI premiums to offset any increase in costs to the consumer resulting from the new administrative fees. That seems fair.

If good quality loans are originated and they perform as expected the insurance fund should not be hurt. Lenders need to do their part.

Or, will the new proposed FHA technology upgrade administrative fee be just another fee hidden as a tax on homeownership? Where does it all end?

About the Author

Michael Vitali

Michael L. Vitali – Independent Consultant to the Mortgage Industry Mike Vitali is an independent consultant to the mortgage industry on matters concerning compliance and mortgage lending. He most recently served as the Senior Vice President and Chief Compliance Officer for LoanLogics, monitoring regulatory developments and their practical implications for the mortgage lending industry. His duties included research, interpretation, and analysis of existing and proposed legislation related to the industry in support of recommendations for policy and/or procedure changes to maintain continued quality and compliance with all applicable laws, rules and regulations, investor requirements, and standard mortgage practices. In his more than 40 years in the mortgage industry, in senior level management, he has gained experience in all areas of mortgage lending, risk management, and compliance. Mike is a past President of the MBA of Greater Philadelphia, is a charter member and was the second Chairman of the MBA of Pennsylvania, and a past board member and Legislative Chair of both associations. He is a recipient of the 1998 Mortgage Banker of the Year Award from the MBA of Greater Philadelphia, and the 2003 Chairman's Award from the MBA of PA, and currently serves on several compliance related task forces for MBA.