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Recently, I discussed a new security role of “Lender Agent” that was created by USDA Rural Development for participating lenders.
Once designated as a “Lender Agent” – a User will be authorized to establish applications, order new and re-issue existing credit reports and request preliminary underwriting recommendations on behalf of an approved lender.
Although this is a baby-step in the right direction, one glaring difference between FHA & VA loans, with those administered by the USDA, is that RHS-guaranteed loans must ultimately be approved by USDA staff.
Under HUD/FHA’s Lender Insurance Program (which currently accounts for over 70% of its single-family business), approved Direct Endorsement (DE) lenders can process, underwrite, close and insure FHA loan transactions – all without prior review by HUD staff.
This helps overall processing times to be greatly reduced, not to mention saving lenders thousands of dollars in mailing & shipping costs since only those cases targeted for post-closing review (less than 5%) must be forwarded to the HUD Homeownership Centers (and many of these files are sent electronically).
The good news from Capitol Hill in the first week of February 2016 is that the House overwhelmingly (427-0) approved a Bill that will authorize the USDA to use Direct Endorsement lenders to approve RHS-guaranteed single-family loans.
Although this legislation must get through the Senate and ultimately must be signed by the President before it is enacted, it is rather encouraging that such a reform measure is being planned. Of course, it will take the USDA some time to develop its DE policies & procedures once this legislation becomes law but their staff can look at both FHA’s and VA’s recent past experiences in implementing similar programs and benefit from the results.
Loading ...As I stated in my December 18, 2015 Blog Post, once the USDA fully implements its version of the DE program maybe some of our lawmakers will begin “thinking outside of the box” and consider the consolidation of all single family government loan programs (i.e. FHA, VA and USDA) into “Government Loan Processing Centers”.
In 1996, HUD began the process of consolidating all of its single-family FHA loan origination activities from 81 Field Offices into 4 Homeownership Centers.
This has proven to be a big success as FHA loans have an even larger share of the market and there are no backlogs preventing lenders from closing & insuring FHA loans. Similarly, it would be feasible to establish Government Loan Processing Centers that would administer all single family loan programs currently handled by the FHA, VA and USDA. This move would help streamline current operations and bring some economies of scale to the processing of this workload.
Perhaps a new Administration will explore such initiatives in looking for ways to reduce overall government spending but keeping vital programs such as the FHA, VA and USDA loan programs viable?
Stay tuned!
