FHA unveils new automated underwriting system

For years, lenders across the country used the automated underwriting systems of Fannie Mae and Freddie Mac to speed up their origination process. Meanwhile, the process for Federal Housing Administration loans was a bit different.

Things are about to change.

The FHA announced last week that it is launching its own automated underwriting system for lenders to use when originating FHA mortgages.

According to the FHA, the new underwriting system “allows lenders to electronically submit loan application data for single family forward mortgages from their loan origination systems directly to the module and receive mortgage insurance eligibility scoring decisions” generated by the FHA’s systems.

The new automated underwriting system, which is called “FHA Catalyst: Single Family Origination Module – AUS,” is part of an ongoing technological overhaul at the FHA.

“The launch of FHA’s first direct automated underwriting system is a huge milestone for the over one million borrowers on average who rely on FHA insurance annually,” Assistant Secretary for Housing and Federal Housing Commissioner Dana Wade said. “We’re excited to deliver this enhanced automated underwriting capability specifically for FHA-insured lending because it will streamline processes for everyone, including consumers.”

As Wade said, the change could speed up the mortgage process for FHA borrowers.

According to the FHA, when a lender submits loan documentation, its new system will provide eligibility decisions as well as “detailed feedback certificates that provide specific and actionable information for lenders.”

Per the FHA, lenders will be able to use the new system for single-family mortgages “on or after October 30, 2020.”

The FHA notes that lenders will not be required to use the new automated underwriting system. Lenders will still be able to use “other automated underwriting systems” that work with the FHA’s existing systems.

According to the FHA, the new underwriting system is for single-family forward mortgages only. The system does not affect the Home Equity Conversion Mortgage (HECM) program for reverse mortgages.