What can the residential mortgage industry expect from the Federal Housing Administration (FHA) as we head into 2021? In the latest episode of On the Hill, Tim Rood, SitusAMC head of industry relations, spoke with Dana Wade, FHA Commissioner and Assistant Deputy Secretary of the Department of Housing and Urban Development (HUD). They discussed efforts to help borrowers through the COVID-19 crisis, recent technology improvements and expectations for the year ahead. Click here to listen to the podcast.
Ms. Wade has deep experience in housing policy and finance, including serving as an associate director of the Office of Management and Budget (OMB) and deputy staff director of the Senate Banking Committee. “I’ve had a lot of roles where I’ve had to deal with crisis,” Wade said. “I started working on Capitol Hill on the Budget Committee in the middle of the Great Financial Recession and worked on the Troubled Asset Relief Program and the conservatorship of Fannie and Freddie. I had to be adaptable and work hard and fast. I’ve applied a lot of those lessons to the COVID pandemic.”
Helping Borrowers Through the Crisis
FHA’s mission is to serve low- to moderate-income and minority borrowers, who have been hard hit by COVID-19. About 10 percent of FHA’s portfolio in forbearance and delinquency, comprising more than 800,000 borrowers. FHA provided a range of forbearance policies and expansion of the loss-mitigation tool kit that allows for a standalone partial payment of claims, so borrowers don’t have to worry about balloon payments if they’ve taken forbearance.
Heading into 2021, Wade is hopeful that a foreclosure and eviction crisis can be avoided or minimized by the options FHA has put in place to help borrowers and “keeping lines of communication open” with industry participants. The industry “is doing the huge task of working out these loans with borrowers,” she said. “We would never have been able to accomplish all the policy changes this year without the input of the industry. That doesn’t mean we can do everything industry wants, but they have been invaluable partners.”
Modernizing the Process
Wade spent four years working to transform FHA into a world-class business organization, including implementing FHA Catalyst, the agency’s technology modernization initiative. “FHA was being buried by paper, antiquated systems and complicate procurements, and it was really coming in the way of our ability to do our mission,” she said. FHA Catalyst includes an automated underwriting system (AUS), digitizing much of the claims submission and processing tasks. The system currently allows participants in the single-family forward mortgage insurance program to electronically submit case binders and supplemental claims, simplifying and streamlining the process for lenders, services and the agency. Additional functionality will be added over time to address all aspects of FHA’s business.
Wade’s tenure as FHA leader was characterized by a range of other improvements, including updated rules and regulations, more transparency in financial reporting, and better clarity to lenders and markets. Over the last four years, FHA:
- issued more than 65 mortgagee letters and rewrote FHA handbook;
- grew the economic value of Mutual Mortgage Insurance (MMI) Fund by $40 billion, doubling its value and tripling the capital ratio to 6 percent from 2 percent;
- managed through 30 hurricanes and implemented the Congressionally mandated forbearances and foreclosure moratoriums triggered by the COVID-19 pandemic;
- and improved the financial performance of the Home Equity Conversion Mortgage (HECM) program serving senior citizens.
Fostering Clarity and Transparency
Mitigating business risk is a paramount concern for the industry in 2021, given the new rules and regulations that emerged to address the pandemic’s impact on borrowers. Wade said she is hopeful that her team’s work to provide more clarity and certainty will continue in the new administration.
“In terms of enforcement, you can be aggressive and make enforcement a top priority, which we have done; we don’t turn a blind eye to any bad actor,” she said. “But we’ve been able to accomplish more certainty and clearer rules of the road.” For example, FHA executed a memorandum of understanding with the Department of Justice on use of the False Claims Act and other measures. “I hope the things we’ve done will have staying power,” she said. “You can marry the goal of having strong enforcement with providing as much certainty to the mortgage marketplace as possible.
“The mortgage industry has been such a positive contributor to economic growth and some of the bright spots that we see in the economy,” Wade added. “It’s a lot of folks who have been working very hard to provide mortgages, to refinance mortgages, to service them. I hope we can step back and appreciate the positive role the mortgage industry has played this past year.”
Click here to listen to the full interview with FHA Commissioner Dana Wade.