Magazine article American Banker

FHA Preparing Electronic Loan Specifications

Magazine article American Banker

FHA Preparing Electronic Loan Specifications

Article excerpt

Byline: Anthony Garritano

The Federal Housing Administration - whose volume is expected to rise to about 30% of industrywide originations this year - says it recognizes the need to automate and will publish electronic mortgage specifications this year.

"We know we need to work in a paperless environment," said Jo Ann Kuczma, the director of the home mortgage insurance division at FHA. "Our goal is to receive all mortgage documents electronically and update FHA systems with all required information so that manual input of information by lenders is not required."

To this end, FHA is planning to pilot-test fully electronic mortgages with an FHA-approved lender this year. The agency has circulated a seven-page draft of its electronic signature specifications.

"This says that we've passed the tipping point on adoption," said Kim Weaver, the vice president of product management for Fiserv Inc.'s electronic lending platform.

"Considering that Fannie and Freddie control most of the industry and FHA controls the rest," she said, the agency's "willingness to work on documents across the life cycle of the whole mortgage and not just the note is huge."

But the fact that FHA is looking to standardize all mortgage documents has some wondering whether the specifications will be too complicated to stimulate adoption.

"There seems to be a lack of clarity on what standards are applied to what document," said Ken Moyle, the chief legal officer at DocuSign Inc. and a member of the Electronic Signature and Records Association. "For example, they're clear they want the note to be a Smart Doc" - a securable, manageable, archivable, retrievable and transferable document - "but not the other documents."

Moyle said one of his trade group's goals is "keeping technology neutral. …

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