[Federal Register Volume 65, Number 235 (Wednesday, December 6, 2000)]
[Notices]
[Pages 76273-76274]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-30987]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
[Docket No. FR-4623-N-01]
Deployment of the FHA TOTAL Mortgage Scorecard
AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner, HUD.
ACTION: Notice.
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SUMMARY: This notice announces HUD's intention to deploy the FHA TOTAL
Scorecard for mortgage industry use. TOTAL refers to ``Technology Open
To All Lenders.'' The FHA TOTAL Scorecard, developed by HUD, assesses
the credit worthiness of FHA borrowers by evaluating certain mortgage
application and borrower credit information that has been statistically
proven to accurately predict the likelihood of borrower default. The
FHA TOTAL Scorecard is not an automated underwriting system; rather, it
is a mathematical equation intended to be used within an automated
underwriting system. HUD wishes to deploy the FHA TOTAL Scorecard with
industry users
[[Page 76274]]
who share the Department's vision of increasing homeownership
opportunities.
In order to participate in the Scorecard initiative, interested
parties should have an automated underwriting system (``AUS'') in
place. As this product offering relates solely to the deployment of a
scorecard, the AUS will utilize its own checks for FHA eligibility
rules and its own functionality for loan specific messages. Based on
the Scorecard configurations, the industry user must be equipped with a
Sybase Database Server that receives calls in XML or Sybase Open
Client. In addition, the user must have a communication link to HUD
(https). In order to maximize the effectiveness of the Scorecard,
interested participants should consult their internal IT personnel to
ensure sufficient capacity to house the FHA TOTAL Scorecard.
Participants should be prepared to fully support the server under their
current IT Operations center. Additionally, any programming related to
required inputs/connectivity to the FHA TOTAL Scorecard are the
responsibility of the industry users.
ADDRESSES: Interested persons are invited to submit comments and
responses to the Rules Docket Clerk, Office of the General Counsel,
Room 10276, Department of Housing and Urban Development, 451 Seventh
Street SW, Washington DC 20410-0500. Communications should refer to the
above docket number and title. Facsimile (FAX) responses are not
acceptable. A copy of each response will be available for public
inspection and copying during regular business hours (7:30 a.m. to 5:30
p.m. Eastern Time at the above address).
FOR FURTHER INFORMATION CONTACT: Laura Donnelly, Office of the Deputy
Assistant Secretary for Single Family Housing, Room 9278, Department of
Housing and Urban Development, 451 Seventh Street S.W., Washington,
D.C., 20410, telephone (202) 708-0614 (this is not a toll-free number).
Hearing or speech-impaired individuals may access these numbers via TTY
by calling the Federal Information Relay Service at 1-800-877-8339
(this is a toll-free number).
SUPPLEMENTARY INFORMATION:
Background, Purposes and Objectives
In July 1996, the FHA, an entity within the Department of Housing
and Urban Development (``HUD'' or the ``Department'') issued Mortgagee
Letter 96-34. That Mortgagee Letter set forth HUD/FHA's requirements
and processes for approving automated mortgage underwriting systems
(``AUSs'') to underwrite HUD/FHA insured mortgage loans. Mortgagee
Letter 96-34 permitted lenders to utilize various AUSs in underwriting
FHA loans, following screening, evaluation and approval of the AUS by
FHA. Pursuant to Mortgagee Letter 96-34, two individual privately-
developed mortgage scorecards were approved by HUD for use in the
processing of HUD/FHA mortgage loans. Both of these systems employ
mortgage scorecards developed by the system vendors using FHA borrower
data. This notice is to inform the public that FHA intends to rescind
approval of these proprietary scorecards and replace with the FHA TOTAL
Scorecard. TOTAL refers to ``Technology Open To All Lenders.''
A Mortgagee Letter will be issued to supersede Mortgagee Letter 96-
34, and outline the basic requirements for an AUS to be used in
underwriting FHA loans; this future Mortgagee Letter may be further
amended or supplemented by future mortgagee letters, handbooks, policy
statements, or lender notices concerning AUSs. Prior approvals for use
of privately-developed mortgage scorecards will be formally rescinded
by written notice to the entities previously receiving such approvals.
HUD anticipates providing three months prior notice of rescission and
thereafter HUD will require use of the FHA TOTAL Scorecard in any AUS.
Users of the FHA TOTAL Scorecard will receive documentation relief and
credit policy waivers provided by FHA. FHA has also developed a Use
Agreement which sets forth the requirements and responsibilities for
implementation and use of the FHA TOTAL Scorecard by qualified lenders,
government sponsored enterprises and their contractors, sponsors, loan
correspondents and authorized agents that purchase, sell, underwrite or
document HUD/FHA mortgage loans for lenders under HUD/FHA's Direct
Endorsement procedures for various HUD/FHA mortgage insurance programs
(hereinafter ``Lenders''). Please note that while FHA wishes to permit
access to the FHA TOTAL Scorecard as widely as possible, only lenders
with Direct Endorsement status may ``underwrite'' FHA insured loans,
with or without use of AU systems, on FHA's behalf.
HUD/FHA's objectives for entering into the Use Agreement are to:
(a) Provide for the use and implementation of the FHA TOTAL
Scorecard in AUSs used during the process of underwriting FHA loans;
(b) Identify and approve creditworthy borrowers that may have been
excluded from homeownership under traditional HUD/FHA underwriting
guidelines;
(c) Continue to ensure that no borrower will be denied an FHA-
insured mortgage loan solely on the basis of a ``refer'' risk
classification by an AUS.
(d) Expand access to mortgage credit for low-and moderate-income
borrowers and other under served populations and locations and to
discourage unlawful discrimination against borrowers protected by the
Fair Housing Act and the Equal Credit Opportunity Act;
(e) Facilitate access to and reduce the cost and time associated
with originating HUD/FHA-insured mortgages;
(f) Enhance HUD/FHA's ability to assess and manage risk and
preserve the actuarial soundness of HUD/FHA's mutual mortgage insurance
fund;
(g) Facilitate and encourage a standardized, industry-wide
capability for communication and exchange of information among members
of the mortgage lending community.
This Notice
HUD is in the process of deploying the FHA TOTAL Scorecard and will
rescind the approval of scorecards under Mortgage Letter 96-34, ML 98-
14 and ML 99-26. Upon completion of FHA's deployment efforts, FHA will
require use of the FHA TOTAL Scorecard in any AUS and Users will
receive documentation relief and credit policy waivers approved by FHA.
HUD's goals are to increase the availability of the FHA TOTAL Scorecard
and increase lenders' efficiencies through loan level data transfer on
a real-time basis thereby reducing lenders reporting requirements and
improving workflow processes through reduced data entry. Other goals
include improving underwriting efficiencies by lenders, decreasing
losses to FHA's insurance fund, and integrating the use of automated
underwriting systems into FHA's existing processes and workflow
including mortgage insurance endorsement processing.
To that end, HUD continues to work with Users to deploy the FHA
TOTAL Scorecard.
Dated: November 29, 2000.
William C. Apgar,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 00-30987 Filed 12-5-00; 8:45 am]
BILLING CODE 4210-27-P