Red Tape Still Holds Back FHA
There are a zillion articles out there examining what’s wrong with FHA, what’s right with FHA, what’s changing with FHA, etc., etc., etc.! Most of them mention the mounds of paperwork associated with FHA, but this USA Today article goes a little deeper with the explanation of the current situation.
When a mortgage broker deals with an FHA loan, the process “has to go through two extra hoops and another pile of paperwork,” Gumbinger says. Many private lenders use automated underwriting systems, a tool that FHA is now considering.
While soaring defaults in subprime mortgages have led to an increase in FHA applications, approvals are climbing at a slower pace. It generally takes 90 to 120 days for an FHA loan approval, so some applications are still in the pipeline.
The article also explains why FHA can be more difficult for lenders as well as borrowers when it comes to the red tape – specifically, expensive yearly audits. This article makes it very clear that making FHA relevant again has as much to do with administrative fixes as it does with fixes to the loans.
