Government Lending Has A Strong Digital Future

“When I came on board (at the VA), a reviewer would get a file that might have 200 to 300 pages,” said Bell. “They would review that file and if anything was missing, they would send a letter and wait for someone to respond. You could not report on what happened to that file” while waiting for a response.

Three Years Away

Today, he said, the VA is “two years into a five-year project to change the way we do business in loan guarantee. It’s going to be an (Application Programming Interface) API-based system.”

He says their new API-based system will bring efficiencies and speed to reviewing files from prospective loan applicants.

The VA has just over 1.4 million purchase and refi loans that are worth a combined $447 million. The average loan is just over $300,000.

At the USDA, they use a version of The TOTAL Mortgage Scorecard from the Federal Housing Administration, Dean said.

“It’s been a great system but with (upcoming changes to the) URLA, we’ve re-platformed it from a Java-based application and put it on a modern cloud service,” Dean said. “We don’t have the integration everyone wants but we’re building that out.”

Solving Data Integrity

CSBS faces some very different issues, said Byers.

“We’ve been engaged for the past three-and-a-half years with state regulators as well as (banking) industry in trying to solve a data integrity issue with batch uploads of loan origination file data for examination purposes into our compliance platform,” he said. “Our compliance platform works very well with accurate and complete data but with inaccurate and incomplete data, it gives us a lot of findings that are bogging down the regulators in the examination process.

“Many of them have stopped using technology in a time when the nonbank mortgage origination volume has skyrocketed,” he added.

What’s Happening Today

The session’s moderator, former Housing and Urban Development Deputy Secretary Brian Montgomery, then asked the panel what they had learned about implementing new technology.

“Plan and plan,” said Daetwyler. “We’ve communicated frequently. We’re not going out on a limb by ourselves.

“We need to be more agile and automated. We’re looking forward to utilizing more AI (artificial intelligence) and other technologies,” he added, so the USDA can help more low- to moderate-income people buy homes.

He also suggested that anyone changing technology, within the mortgage industry, make sure they use MISMO’s standards.

At CSBS, Byers said, “We need to bring the state examination system into the world of technology that many of you are used to.”

They’re “in the process of drafting an RFI (request for information) to explore the uses of technology now and in the future in the examination processes and how that can facilitate compliance reviews in our world and, more broadly, help the state bank examiners,” he added.

Toward the end of the session, Bell suggested his colleagues on the panel, as well as those attending the session, faced a similar issue.

“If we don’t figure out a way to define data as an industry, then how are we going to improve processes for this industry?” he asked. “Data and analytics, if we’re not using them the same way, we’re missing a great opportunity.”

USDA Loans

In just over 30 years, the United States Department of Agriculture (USDA) has guaranteed 2.4 million mortgages for more than $292 billion.

“In fiscal year 2021, we guaranteed our largest amount ever, $22.5 billion,” Dean Daetwyler, director of the system implementation and management division at the USDA’s Rural Development department, said. “For us, that’s big. That was over 126,000 loans and it’s to low- and moderate-income families in rural areas.”

The USDA guaranteed program started in 1991, and it’s like the ones managed by the U.S. Department of Veterans Affairs (VA) and the Federal Housing Administration (FHA), he said.

“We can guarantee up to 100% of the LTV plus the upfront guaranteed fee which is 1% of the loan,” Daetwyler said.