As part of a recent Trump administration push to expand access to mortgage credit, the Federal Housing Administration should modernize its collateral valuation process to align it with the collateral valuation standards established by Fannie Mae and Freddie Mac, the American Bankers Association and nine associations said in a joint letter to the agency.
In March, President Trump signed an executive order directing federal agencies to take steps to improve the availability and affordability of mortgage credit. The associations said that aligning FHA’s collateral valuation process with those of the two government-sponsored enterprises, or GSEs, could streamline the agency’s financing process, “making it faster and easier for lenders to produce and consumers to obtain an FHA loan.”
The most significant change would be for FHA to adopt the GSE’s property condition standards as a replacement for the FHA Minimum Property Requirements, the associations said.
“The GSE’s strong consumer protection standards are associated with the most widely used financing programs in the market,” they said. “This change alone, which would still clearly protect FHA borrowers from purchasing substandard housing, would have a substantial impact in reducing the friction that can discourage or disrupt access to the FHA home loan program.”
Another key change would be to update the FHA Handbook guidance for the Direct Endorsement Underwriter Program to separate the credit underwriting from the appraisal underwriting experience requirements, they said. In addition, the FHA should follow the example set by the GSEs by replacing its outdated field review process with a desk review baseline, “granting lenders the flexibility to order physical inspections only when specific risk factors warrant.”
