The Federal Housing Administration (FHA) needs to spend millions of dollars on technology to catch up with the rest of the industry, FHA Commissioner Brian Montgomery said at the Mortgage Bankers Association annual convention in Washington, D.C.

"To be sure, my highest priority is to move FHA into the 21st Century and beyond." Montgomery added that the agency will explore shared technology with Fannie Mae and Freddie Mac as well as other government agencies. But, if that's not possible, FHA will go with "off-the-shelf" software upgrades. "We peg the price tag at roughly $80 million over four years. This will encompass all the work we need to do in single-family housing," Montgomery said. He explained that the agency lags far behind the rest of the industry in its automated underwriting and valuation systems, and paperless processes. "We can only monitor a small number of loans, looking for underwriting defects, yet we are the largest residential finance insurer in the world," Montgomery said. He noted that FHA is still using paper case files. "This costs us millions of dollars in storage, maintenance and shipping, and presents a burden to the industry that has been moving toward a paperless environment for years," Montgomery said. "And it comes at enormous expense to borrowers, to lenders and even taxpayers. We operate a legacy information system that is unfit to meet the needs of the 21st Century. Some of our key systems are over a quarter-century old." Elsewhere in his speech, Montgomery hinted that FHA could move to raise the standards on FHA forward loans. FHA has made a series of moves to tighten the reverse-mortgage program, but also has concerns about borrower debt loads and other risk factors in the regular book. Source: The Scotsman Guide