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The start of the end of paper submissions
The FHA joins Fannie Mae and Freddie Mac in providing technology for appraisal submission, review and purchasing. The U.S. Department of Housing and Urban Development (HUD) announced the news with Mortgage Letter 2015-08 which gives an overview of the FHA’s new Electronic Appraisal Delivery (EAD) FHA loan portal. Mortgagees, their authorized users, and designated third party service providers will be able to electronically deliver all FHA origination appraisal reports before endorsement through the EAD portal. All case numbers assigned on or after June 27, 2016, would require electronic appraisal delivery through the EAD portal.
How does it work?
The EAD portal is presently available to lenders for testing purposes and to become acclimated. As soon as the FHA gives mortgagees access credentials and the mortgagees validate that they are ready to use the portal, they can start delivering appraisals this way.
Appraisal reports can be submitted two ways through the EAD portal:
Once an appraisal is uploaded, a ‘successful submission’ confirmation will be provided to the mortgagee or they will be informed that the appraisal requires a correction and resubmission. After an appraisal report is successfully submitted, data sharing between the EAD portal and FHA Connection (FHAC) would allow for the population of certain data fields on the FHAC platform.
Lenders should note the following:
EAD Portal Technology
Determining how a mortgagee will submit appraisals to the EAD portal next year is important as appraisals can be submitted directly to the portal or through a third-party technology provider which integrates with the portal.
Lenders should make sure that their AMC or valuation management software provider is preparing for the change by establishing an interface with the EAD portal. Tight integrations should also be established by Loan origination system (LOS) vendors by working with their valuation software providers. Because the EAD portal technology is very similar to the GSEs’ Uniform Collateral Data Portal (UCDP) and many of the same technology vendors are working with the UCDP, this shouldn’t involve a steep learning curve.
The FHA is not stopping at its EAD portal, it will also start introducing other technologies such as electronic signature capabilities on most of its documents, developing an electronic case binder, which would replace paper-based files and adopting e-signed promissory notes. The Computerized Home Underwriting Management System (CHUMS), which has been the FHA’s insurance endorsement system of record for more than three decades will be upgraded in phases.
Prepare for EAD Now
The FHA is essentially mirroring what the GSEs did a couple of years ago with the development, training, introducing and addressing user concerns and issues of the UCDP, which was very successful and is now the standard for submitting appraisals, for investors as well as the GSEs. Because Fannie Mae and Freddie Mac’s UCDP has already been battle-tested, the FHA can benefit by learning from and leveraging the GSEs’ process of successfully accepting and handling electronic appraisals.
The EAD portal utilizes the same Uniform Appraisal Dataset (UAD) that the GSEs use, appraisers are acclimated to the UAD format and AMCs and lenders have implemented electronic appraisal delivery into their respective business process, making the system much easier to navigate and should lessen any user-related errors.
It’s important to start using the EAD portal well in advance of next year’s required start; although adoption rates are expected to be high along with relatively few system issues. Vendors are preparing now for next year’s rollout and lenders should plan on testing their systems and processes to ensure that they are ready for the deadline.
HUD.gov. Mortgagee Letter 2015-08