Along with private mortgage providers, the Department of Housing and Urban Development's (HUD) Federal Housing Administration (FHA) has been impacted by technological advances that began in the mid-1990s and that have significantly affected the way the mortgage industry works. As a result, in 2004, FHA implemented Technology Open to Approved Lenders (TOTAL) Scorecard--an automated tool that evaluates the majority of new loans insured by FHA. However, questions have emerged about the effectiveness of TOTAL. Given these concerns, you asked GAO to evaluate the way the agency developed and uses this new tool. This report looks at (1) the reasonableness of FHA's approach to developing TOTAL and (2) the potential benefits to HUD of expanding its use of TOTAL.
Recommendations for Executive Action
|Department of Housing and Urban Development||To improve how HUD uses and benefits from TOTAL, the Secretary of HUD should develop policies and procedures for updating TOTAL on a regular basis, including using updated data, testing additional variables, exploring hazard model benefits, and testing other cut points.|
|Department of Housing and Urban Development||To improve how HUD uses and benefits from TOTAL, the Secretary of HUD should explore additional uses of TOTAL and the credit data it utilizes, including to help adjust cut points, implement risk-based pricing, develop new products, and enable Ginnie Mae to disclose more information about securities backed by FHA-insured loans.|