Lenders mandated to use FHA Catalyst for appraisals

Starting March 14, 2022, all lenders must use the FHA Catalyst appraisal module

Starting March 14, 2022, the Federal Housing Administration (FHA) will require all lenders to use FHA Catalyst for appraisals. The module can also accept appraisals for Home Equity Conversion Mortgages (HECMs), the administration announced last week.

The FHA Catalyst: Electronic Appraisal Delivery module will allow for the administration to expand their data collection and analysis capabilities. Meanwhile, lenders can electronically submit, track and manage single-family property appraisals, the FHA said.

The announcement comes after more than a year’s worth of efforts by the FHA to streamline and modernize their FHA loan origination and claims process.

Last year, the module was introduced as a pilot with no set deadline for lenders to transition.

According to the administration, this gave mortgagees and their designated technology service providers time to make “necessary adjustments to their systems and processes, including onboarding activities.”

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Now the administration is mandating the use of the platform starting next year. For cases with a previous appraisal submission to the legacy EAD, the FHA is allowing for appraisal resubmission to be delivered through the legacy EAD portal until April 15, 2022.

However, after that date, appraisal submissions for all cases, regardless of previous submissions, must be delivered through Catalyst. Meanwhile, lenders with HECM cases may use the module immediately, the administration said.

The FHA Catalyst platform has been a bright spot in the Department of Housing and Urban Development’s outdated IT structures.  

A HUD Office of Inspector General report published earlier in the year said that “to date, FHA Catalyst has been referenced as the most successful effort due to its increased efficiencies and cost savings results.”

Once fully deployed, the platform will allow the decommissioning of at least 11 outdated legacy HUD IT systems, which will save close to $20 million annually, the IG added.

In the report, the IG warned that the success of FHA Catalyst is “dependent upon several factors that pose potential risk”, one of those factors being “the leadership transition [that] has resulted in a shift of focus from continued FHA Catalyst module deployments and improvements to other programs office priorities.”

“This change not only affects HUD but affects the industry as it has already committed, allocated resources, and begun integrating FHA Catalyst into its business processes,” the IG noted.

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