Lydian Forms New FHA/VA Loan Processing Subsidiary

FHA loans expected to take 10 percent of lending market in 2008, 15 percent in 2009, and mortgage companies have little experience processing them

Lydian Data Services, the industry’s leading provider of end-to-end outsourcing services for all aspects of mortgage lending operations, has established Lydian Data Government Services, a new fully integrated subsidiary to provide expert mortgage processing, closing, post-closing and quality control services for FHA and VA loans. This rapidly expanding sector of mortgage lending has been hampered by a lack of expertise in processing government loans, leading to long delays in loan approvals and fundings. The new subsidiary will also offer consulting services to help originators become approved by FHA (Federal Housing Administration), and training services to help lenders familiarize their Realtors, loan officers and brokers with government lending programs.

“The FHA and VA markets are large and growing larger,” said Brian Fitzpatrick, executive vice president of Lydian Data Services. “We formed Lydian Data Government Services to help brokers, correspondents and lenders bridge the significant knowledge gap and enter this market very quickly. For those currently approved by FHA, we can process their loans up to the point of making the loan decision, and once the lender underwrites and approves the loan, we can take it all the way through closing, post-closing and delivery to the investor. For those not yet approved by FHA, we will assist them in getting approved as quickly as possible so they can start serving their borrowers with these important products.”

Renowned for its technology platform, integrating imaging and collaboration from all parties in the loan process, Lydian combines complete back office loan fulfillment services, allowing lenders to outsource any or all of their processes. Lydian Data Government Services is based in the greater Philadelphia area, selected for its proximity to one of the country’s largest FHA Home Ownership Centers and the depth of its government lending labor pool.

“We’ve seen loan products and market niches come and go, but now we’ve come full circle and FHA is back,” says Fitzpatrick. “The problem is that the origination side of the business just isn’t prepared.”

Back in the 1970s and 80’s, mortgage bankers tended to specialize in FHA/VA lending while savings and loans concentrated on conventional loans. Skilled workers used to be readily available, but that labor force dwindled over the last ten years as home prices rose beyond FHA limits in many markets, government programs became less attractive to originators, and nonprime loan products became more prevalent. According to a 2007 report by the Government Accounting Office (GAO), FHA’s product restrictions and lack of process improvement relative to the conventional market was largely responsible for the decline in market share, despite comparing favorably in cost to the subprime programs that largely eclipsed them. The collapse of the subprime market has led to the resurgence of interest in FHA, and recent revamping has positioned the agency to reclaim the volumes it once enjoyed. GAO expects FHA to fund 10 percent of home purchases in 2008 and 15 percent in 2009, continuing to levels not seen in over a decade.

The existing problem, however, is in the mortgage industry’s inability to accommodate the building demand for FHA and VA loans, according to Fitzpatrick. “There are surprisingly few qualified processors out there,” he explained, “and Direct Endorsement (DE) underwriters are positively scarce. Millions of borrowers qualify for government loans and the lending industry just isn’t ready to accommodate them, so it can take many weeks to get a loan funded. Lydian Data Government Services is well-positioned to fill that gap with complete or partial FHA/VA processing services. And with our expertise,” he added, “we can do a streamlined loan in as little as ten days.” Further hampering the industry’s capacity, mortgage brokers are expressly prohibited from earning commissions from FHA applications if unapproved by FHA, a situation that threatens many of these small origination companies. “We’ll help brokers get their ‘mini-eagle’ or sponsorship so they can serve their clients,” Fitzpatrick said, “And if they desire to become correspondents and lenders down the road, we can guide them toward those goals.” Fitzpatrick underscores that FHA and VA loans are more complicated than conventionals and present a number of pitfalls to lenders inexperienced in processing them. “We’re focusing on keeping lenders from going through the whole process just to suffer rejection by HUD,” he says. “Our experienced staff performs a comprehensive set of reviews on each loan to reduce or eliminate rejections and actually expedite the issuance of the Mortgage Insurance Certificate.” A vital document, the Mortgage Insurance Certificate (MIC) serves as the evidence of FHA insurance on the loan.

Lydian Data Services has designed this new subsidiary to be highly technology-enabled, leveraging Lydian’s people, platform, partnerships and process expertise, according to Brian Fitzpatrick. “Lydian Data Government Services is seamlessly integrated with all of Lydian’s technology and services, including our other loan processing centers. So in addition to making the process smooth, cost-effective and easily implemented, we can accommodate any type of loan, government or conventional. Lenders and brokers who desire to be a part of the resurgence of government lending do not have to be left out for lack of facilities, trained people or processing expertise,” he said. “We are ready to help them serve their customers.”

About Lydian Data Services

Lydian Data Services, a wholly owned subsidiary of Lydian Trust Company and the parent company to Lydian Technology Group (www.LydianTechnology.com) and Lydian Data Government Services (www.LydianDataGovServ.com), provides end-to-end outsourcing and a la carte services to manage or enhance all aspects of the mortgage operation for money center and community banks, credit unions, mortgage banking entities and premier investment banks. Through its award-winning, open-architecture platform, and industry-proven “best practices” fulfillment services, Lydian Data Services improves its clients' operational efficiencies, risk management and service delivery. The company has focused expertise in post-closing, quality control auditing services, correspondent loan acquisition services, origination fulfillment services (including wholesale and retail processing), and bulk due diligence. Lydian Data Services is a central clearinghouse and standard for high quality mortgage transaction processing and fulfillment solutions for leading lenders and investors within the mortgage industry. Lydian has been awarded the Ernst & Young Florida 'Entrepreneur of the Year ® ' award for Financial Services, has been repeatedly ranked one of the fastest-growing private companies on the Inc. 500, and was the top ranking financial services company to be recognized on the InfoWorld 100 list of the 'Most Technologically Innovative Companies in the World.' For more information, visit www.LydianData.com.