As FHA Loan Volume Soars, Lenders’ Access to FHA-Ready Mortgage Origination Systems Found to be Key to Survival

Ellie Mae sees rise from 11% to 35% of FHA loans going through its Encompass LOS

PLEASANTON, CA—October 15, 2008—Ellie Mae, an award-winning provider of innovative software and services for the mortgage industry, has revealed that FHA loans now account for 35 percent of all monthly applications going through its Encompass Mortgage Management System, up from 11 percent in July 2007.  The spike in FHA loans reflects the fall of the subprime market, as a result of which many lenders have been forced to shut down their operations, while many who had the necessary technology and experience were able to adjust their focus and begin targeting more viable loan options—in this case, FHA loans.

The transition into the FHA market for lenders hasn’t been simple. The FHA has its own unique guidelines and processes, and lenders that don’t have FHA capabilities built into their systems are finding it very difficult to accommodate these changes to capitalize on FHA market opportunities. “We anticipated the tremendous shift toward FHA loans, so we became a Direct Endorsement HUD mortgagee 12 months ago,” states Steve Jacobson, CEO of Fairway Independent Mortgage Corporation, a Sun-Prairie, Wisconsin-based mortgage broker/banker with over 100 branches nationwide.  “As a D.E. HUD mortgagee, and equipped with the right technology, we’ve been handling FHA loans with ease.  Encompass has really helped us with the surge in FHA volume this year.”

“What’s unique about these high volume numbers of FHA originations is that a lot of these originators weren’t focused or experienced with FHA loans a year ago, and now they have adapted their business models and leveraged available technologies to address this growing segment,” says Jonathan Corr, chief strategy officer for Ellie Mae. “Despite the fact that FHA loans are completely different loans than what most originators are used to, and that they have completely different sets of guidelines, Encompass users have been able to quickly ramp up their FHA business and capitalize on those opportunities, because Encompass was specifically designed to help both brokers and bankers originate FHA loans.” 

According to a Bloomberg.com article quoting former director of market research at Freddie Mac David Olson, who now runs Wholesale Access Mortgage Research & Consulting Inc. in Columbia, Maryland, “FHA has completely replaced subprime and Alt-A.” 

It’s understandable why FHA loans have become the newest go-to product. The FHA requires a down payment as low as 3 percent of the purchase price, as opposed to 20 percent for conventional mortgages. Plus, with FHA loans, most of your closing costs and fees can be included in the loan. The FHA even has a program that allows you to buy a home, fix it up and include all related costs in one loan. Furthermore, borrowers with FHA loans always pay the same mortgage insurance rate regardless of their credit scores, which is of particular benefit to borrowers with less than 22 percent equity in their homes and credit scores under 620.

“In this market, we’ve clearly seen a path back to bread-and-butter products, and the lenders that have the capacity to quickly adapt are the ones that are leading the pack,” adds Corr. “It’s no wonder that some of our Encompass users are originating as much as 50 percent of their total business in FHA loans.  We’re pleased to know that they’re capitalizing on Encompass’ ability to quickly and easily transition their business into areas where they can originate the most viable and profitable loans.”

More information on Encompass’ recent FHA-specific enhancements is available at http://www.elliemae.com/products/los-encompass-upgrade.asp.

About Ellie Mae
Ellie Mae is an award-winning provider of software and services for the mortgage industry, offering comprehensive business solutions for mortgage brokers, mortgage bankers and lenders. The company's key offerings include the flagship Encompass Mortgage Management Solution, the Encompass WebCenter, Electronic Document Management (EDM), Encompass CenterWise™ and Encompass Closer. More than 150,000 mortgage professionals use the Encompass mortgage management solution, including two-thirds of the nation’s top 300 brokers and nine of the top 10. Ellie Mae is recognized for linking the many parties critical to the mortgage origination industry through its ePASS Network. One third of the nation's almost $2 trillion in new mortgages originated every year pass through the ePASS platform, enabling mortgage companies to easily conduct electronic business transactions with dozens of leading lenders and thousands of settlement service providers. Ellie Mae was founded in 1997 and is based in Pleasanton, California. To learn more about Ellie Mae, visit www.EllieMae.com or call 877.355.4362.

2008 Ellie Mae, Inc. All rights reserved. Ellie Mae, Encompass, and PASS are registered trademarks and Encompass CenterWise, and Ellie Mae Closer are trademarks of Ellie Mae, Inc. in the United States.

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