Opportunities for reducing deliquencies and defaults in federal housing credit programs: A review of new technologies and promising practices

New technologies offer opportunities and create new risks for programs of the Federal Housing Administration (FHA), Department of Veteran Affairs (VA), Rural Housing Service, and Ginnie Mae. This article surveys promising practices in the private sector that merit consideration by federal housing credit agencies. Most important, the private market uses scoring-based systems to skim the most creditworthy borrowers that previously were served by federal agencies such as FHA. Federal housing agencies now need to adopt similar systems to provide financial early warning against the possibility that adverse selection creates intolerable levels of financial risk. Other systems can help to enhance risk management, for example by monitoring the financial performance of mortgage lenders in federal programs.