HUD and VA officials used a panel discussion at the 83d Mortgage Bankers Association Conference in a bid to silence congressional critics.

Nicolas Retsinas, federal housing commissioner and assistant secretary of the Department of Housing and Urban Development, said Monday that 65.6% of Americans own homes - the highest percentage since 1980. Minority homeownership has increased almost twice as quickly as the overall rate, he said.

R. Keith Pedigo, director of loan guarantee service for the Department of Veterans Affairs, said the agency has seen an increase in loan volume of 22% so far this year. In addition, foreclosures on VA loans will likely decrease for the eighth straight year, he said.

Still, the two acknowledged that there were many challenges that the FHA and VA must face in the year ahead.

HUD is having a particularly tough time with its 203(k) loan program, which allows investors and homeowners to receive home rehabilitation loans. The program came under fire recently when an Inspector General's report revealed that 412 of 442 examined 203(k) loans contained abusive practices.

The department is now revamping the program, Mr. Retsinas said, which will mean months of delay before new 203(k) loans are available to investors.

The 203(k) program has originated more loans in the last years than in the previous 30 years, Mr. Retsinas said.

For the VA, downsizing will continue to be a major issue. Mr. Pedigo said that at the end of the fiscal year, the VA will have about 1,550 employees, down from 2,000 three years ago. Furthermore, the VA's 46 offices are in the process of being closed and will be replaced by eight regional loan centers.

Technology is an item both organizations must also address. Mr. Retsinas said the increased use of automated underwriting systems in the industry is inevitable.

"The way we will do business five years from now will not be the way we do business today," he said.

And Mr. Pedigo announced that the VA and Freddie Mac, formally the Federal Home Mortgage Corp., had set up a pilot in which six lenders will use Freddie Mac's Loan Prospector to underwrite VA loans. The FHA is also in the midst of a pilot program with Freddie Mac.

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