Thousands of potential home buyers find out every day that they don't qualify for market-rate mortgage loans, but the computer programs that spit the decisions out don't have to explain why.

In what officials say is an effort to make the judgments less mysterious, the federal government is developing a "transparent" system of credit scoring that would let applicants see how the computer formula works and what the credit variables were. The system would be an alternative to the ones used by private mortgage giants Fannie Mae and Freddie Mac.

Andrew M. Cuomo, the secretary of the Department of Housing and Urban Development, is scheduled to announce plans today for the system and for a public education campaign with the nation's mortgage bankers at a national conference on home ownership in Charlottesville.

Fannie Mae and Freddie Mac developed automated mortgage underwriting systems in 1995. They are the '90s electronic equivalent of meeting with a loan officer and submitting reams of paperwork to qualify for a mortgage. In automated underwriting, an applicant's loan information is submitted once and plugged into computer models that attempt to predict the risk of default. The scoring models are considered proprietary.

The scorecard the Federal Housing Administration is developing "will tell you exactly how you get qualified and what you have to do" if the application falls short, Cuomo explained in an interview yesterday. He said the "fully open and fully transparent" scorecard aims to boost consumer confidence, which he said is undermined by "the mystery" of the way Fannie Mae and Freddie Mac use scorecards now.

Cuomo said "suspicions" raised by proprietary systems feed concerns about discrimination.

"Right now," said Cuomo, "the machine spits out an answer: accepted, rejected. No one knows the basis on which the decision was made."

HUD officials say consumer groups are concerned that a disproportionate number of minorities are kicked out of the approval stream by the scorecards and referred to loan officers for time-consuming manual processing.

HUD officials said their scorecard will be more flexible in evaluating the creditworthiness of people whose records may have some flaws.

The score used as a main building block by most lenders is called FICO, named for Fair, Isaac & Co., the San Rafael, Calif., firm that developed scoring. The score assigns risk rankings to applicants based on complex statistical analyses of their credit histories. People whose credit reports show that they have always paid bills on time and that they use credit cards responsibly get the highest scores. Those who have been late in paying bills get lower scores.

Making the process transparent, said Cuomo, will not only ensure that lending is nondiscriminatory but also that it will attract more applicants to the FHA. And that will put pressure on Freddie Mac, Fannie Mae and other big lenders to follow suit, he said.

The FHA last year issued 1.3 million loans, worth $125 billion. That is about 10 percent of last year's total loan volume of more than $1 trillion. FHA borrowers are often first-time home buyers, seeking to make a low down payment, who don't qualify for a conventional Fannie Mae or Freddie Mac mortgage.

HUD plans to have the scorecard available within six to eight months, according to William Apgar, assistant secretary for housing and the FHA commissioner.

The Mortgage Bankers Association of America, sponsor of the conference today in Charlottesville, has agreed to share the $1 million cost of a public education campaign on the FHA scorecard and to advise the FHA on the underwriting system.

While a Fannie Mae official declined to comment on the HUD announcement expected today, she said Fannie Mae's Desktop Underwriter does not "reject" without explanation. Instead, she said, applicants who don't qualify are "referred" to a human underwriter who can explain why they fell short and seek financing other than market-rate loans.

A Freddie Mac spokesman said its Loan Prospector program will either approve an applicant or generate a "caution" response that requires the loan officer to take a closer look at credit issues or suggest different financing.

HUD uses both Desktop Underwriter and Loan Prospector to process some loans, although about 75 percent are still handled manually. The decision to use the two systems, the Freddie Mac spokesman said, "speaks volumes about their comfort level with our systems." He suggested that HUD is developing its own system to help educate skeptical consumers.

CAPTION: HUD's Andrew Cuomo vows less mystery.