MBA releases study on lender perspectives of FHAMortgagePress.comFederal Housing Administration
Lenders see the lack of a loan product with no down payment as a
major reason for the decline in market share for the Federal
Housing Administration (FHA), according to a study released by the
Mortgage Bankers Association (MBA). The study, "Lender Perspectives
on FHA's Declining Market Share," was commissioned by the Research
Institute for Housing America, a 501(c)(3) trust fund of MBA, and
conducted by Bernadette Kogler, Ann Schnare and Tim Willis of the
Hollister Group. Sixty-one lending institutions of varying size and
with varying degrees of experience with FHA participated in the
study.
"With legislation pending in Congress, this study provides
relevant and timely information to MBA members and policymakers
regarding the FHA program," said Doug Duncan, MBA chief economist
and senior vice president of research and business development.
"Lenders see value in FHA, but there are barriers that FHA needs to
overcome to allow it to provide additional options for borrowers
and to be more user friendly for lenders."
Key findings from the study include the following:
• More than two-thirds of lenders believed that FHA's lack
of product offerings was a major factor underlying its declining
market share.
• Almost 70 percent of lenders reported that the addition of
a product with no down payment to FHA's product line would result
in a "significant" or "major" increase in the number of FHA loans
that they originate.
• One-third of lenders believed that an expanded product line
would lead to a "significant" or "major" increase in their FHA
volume.
•Forty-six percent of lenders believed that a stronger
cash-out refinance program would make FHA programs significantly
more competitive, particularly in the current interest rate
environment.
• Sixty-two percent of lenders identified the closing and
post-closing processes of FHA loans as "significant" or "major"
contributors to higher origination costs of FHA loans.
Survey results also suggested that there is a consistent
interest in FHA lending and that there are numerous opportunities
to improve FHA program offerings.
Since the survey was administered, the U.S. House of
Representatives passed HR 5121, the Expanding American
Homeownership Act of 2006, which empowers and revitalizes the FHA.
Additionally, the FHA has made a number of enhancements to its
programs and processes. The HUD-92564-VC form, commonly known as
the "VC Sheet," which appraisers were required to complete, while
reviewing a property's condition, has been retired. Additionally,
HUD's recently announced lender insurance program and new appraisal
protocols are expected to address the cumbersome workload in the
closing and post-closing processes of FHA loans. In fact, 61
percent of lenders said that they would participate in the program,
and 87 percent that were planning to participate anticipated a
decline in the average cost of FHA loan originations.
"The retirement of the VC Sheet and announcement of the lender
insurance program are steps in the right direction for FHA," said
Duncan. "Other issues that have been uncovered in this survey would
require congressional action for changes to be made, and MBA plans
to support such action."
For more information, visit www.mbaa.org.
