MBA study shows government-insured share of mortgage applications continues to increaseMortgagePress.comMBA, government-insured, mortgage applications, Weekly Mortgage Applications Survey,
The government-insured share of mortgage applications continues
to grow relative to conventional mortgage applications, according
to data from the Mortgage Bankers Association's (MBA) Weekly
Mortgage Applications Survey. Of all mortgage applications taken
during the month of October 2008, 32.9 percent were for
government-insured loans (consisting mainly of FHA loans) compared
to 10.3 percent in October 2007.
The government-insured share has increased from 9.4 percent in
January 2008 to its current level of 32.9 percent, which is the
highest level observed since February 1991. Since the MBA survey's
inception in January 1990, the lowest recorded share was 5.8
percent in August 2005 and the highest was 43.8 percent in February
1990.
"This increase in the share of government-insured mortgage
applications provides further evidence that there are still loans
available to qualified borrowers, particularly through the FHA,"
said MBA's Chairman David G. Kittle, CMB. "The mortgage market
remains fully operational and lenders are working to ensure
borrowers with sufficient down payment and good credit have the
opportunity of homeownership."
Data from the U.S. Department of Housing and Urban Development
(HUD) show that the level of conventional to FHA refinance
applications has increased 89.2 percent on a year over year basis
in October. Likewise, the actual level of refinances from
conventional loans to FHA insured loans has increased 144.3 percent
on a year over year basis. Based on the MBA survey, application
volume for government-insured loans was up 113.6 percent in October
from a year ago, while application volume for conventional loans
was down 49.7 percent, showing that borrowers are still moving from
conventional to government-insured mortgages.
There are several reasons why government-insured loans,
specifically FHA, have gained an increased share of the market:
1. In March of this year, the Economic Stimulus Act of 2008
temporarily raised the FHA and conforming loan limits for most
areas in the country, which made FHA financing an option for more
borrowers. However, the passage of the Housing Bill in July 2008
permanently increased the loan limit to a maximum of $625,500 in
2009, which is lower than the temporary limit of $729,750 for 2008.
As a result, most high-cost markets will see declines in their loan
limit next year.
2. FHA loans typically require lower down payments than those
purchased by Fannie Mae and Freddie Mac (the GSEs). Generally the
maximum loan to value (LTV) ratio for FHA loans is 97 percent and
95 percent for the Government Sponsored Enterprises (GSEs).
3. Conventional GSE loans require Private Mortgage Insurance
(PMI) for loans with a loan-to-value (LTV) ratio in excess of 80
percent, while FHA has an upfront mortgage insurance premium. Some
borrowers may prefer the upfront insurance premium and monthly
insurance payments as it may prove more cost effective for their
financial situation.
4. Conventional GSE loans typically have higher credit score
requirements than FHA loans, therefore borrowers who may not
qualify under the GSE requirements may be applying for an FHA
insured loan as an alternative.
For more information, visit www.mortgagebankers.org.
