FHA Loan Volume Strong in December; Short Refi’s Weak

January 25, 2011 (Jeff Alan)
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The Federal Housing Administration (FHA) Mortgage funded $28.1 billion to mortgage bankers for FHA backed single-family mortgage loans in December, a slight gain from the previous month. Included in that figure is $1.7 billion of FHA guaranteed reverse mortgages. FHA also reported an uptick in seriously delinquent mortgage loans during the month.

The percentage of government insured mortgage loans that are 90 days or more past due jumped to 8.8 percent, compared to 8.3 percent in November. (FHA originally reported an 8.7 percent serious delinquency rate for November but later revised it down to 8.34 percent.)

In December, nearly 50 percent of FHA endorsements involved purchase money loans. First-time homebuyers accounted for 73 percent of all approved borrowers.

During the month, FHA approved just 21 FHA ‘Short Refinance’ loans with lenders submitting another 30 short refinance applications for endorsement.

The FHA launched the program on September 7, 2010, to offer certain ‘underwater’ non-FHA borrowers who are current on their existing mortgage and whose lenders agree to write off at least ten percent of the unpaid principal balance of the first mortgage, the opportunity to qualify for a new FHA-insured mortgage.

The program was designed to allow borrowers with underwater conventional loans to refinance into new FHA-insured loans, after the investor writes down the principal amount of the mortgage to a 97.75 percent loan-to-value ratio. The combined LTV cannot exceed 115 percent.

Critics of the program have taken a dim view of the program since the start citing lender requirements such as reducing the loan balance and the FHA’s program restrictions as a deterrent to their participation. With the very low volume of short refinances, they’ve been proven to be right.

Tags: FHA, mortgage bankers, mortgage volume, mortgage loans, loans, purchase loans, first mortgage, second mortgage liens, FHA-insured loans, short refinances