Over the last few months many FHA loan companies have been struggling to submit new loans into process because the loan application volumes were down for FHA refinancing and new home buying. There were a few good weeks here an there, but overall, morale was down for loan officers according to several FHA lenders. The Mortgage Bankers Association published its weekly home loan application report for the week that ended on June 11th. Home refinancing and purchase mortgage applications rose and that is good news for mortgage brokers and lenders across the country.
There was also good news the government mortgage programs as both FHA and VA loan applications increased significantly. refinance loan guidelines have seen some tightening of one of the most popular programs, the FHA streamline in which borrowers are no longer allowed to finance the closing costs. Borrowers must pay for the closing costs themselves outside of the loan. Many FHA lenders have said that this had hurt their FHA refinance business, but it appears the borrowers are still using FHA for refinancing transactions. FHA first time home buying loans could become fashionable again as more people look to become homeowners this summer.
The MBA’s index measures the volume of home mortgage applications and the report indicated an increase of 17.7% from the week prior. The Unadjusted Index spiked 29.7%, when compared to the prior week but the Memorial Day holiday shortened that week.
Michael Fratantoni who is MBA’s Vice President of Research and Economics, released a statement saying, “Mortgage loan applications for home buying rose last week, the first increase in over a month. Mortgage refinance applications also roseup dramatically over the week.” He further went on to state that, “While it is clear that home loan applications in May dropped sharply as a result of the tax credit induced increase in applications in April, it is unclear whether we are seeing the beginnings of a rebound now.” The Weekly Home Loan Applications Survey contains over a dozen indices that covers mortgage-related application activity for fixed and adjustment rate, as well as conventional and government loans for home purchase and refinances.
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Once again 1st-time home buyers made up almost half of the homes purchased in April. New home buyers have been inspired by historically low interest rates and low down-payment requirements with FHA loans. Many mortgage executives privately feared rate hikes once the Federal Reserve allowed $1.25 trillion mortgage-securities purchase program to officially expire, but conforming and FHA loan rates remain at record lows.
The flexible FHA guidelines and aggressive lending standards set forth by the Federal Housing Administration have encourages FHA lenders to finance new home buying if the borrower can document their income. In 2010, government home financing has taken the market-share for mortgage loans as, through Freddie Mac, Fannie Mae and the FHA, have seized almost 97% of the home financing market.
According to FHA commissioner David Stevens “This is a mortgage market surviving purely on life support and sustained by the federal government.” Stevens spoke with passion at the Mortgage Bankers Association conference yesterday. He reached out to FHA lenders to start thinking more about the borrower and helping the mortgage industry recover rather than focusing on maxing out loan commissions. HUD has tightened FHA loan requirements with stricter FHA guidelines that have made qualifying with FHA for challenging for borrower than it was in the past few years.
FHA lenders continue to be blessed with affordable FHA loan rates. The Mortgage Bankers Association mentions that FHA rates should remain relatively low in the short term because of concerns in Europe financial woes with debt burdens. Lower FHA rates help to reinforce demand. Despite average thirty-year FHA interest rates dipping below the 5% illustrious threshold, the MBA noted last week that the number of people seeking purchase loan applications has declined by over 27%, the most dramatic drop since May of 1997. Read the original FHA loan article online at CNN Money >
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According to FHA Loan Pros, HUD is working over-time to prevent losses associated with irresponsible FHA lending practices, FHA is emphasizing enforcement of FHA requirements and is increasing its review of FHA approved lenders. HUD has taken actions against six times as many FHA lenders since 2009 than it cited during 2000-2008. HUD increased scrutiny of FHA approved lenders helps with minimizing non-compliant mortgage lending practices and reducing mortgage fraud.
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Mortgage industry groups lowered their forecast for 2009 home loan originations by more than 25% as higher FHA mortgage rates stifle mortgage refinancing activity. MBA estimated that FHA lenders will make $2.03 trillion in new home loans this year, down by more than $700 billion from its forecast in March. The Washington-based group attributed $84 billion to reduce mortgage lending on home purchases. The rest of the decline would be from fewer FHA refinance loans and “very low” volumes on an affordability loan program overseen by mortgage agencies FHA, Fannie Mae and Freddie Mac, MBA said in a statement.
FHA mortgage rates have risen from record lows since the MBA’s prior forecast as have Treasury yields, which spiked amid a flood of debt issuance needed to fund federal rescue programs. Read the original article online > FHA Mortgage Rates Rise
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Until recently, FHA has allowed cash out refinancing for homeowners up 95% loan to value if the borrowers have made their mortgage payments on time for at the prior least twelve months. The seasonally adjusted percentage of FHA home mortgages that are 90 days or more delinquent increased to 4.11%. The Washington Post recently that these instant defaults nearly tripled in the past year alone and more than quadrupled among FHA home refinancing.
FHA refinance loans now make up two-fifths of all the agency’s instant defaults, according to the Washington Post article, some lenders have singled out cash out refinance loans as especially risky. With conventional loans, many FHA lenders now offer cash out mortgage only to borrowers with high credit scores and significant equity in their homes. Read the complete FHA article > FHA Rumored to Tighten Cash Out Refinancing Guidelines
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