Fence-Sitting Homebuyers Face FHA Fee Hike Deadline

Both applications for FHA-guaranteed mortgages and FHA endorsements were lower in January than in the previous month or in January 2010. Reduced loan demand was reflected across all subsets, purchases, refinances and mortgages for first-time buyers.

Applications for FHA mortgages totaled 103,991 in January compared to 112,500 in December and 126,043 a year earlier.  The year-over-year figure reflects a drop of 17.5 percent.  There were 55,417 applications for mortgages to purchase homes and 41,178 to refinance.  This was a 3.4 percent decrease in purchase applications since December and a 21.6 percent change from January 2010.  Applications to refinance were down 12.1 percent quarter-to-quarter and 16.9 percent over the longer period.

FHA endorsed 119,521 mortgages in January compared to 133,603 in December and 158,612 in January 2010.  January numbers are lower by 10.5 percent and 24.6 percent respectively.  Purchase mortgages totaled 63,887 compared to 66,165 (-3.4 percent) and 90,030 (-29 percent) in the earlier periods.  47,429 (74.2 percent) of the purchase mortgages went to first time buyers compared to 48,539 (73.4 percent) and 90,030 (56.8 percent) in December and in January 2010.

Home Equity Conversion (HECM) or so-called Reverse Mortgages for senior citizens represented 5.4 percent of FHA endorsements compared to 4.9 percent in December and 4.8 percent a year earlier.

Year-to-date figures also show a substantial decrease in activity between FY 2010 and FY 2011.  Total applications are 26.7 percent lower with purchase mortgages down 34.3 percent and refinancing off 22.1 percent.  Total endorsements are 24.1 percent off of the 2010 pace with most of the fall-off accounted for by the purchase sector which was down 34 percent.  Refinancing endorsements dropped 8.1 percent and HECM endorsements are at -23.3 percent the 2010 level.

Mortgage Insurance -in-Force in January totaled 5,882,984, an increase of 1 percent month-over-month and 16.3 percent over the January 2010 total of 5,917,805.  The total unpaid principal balance amount is $947.8 billion.  The portfolio has a current delinquency rate of 8.9 percent with 612,443 loans over 90 days delinquent.   In December the rate was 8.8 percent and one year earlier it was 9.2 percent.

The weighted average FICO score for FHA mortgages was 703, one point higher than the previous month and nine points above the score a year earlier.   

FHA took an average of 5,735 applications per day in January.  The average processing time from application to closing was 8.1 weeks, up from 7.6 in December but about the same as a year earlier and 4.0 weeks from closing to endorsement, 1.3 week less than a year ago.

These figures are from the Single-Family Operations Report for January issued this week by the Department of Housing and Urban Development.  FHA mortgages have risen dramatically in popularity since the beginning of the housing crisis but the agency has also raised upfront and annual premiums in the past year. Declining loan demand in January is no surprise given the uptick in mortgage rates we witnessed. Rates are now off those highs but loan production has yet to pickup.  We are curious to see how the FHA's decision to raise the annual mortgage insurance premium will impact loan demand before the new fee structure goes into effect on April 18th.

Perhaps buyers will rush to beat the deadline?