The volume of loans insured by the Federal Housing Administration has spiked this year, new data indicate. Two firms are helping mortgage companies that are struggling to understand and comply with recent changes to the FHA program while trying to keep up with increased activity.
The Mortgage Bankers Association reported today that the government share of loan applications has gone from 8.4 percent in July 2007 to 29.1 percent during July 2008. Government applications consist mostly of FHA loans.
During the same period, conventional applications have fallen 50.2 percent.
MBA said the government share began slowly increasing in February 2007 but accelerated this year.
The Washington, D.C.-based trade group, which began tracking applications in 1990, said it recorded the lowest government share in August 2005, when it was 5.8 percent, and the highest share in February 1990, when it reached 43.8 percent.
MBA attributed the recent increase to new legislation that has boosted the maximum FHA loan amount and the disappearance of subprime adjustable-rate programs.
Last month, the U.S. Department of Housing and Urban Development said overall FHA endorsements this year were 413,790 from January 1 to May 31, compared to 532,307 endorsements for all of fiscal 2007.
HUD reported earlier this month that 300,000 mortgages have been refinanced under the FHASecure program since September 2007, while the total is expected to reach 500,000 by the end of this year. The program was launched in August 2007 to refinance exotic subprime mortgages.
In its forecast last week, Freddie Mac projected government originations, including loans guaranteed by the Department of Veterans Affairs, are expected to climb from $120 billion last year to $280 billion this year. Government originations are projected to peak at $285 billion in 2009, then drop to $255 billion by 2010.
Among companies that are helping mortgage bankers manage the shift from conventional to FHA originations is First American Loan Production Solutions.
The Westlake, Texas-based firm is working closely with clients to help them understand both the details and implications of new requirements under H.R. 3221, The Housing and Economic Recovery Act of 2008, Randy Gilster, president of the unit, told MortgageDaily.com in a statement today. The legislation became law late last month.
"Many lenders that were in the process of re-learning FHA lending before the passage of the new law are now scrambling to understand the new programs and make sure that their systems and procedures will be in compliance once the new law takes effect in October," Gilster said. "We have committed to revising all of our FHA programs and packages, including reverse mortgage documents and disclosures, prior to the new deadline."
He noted lenders face the biggest challenges with new document revisions and compliance requirements, a new requirement to monitor APR changes and re-disclose them to the borrower three days prior to closing, and supporting the new reverse mortgage package requirements for purchase and coop transactions. Gilster also indicated the new legislation includes new disclosures.
He said First American, which has "a great deal of experience with FHA lending," is a major provider of FHA outsourcing services as well as compliance and document solutions.
Mortgage industry information provider AllRegs recently announced an FHA Hotline that "will provide answers to questions about the FHA program, program changes, how to become an FHA lender, business advice on what to do with borrowers as it applies to the FHA program, interpretation of the regulations and interpretation of the new law."
The new service was created through an agreement with mortgage advisory firm Mortgage Dynamics Inc.
AllRegs said the new hotline will provide operational advice on FHA loans, processes and down payments from industry experts. The support service is available by phone or e-mail from 7 a.m. to 5 p.m. It is designed for originators, loan production personnel, account executives and mortgage brokers.