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FHA Market Share Falls, Delinquency Jumps

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The Federal Housing Administration endorsed 27 percent fewer loans during fiscal 2011 than it did the prior year, dragging down its market share in the process. A slump in purchase production versus August hurt overall monthly activity, though refinance volume was up. Delinquency jumped around 30 basis points during the latest month.

FHA endorsed 91,963 mortgages for $16.2 billion in September. Production was lower than August, when 100,490 loans were endorsed for $17.4 billion.

The government lending metrics are provided monthly in an operational summary from the Department of Housing and Urban Development.

The weakness in September’s performance came despite a 9 percent month-over-month improvement in refinance endorsements, which totaled $3.6 billion last month.

The problem was purchase endorsements, which were down 12 percent to $11.2 billion in September.

Home-equity conversion mortgage activity was barely changed from August at 5,590 endorsements for a maximum claim amount of $1.4 billion.

Section 203(k) business was off 1 percent to 2,217 endorsements during September, and condominium closings declined 13 percent to 3,152 loans insured. Manufactured housing fell 7 percent to 1,691 endorsements.

Government originations are likely to continue declining this month, with FHA applications falling to 129,045 last month from August’s 142,793 applications.

Purchase activity again was responsible for much of the diminished volume, with purchase applications falling 14 percent from a month earlier. Refinance applications slipped 3 percent, while new HECM applications were off 7 percent.

FHA loans took an average of 5.9 weeks from application to closing in September, the same as a month prior. But processing time was better than 6.8 weeks in the same month last year.

The number of overall FHA endorsements in the latest report was 27 percent lower than in September 2010. On a dollar-volume basis, the decline was 34 percent lower than the $24.4 billion endorsed in the year-earlier period.

At a 64 percent year-over-year decline, refinance volume was most responsible for the deterioration. Purchase production was down 13 percent from the year-prior reading, and HECM volume fell 7 percent.

From Jan. 1 until Sept. 30, FHA has endorsed 881,655 mortgages for $158.3 billion.

But on a fiscal-year basis, which includes originations from Oct. 1, 2010, through Sept. 30, 2011, FHA endorsed 1,271,211 loans for $236.0 billion. The volume fell short of the 1.7 million loans endorsed for $318.8 billion in fiscal 2010.

HUD originally projected 1.5 million endorsements for $288.7 billion in 2011 fiscal activity.

Using Fannie Mae data for residential originations from all U.S. lenders, FHA’s market share fell to 15.78 percent in fiscal 2011 from around 20.43 percent in fiscal 2010.

The number of FHA insurance policies in force as of Sept. 30 was 7,304,368, rising from 7,259,736 a month earlier. A year earlier, the outstanding count was more than 6.6 million.

There were $1.0197 trillion in outstanding FHA mortgages as of September, growing from $1.0128 trillion as of August. In September of last year, only $0.8975 trillion was outstanding.

Delinquency of at least 90 days jumped to 8.7 percent last month from 8.4 percent in both August and September 2010.

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