FHA Helps Push Up Higher Priced Loan Share

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Government data released annually indicate that an increase in the share of federally insured mortgages has helped push up the share of higher priced loans.

Last year, there were nearly 14 million home loan applications that were covered by the Home Mortgage Disclosure Act. Of those applications, 8.7 million resulted in loan originations.

In addition, another 2.8 million loan purchases were covered by HMDA, bringing total actions for 2013 to 16.8 million.

The HMDA findings were reported Monday by the Federal Financial Institutions Examination Council.

Members of the FFIEC include the Consumer Financial Protection Bureau, Federal Deposit Insurance Corp., Federal Reserve Board, National Credit Union Administration, Office of the Comptroller of the Currency and State Liaison Committee.

Data were collected from 7,190 HMDA-covered financial institutions for the 2013 report. The number of covered institutions was down 3 percent from 2012 and has been falling since 2006 — when there were 8,900 reporting lenders.

“The decline reflects mergers, acquisitions, and the failure of some institutions,” the report said.

Examiners utilize HMDA data — along with other factors such as credit histories, debt-to-income ratios and loan-to-value ratios — to determine whether a lender is complying with fair lending laws.

Information on roughly 516,000 requests for home purchase pre-approvals was included in the HMDA data.

The report indicated that total loan originations declined by 1.1 million loans between 2012 and 2013. That was approximately an 11 percent drop. Refinance originations tumbled 23 percent, while home purchase financing was up 13 percent.

The share of residential home purchase loans to black and Hispanic white borrowers was down slightly from 2012, while the share to Asian borrowers inched higher.

But the share of refinance loans made to black and Hispanic white borrowers was up in 2013 as the share to Asian borrowers retreated.

Borrowers whose income was less than 80 percent of the area median income represented just over a quarter of last year’s borrowers on purchase financing. The share was down from 31 percent in 2012.

But the share of refinance transactions to low- and moderate-income borrowers widened to 20 percent in 2013 from 19 percent a year earlier.

The Federal Housing Administration insured 24 percent of first-lien purchase loans on site-built owner-occupied properties last year, declining from 31 percent the previous year. FHA share had been as high as 42 percent in 2009.

A 9 percent share of purchases was garnered by the Department of Veterans Affairs, about the same as in 2012.

While total government share on purchases was 38 percent in 2013, the share was just 16 percent on refinances.

Higher priced loans — first liens with rates that were at least 150 basis points worse than on prime loans and second liens that were 350 BPS higher — climbed to nearly 5 percent of activity last year from 3 percent a year earlier.

The increase in higher -priced share was partly attributed to increased FHA share.

“FHA raised its annual mortgage insurance premium slightly in April 2013, and extended the period over which MIP is required to be paid by borrowers in June 2013,” the report said. “All else equal, these changes, particularly the latter, would push up APRs for FHA loans. About 75 percent of FHA purchase loans that met the higher-priced definition had APRs that were less than 0.5 percentage points above the higher-priced threshold.”

Black and Hispanic white applicants were turned down more often than their Asian and non-Hispanic white counterparts, though there was little change from earlier years.

Mortgage Expert

Mortgage Daily Staff



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