The Federal Housing Administration single-family program is experiencing heavy prepayments, but more than half of the borrowers are refinancing back into FHA loans.
FHA reported nearly 380,000 repayments from October 2012 through January 2013—up 140% from the same four-month period a year ago.
However, 197,890 of those homeowners used streamline programs to refinance back into FHA-insured loans. Which means FHA is still going to collect insurance premiums on those loans.
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About 73,500 borrowers used the regular streamline refinance program and paid an upfront mortgage insurance premium of 175 basis points along with an annual premium 125 bps. FHA has been raising premiums for over two years and many of these streamline borrowers are paying much higher premiums on their new FHA loan.
Another 123,300 borrowers used a “special” streamline program for legacy loans that have not refinanced since May 2009. The FHA upfront fee is just 1 bp on special refis with an annual premium of 55 bps. The special program is designed to encourage borrowers to refinance at today’s low rates, improve their cash flow and reduce defaults.
FHA lenders actually completed 243,600 refinancings during the four-month period, up 112% from the same period in FY 2012. Those refis included 31,500 conventional borrowers who refinanced into FHA loans and paid the 175 bp upfront premium.
