Applications for FHA single-family loans dropped off a cliff in June as a regressive mortgage insurance policy kicked in early in the month and potential borrowers were dealing with rising mortgage rates.
In a monthly loan production report issued Friday, the Federal Housing Administration reported that loan applications fell nearly 50% in June from the prior month.
The new report shows that FHA applications fell to 93,700 in June from 182,400 in May. Applications for FHA purchase mortgage loans fell to 57,650 in June, down 43.5% from the prior month.
The drop was accentuated by a spike in May applications as borrowers rushed to avoid the June 3 implementation date of a new policy that makes FHA loans more expensive longer-term. Going forward, the annual premium on new FHA loans can no longer be canceled when the LTV ratio hits 78%. FHA borrowers must pay a 1.35% annual premium over the life of the loan. (With private MI, the annual premium is cancelable.)
FHA application volume has been very volatile this year.
On April 1, FHA raised the annual premium 10 bps to 1.35%. And loan applications filed in April fell to 118,200 from 221,600 in March.
FHA commissioner Carol Galante recently warned Senate Banking Committee members that further
FHA has increased premiums five times over the past two years and “we are clearly at a tipping point here,” Galante testified. “If we increase them more, we would actually shut out additional homebuyers,” she testified.
