Federal Housing Administration endorsements of single-family loans slipped 8% in April after rising 8% in March, another sign that residential production – especially the purchase money business – is hitting some headwinds.
FHA endorsed $16.8 billion of 1- to 4-family loans in April, down from $18.3 billion the prior month.
Overall, the pace of FHA originations is off 25% during the first seven months of this fiscal year (Sept. 30), compared to the same period in FY 2010.
According to the FHA Single-Family Outlook report released Tuesday morning, lenders originated $10.3 billion of purchase money loans, $5 billion in refinancings, and $1.5 billion of government-insured reverse mortgages (Home Equity Conversion Mortgages.)
Each product type experienced reduced demand, and it appears that special FHA programs designed to refinance underwater borrowers are losing momentum as home values continue to slide.
Applications for the Hope for Homeowners program fell 44% from March to April with just 155 consumers requesting help. The H4H program is due to expire Sept. 30. In April, FHA endorsed only 29 H4H loans.
A newer version of the outreach -- the FHA short refinance program -- launched last October has refinanced 151 underwater borrowers who are current on their mortgage.
This refinance option requires servicers to write down the principal amount of a conventional mortgage by at least 10% so the loan can be refinanced into a standard, fully underwritten FHA-insured mortgage with a 97.75% loan-to-value ratio. With house values declining, this slim piece of equity can quickly disappear.
In March, the Republican majority in the House of Representatives voted to terminate the FHA short refi program by a 256-171 vote. The House sent the FHA Refinance Program Termination Act (H.R. 830) to the Democratic-controlled Senate but the Senate Banking Committee is unlikely to take any action on the measure.
