Government-backed loans continued to grab a larger slice of the mortgage market last year, according to new Home Mortgage Disclosure Act data released Monday.
Federal support for home lending was already expansive in 2008 with the government takeovers of Fannie Mae and Freddie Mac. But the latest HMDA report found government guarantees only intensified in 2009 as loans backed by the Federal Housing Administration and the Department of Veterans Affairs skyrocketed.
The HMDA report, published by the Federal Reserve Board and compiled from data collected from all the agencies, said the number of government-insured loans rose 250% between 2007 and 2009 to exceed 1.1 million.
Of those, such loans made in so-called distressed areas — typically suffering from employment and home-price declines — rose nearly 500%, to about 543,000.
The Fed said loans backed by the FHA, VA or federal farm programs made up 54% of all new mortgages in 2009.
"The big story here is the same story," said Tom LaMalfa, president of TSL Consulting, a research mortgage group based in Cleveland, Ohio. "The government continues to dominate the mortgage business."
Mortgage data is reported annually by regulators under HMDA, and provides a comprehensive picture of mortgage trends regarding loans types and borrower demographics.
In addition to high totals for government-insured loans, the report noted that even though overall loan volume in 2009 rebounded from the prior two years, it still remained well below levels seen earlier in the millennium. Last year, loan volume rose 12% to 19.5 million after experiencing consecutive declines in 2007 and 2008. The report attributed the higher volume to historically low interest rates driving up refinancing activities, with refinancings rising by 29%, to 9.9 million, even though home purchases fell last year.
The Fed said refinancing activity could have been even stronger.
"The increase in refinancing activity in 2009 appears to have been somewhat subdued compared to what has historically been observed when mortgage rates sharply decline," the report said.
"Evidence presented in this article suggests that the more muted growth stems from several factors, including economic distress and low or negative equity among many households that could have benefited from lower rates."
