The Federal Housing Administration had a market share of 3% five years ago. That’s swelled to 10 times that currently. Assuming neither of those figures is optimal, what is the right range of market share for FHA to take down in a more normal market?
Probably 10% to 12%, Vicki Bott, deputy assistant secretary for FHA single-family housing, told the recent New England Mortgage Banking Conference in Providence, R.I.
At 3% share, FHA is the lender of last resort, and “I don’t want to be that,” Bott told attendees. But if the agency takes down all the business in a particular niche, then it takes all the bad loans, too—another thing she doesn’t want.
FHA currently is struggling to deliver on several different mandates, according to Bott, the need to manage the long-term viability of its insurance fund (it is currently below minimum reserves), to serve the underserved, especially first-time homebuyers, and to support the housing market in line with the administration’s public policy directives.
“Our oversight practices are very outdated,” she said.
FHA’s quality assurance team reviewed 98,000 loans last year. This year, it will review 48,000. But, it is doing more thorough reviews of each, Bott said. Some 40% of this year’s files have come up as EPD (meaning an early payment delinquency in the first months of the loan). Two problems she herself has flagged by reviewing loan files are EPD expectancy for newly self-employed truck drivers and first-time homebuyers trying to buy investment properties like a three-unit home.
Another FHA official, Gerry Glavey, director of the processing and underwriting division, gave attendees some numbers on FHA’s performance this fiscal year, which ends Thursday. Glavey said this year will be the agency’s second-best year ever (2009 was the best), and that it is a leader in the depressed purchase market, doing up to 50% of purchase volume in some areas.
He estimated FHA volume this year at 1,760,000 loans. Through July 31, the number was 1,487,069, including 953,370 purchase loans, 417,258 refinancings, 260,581 conversions of other types of mortgages into FHA loans and 66,441 reverse mortgages.
He said FHA’s new short refinance program could accommodate between 500,000 and 1.5 million loans, resulting in a savings to borrowers of $11.7 billion to $33 billion.
The bottom line on FHA? “FHA has never cost the taxpayers a single dime,” he said.
