The government-insured share of mortgage applications rose to its highest point since 1990, according to a new report from the Mortgage Bankers Association.
Government-insured loans accounted for 38.6 percent of purchase mortgage applications last month, up from 27.8 percent a year ago; the low point was 6.8 percent in, you guessed it, August 2005.
“A primary reason government-insured loans have retained a high share of the purchase market is that these loans typically require lower down payments than conventional loans,” said Orawin Velz, MBA’s Associate Vice President of Economic Forecasting.
“In addition, lending standards tend to be tighter for conventional loans, especially for loans that require private mortgage insurance.”
The government-insured share of refinance applications has been more volatile thanks to the movement of interest rates this year.
FHA and VA loans accounted for 38.4 percent of refinance apps back in October, a new record high, but subsequently fell below 20 percent for much of this year as mortgage rates plummeted.
But as rates climbed higher, the government share surged back to 33.6 percent in June; unfortunately, all that lending is putting stress on the FHA, with government support likely just around the corner.