FHA Loan Production More Than Doubles in Fiscal Year 2008

November 18, 2008 No Comments »

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FHA lending is popular.

During fiscal year 2008, the FHA endorsed over 1.2 million single-family mortgages, up from 532,000 a year earlier, HUD said in its annual report.

That figure includes 111,661 Home Equity Conversion Mortgages (reverse mortgages), with the grand total representing $177 billion in new mortgage endorsements, up from $60 billion in 2007.

HUD credited the recent rise in FHA lending to the fall of subprime lending, plentiful adjustable-rate mortgage resets, higher FHA loan limits, and more affordable housing prices.

Nearly 80 percent (77.9 percent) of the new mortgage endorsements went to first-time homebuyers, while 31.2 percent were for minority homebuyers.

As of June 2008, the FHA’s share of loan origination volume rose to 22 percent, skyrocketing from under two percent in early 2007.

However, all that new lending has put a strain on the FHA’s capital ratio, which fell to just three percent (one percent above the minimum requirement) this year, down from 6.4 percent in fiscal year 2007.

“The estimated economic value of the fund decreased significantly with the forecast of expected house price declines due to the declining housing market,” the FHA said in its report.

“Conversely, the total MMI insurance in force increased significantly due to the volume of new endorsements. The combination of these factors resulted in the decrease in the capital ratio.”

As of the end of fiscal year ’08, there were a total of 4,377,795 outstanding single-family mortgages insured by the FHA, representing an unpaid principal balance of $475 billion.

Let’s hope they know what they’re doing…

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