Gov’t.-Insured Share Of Mortgage Apps Highest Since 1990

vernment-insured share of mortgage applications rose in June to its highest level since November 1990, the Mortgage Bankers Association (MBA) says. Based on data from MBA's Weekly Mortgage Applications Survey, the government-insured share – which comprises Veterans Affairs and Federal Housing Administration (FHA) loan applications – jumped to 35.9% in June, from 25.7% in May and 27% in June 2008. Since the MBA survey's inception in January 1990, the lowest recorded share was 5.8% in August 2005. The government-insured share of purchase applications in June was 38.6%, up from 27.8% one year earlier. The government-insured share of purchase applications has averaged 36.6% to date in 2009, compared to an average of 21.8% during the same period in 2008.The low point was in August 2005, when it was 6.8%. "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," notes 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 "volatile," adds Velz, hitting a record high of 38.4% in October 2008, before refinance activity surged for conventional loans. "This surge in conventional refinance applications dominated the market, causing the share of FHA refinance applications to fall below 20 percent for most of this year," Velz says. "Recent increases in mortgage rates have caused conventional refinance activity to drop much more sharply than government-insured refinance activity due to a combination of credit and [loan-to-value ratio] requirements. As a result, the government-insured share of refinance applications climbed to 33.6 percent in June." SOUR


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