May 22, 2024

FHA Mortgage Lending Plunges As Housing Values Decline

The latest report from the Federal Housing Administration shows a continued collapse in FHA loan origination.

A combination of declining home values and buyer reluctance to purchase contributed to a decline in purchase applications of 30.8% for the nine months ending June 30th.  In addition, despite the currently low level of home mortgage rates, refinance applications also declined significantly by 29.4%.  Many homeowners are unable to refinance due to negative equity or poor credit.

The FHA Single-Family Outlook report shows a decline in applications of 28.6% and a decline in total endorsements of 26.2% for the nine months ending June 30th.  The FHA’s fiscal year ends in September and the Outlook Report shows results for the nine months ending ending June 30th.

Highlight summary of the FHA Single-Family Outlook

June applications increased by 7.8% over the previous month.  June is typically the height of the single family home buying season.  The annually adjusted rate of new applications was 1.388 million.

Total applications in June totaled 131,796, including 87,674 purchase applications, 35,367 refinance applications and 8,755 reverse mortgage applications.

Of the refinance applications, 22,619 were to refinance from a conventional mortgage.

During the month ending June 30, the FHA insured a total of 101,469 single family mortgages amounting to $17.7 billion.  For the nine months ending June 30th, the FHA insured 987,352 mortgages totaling $186.4 billion.

The average processing time for an FHA mortgage during June was 9.4 weeks of which 6.1 weeks covered the time from application to closing.

At June 30th, the FHA held 7.2 million single family mortgages with an outstanding balance of $994.6 billion.

Delinquencies continue to plague the FHA with 584,822 mortgages in serious delinquency at June 30th, up slightly from May.  The overall rate of seriously delinquent mortgages at the FHA was a hefty 8.2%.  A seriously delinquent mortgage is define as one that is 90 days or more past due.  The FHA foreclosed on 68,900 homes during the nine months ending June 30th, down slightly from the previous year’s total.

The only significant category of lending that showed an increase for the nine months through June 30th was for reverse mortgages (HECM).