Simple Math: FHA Hikes Premiums, Applications Fall

Mortgage & Real Estate

Applications for FHA-insured mortgages dropped by nearly 25% in April as the Federal Housing Administration implemented a premium hike announced in early March.

On April 9, FHA officially raised its annual premium by 10 basis points and its upfront fee by 75 bps.

Lenders that received a FHA case number before April 9 spared their customers from the higher premiums, which are now 175 bps for the upfront fee and 125 bps for the annual premium on loans with an LTV ratio greater than 95%.

Applications for refinancings and purchases dropped to 150,000 units in April from 199,000 in March.

Once the lender takes an application they can receive a FHA case number. It takes another 30 to 60 days to close the loan and get an approval or endorsement. As a result, there is likely to be a bulge in FHA endorsements over the next couple of months as applications for standard FHA-insured loans dropped in May and June.

In April, FHA endorsed 104,350 forward single-family loans totaling $19.2 billion. Compared to March, endorsements rose 8% in terms of number of loans and 8.5% in terms of dollar amount.

Applications have been rising for several months, thanks to lower mortgage rates. FHA endorsements of refinancings are up 45% from February to $9.3 billion in April.

The government insurer is on track to launch its special streamline refinancing program for legacy FHA-insured loans on June 11. Borrowers with FHA loans originated before June 2009 can refinance with a reduced upfront fee of just 1 bp and an annual premium of 55 bps.

Lenders have already lined up applicants for a special FHA streamline refi program, but are waiting on a June 11 start date to get a case number.

It’s estimated that 3 million FHA borrowers could potentially be eligible for this special streamline program. But many of these borrowers have been reluctant to refinance in the past.

 

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