The decision to increase the annual insurance premium for the Federal Housing Administration’s HECM program hasn’t had any measurable effect on the number of loans endorsed according to a report from FHA.
During the first quarter of fiscal year 2011, the industry endorsed 18,387 reverse mortgages with max claim amount of $4.6 billion, down 0.5% from the previous quarter.
“Endorsement counts and dollar volumes were down just slightly from the previous quarter, though they were again down substantially from the year-earlier period,” said the report. “Applications for HECM loans in the quarter suggest that endorsements in FY 2011 Q2 should be close to the level of FY 2011 Q1.”
The credit subsidy rate for reverse mortgages endorsed during FY 2011 rose from -0.50% to 0.00%, providing no funds to be added to the capital reserve account for new loan guarantees. New premium revenues were offset by the potential cost of claims on loans where the borrowers stop paying required property charges and new research that shows expected home-value appreciation for seniors can be less than average expectations for an entire housing market.
FHA endorsed 371,310 forward loans during the quarter, bringing total volume of new insurance up to $72.1 billion, up from the $71.4 billion from the previous quarter. The agency said it expects insurance volumes to decline as loan originations fell throughout the quarter.
“The overall dollar volume of loans originated for FHA insurance in the quarter was down 33% compared with the year-earlier period, with a 44% decline in home-purchase loan originations and a 16% decline in refinance originations,” said the report. “These product-level changes are in-line with other estimates of overall, national mortgage origination activity for the quarter.”
The year-over-year decline in total origination volume for FHA was larger than that for the overall market (33% vs. 24%) because home purchase loans are a greater share of FHA activity than they are for the overall market.
View a copy of the report here.