Federal Housing Administration loan applications fell 25% in April, following an insurance premium increase introduced on April 9.
The increase, which raised the annual insurance premium on FHA loans by 10 basis points and boosted by upfront fee by 75 basis points, looks to have made a dent in applications during the month, which could lead to lower FHA loan volume in coming months.
For refinance loans and purchase loans, the application count fell from 198,700 in March to 150,000 in April—a roughly 25% decrease, according to the Department of Housing and Urban Development’s Single Family Outlook, released this week.
The premiums, which were announced in early 2012 to ensure stability of FHA’s Mutual Mortgage Insurance (MMI) fund, did not apply to reverse mortgages. While the change in insurance premiums could have a negative impact on volume, there are other efforts in place to help borrowers refinance their FHA loans at today’s low rates. A streamline refi program announced by the Obama Administration earlier this year is scheduled to launch this month.
Written by Elizabeth Ecker