News of the MBA data follows an HW story last week that found Ginnie Mae fixed-rate mortgage-backed securities issuance trumped similar issuance volume from Freddie Mac (FRE: 4.39 0.00%) in July, and was running ahead of both Freddie and Fannie Mae (FNM: 6.15 0.00%) to-date in August. Roughly 97 percent of FHA-endorsed mortgages are securitized via Ginnie Mae.
The government-insured share has been increasing since February 2007, the MBA said, but only since the beginning of this year has the share really exhibited significant increases; up from 9.4 percent in January. The MBA suggested that interest in government-insured mortgages still has room to run, however, relative to a record share of 43.8 percent of mortgage applications in February 1990.
Data from the U.S. Department of Housing and Urban Development show that the level of conventional to FHA refinance applications had increased 317 percent on a year over year basis in July, the bulk of which the MBA suggest was likely from borrowers looking to get out of subprime ARM products.
That said, not all FHA originations are subprime; the level of conventional to FHA refinance endorsements has increased 260.8 percent on a year over year basis, as well.
The MBA suggested growth in FHA originations was a strong impetus to push forward with proposed FHA modernization, including risk-based pricing; the recently-passed housing legislation that included a $300 billion expansion of FHA’s authority to underwrite refinancing for troubled borrowers effectively outlaws the practice. Democratic lawmakers have criticized risk-based pricing for loans as discriminatory against minorities, who tend to comprise more of the subprime credit category.