Recent news reports say that commercial banks are lessening their share of Federal Housing Administration loans. What can LendingPatterns™ tell us about this potential trend?
Taking a look at the Early Look for 2015 data, six of the top 20 FHA lenders are banks, although several more are mortgage banks affiliated with banks. By comparison, HMDA numbers for the full year of 2014 show eight banks in the top 20. So there may be some slowdown. But the Early Look numbers are preliminary, and when all banks have reported there may be more of them on the top 20, so we’ll have to revisit that.
Giant lender Wells Fargo Bank appears to reflect the trend, initially. The country’s largest FHA lender in 2014 and to date for 2015, San Francisco-based Wells took about 8,000 fewer FHA apps last year than in 2014, dropping from 241,000 to 233,000. However, Wells actually originated about 500 more FHA loans in 2015 than the year before, meaning they modestly bucked the trend..
The falloff at Bank of America, the number two FHA bank lender to date in 2015, is noticeable. B of A, based in Raleigh, NC, went from 53,000 FHA apps in 2014 to 34,000 last year. However, the falloff in originations was much lower, just 2600.
The trend isn’t uniform, though. The third largest FHA bank lender last year, Flagstar Bank, Troy, MI, saw increased FHA applications in 2015. It climbed from 24,000 apps in 2014 to 29,000 in 2015.
Overall, it is hard to say what the trend for all FHA lending is during those two years because not all the numbers are in yet for 2015. But this kind of lending seems to be rising even as bank FHA numbers fall. In percentages, FHA apps made up 16.4 per cent of total lending (nearly two million loans) for 2014. But as of Aug. 2, 2015 FHA application volume was more than 20 percent of loans made by those who have reported so far.
What does FHA lending look like when you drill down into the Early Look numbers for last year? Just 14.4 per cent of apps have been denied, rising to 29 percent if you include the withdrawn, incomplete or rejected by applicant categories. Some 38.2 percent (475,000 of 1.2 million apps) was originated and 32.2 percent purchased.
As far as race goes, about 45% of the Early Look FHA app volume for last year went to whites (556,000 of 1.25 million) and 24 percent to minorities, with Hispanics getting half of that. The balance, about 30 percent, was in the “unknown” or “NA” categories.
On the dollar side, $225 billion in FHA apps last year was received by the Early Look lenders that had reported as of Aug. 2. Whites applied for $100 billion of that amount, exactly the same percentage as they had in numbers of loans, while loan dollars asked for by minorities were in slightly higher percentages, just over 25 percent. The rest were in the unknown or NA categories.
Of that $225 billion in apps, 8.3 percent were from low income borrowers, while 15 percent were from moderate income, 18.6 percent from middle income, and 22.7 percent from upper income borrowers.
(Mark Fogarty is a journalist and analyst who has been covering the mortgage industry for more than 30 years.)