FHASecure Blowback

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On FHA Mortgage Guide, syndicated columnist Peter Miller points out today that the number of FHA mortgage endorsements is headed down when comparing the first two weeks of July with the first two weeks of August.

“There were 77,608 FHA endorsements during the first two weeks of August — that’s significantly less than the 82,079 loans that were insured during the last two weeks of July.”

My opinion is that the reason for this some of this decrease might possibly be exemplified in this line from a guideline change received in the middle of July from one prominent national FHA wholesale lender:

All conventional-to-FHA rate and term refinances are considered FHASecure, regardless of whether the borrower is delinquent or current.

For this particular FHA lender there is a 2.5 percent adjustment to the wholesale price of an FHASecure loan. This lender is one considered to have very competitive rates. Most other lenders have price adjustments at least as high or higher. This means that many good credit borrowers who would make excellent additions to the FHA loan pool now have to pay higher rates on FHA loans than would otherwise be necessary.

Lenders have adopted these guidelines based on secondary mortgage market changes which came about because HUD and the White House keep insisting on using the total number of conventional to FHA rate and term refinances to represent the number of homeowners “rescued” by their anti-foreclosure efforts.

It’s the Law of Unintended Consequences in full action.