The government-insured share has increased from 9.4 percent in January 2008 to its current level of 32.9 percent, which is the highest level observed since February 1991. Since the MBA survey’s inception in January 1990, the lowest recorded share was 5.8 percent in August 2005 and the highest was 43.8 percent in February 1990.

“This increase in the share of government-insured mortgage applications provides further evidence that there are still loans available to qualified borrowers, particularly through the FHA,” said MBA's Chairman David G. Kittle, CMB. “The mortgage market remains fully operational and lenders are working to ensure borrowers with sufficient down payment and good credit have the opportunity of homeownership.”

Data from the U.S. Department of Housing and Urban Development (HUD) show that the level of conventional to FHA refinance applications has increased 89.2 percent on a year over year basis in October. Likewise, the actual level of refinances from conventional loans to FHA insured loans has increased 144.3 percent on a year over year basis. Based on the MBA survey, application volume for government-insured loans was up 113.6 percent in October from a year ago, while application volume for conventional loans was down 49.7 percent, showing that borrowers are still moving from conventional to government-insured mortgages.  

There are several reasons why government-insured loans, specifically FHA, have gained an increased share of the market:

• In March of this year, the Economic Stimulus Act of 2008 temporarily raised the FHA and conforming loan limits for most areas in the country, which made FHA financing an option for more borrowers. However, the passage of the Housing Bill in July 2008 permanently increased the loan limit to a maximum of $625,500 in 2009, which is lower than the temporary limit of $729,750 for 2008. As a result, most high-cost markets will see declines in their loan limit next year.  

• FHA loans typically require lower down payments than those purchased by Fannie Mae and Freddie Mac (the GSEs). Generally the maximum loan to value (LTV) ratio for FHA loans is 97 percent and 95 percent for the Government Sponsored Enterprises (GSEs).

• Conventional GSE loans require Private Mortgage Insurance (PMI) for loans with a loan-to-value (LTV) ratio in excess of 80 percent, while FHA has an upfront mortgage insurance premium. Some borrowers may prefer the upfront insurance premium and monthly insurance payments as it may prove more cost effective for their financial situation.

• Conventional GSE loans typically have higher credit score requirements than FHA loans, therefore borrowers who may not qualify under the GSE requirements may be applying for an FHA insured loan as an alternative.  

**SPECIAL NOTES**

MBA’s Weekly Appplication Survey covers approximately 50 percent of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990.  Respondents include mortgage bankers, commercial banks and thrifts.  The survey includes eight of the top ten originators in 2008, based on data from Inside Mortgage Finance. 

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The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry that employs more than 280,000 people in virtually every community in the country. Headquartered in Washington, D.C., the association works to ensure the continued strength of the nation's residential and commercial real estate markets; to expand homeownership and extend access to affordable housing to all Americans. MBA promotes fair and ethical lending practices and fosters professional excellence among real estate finance employees through a wide range of educational programs and a variety of publications. Its membership of over 2,200 companies includes all elements of real estate finance: mortgage companies, mortgage brokers, commercial banks, thrifts, Wall Street conduits, life insurance companies and others in the mortgage lending field. For additional information, visit MBA's Web site:  www.mortgagebankers.org.