FHA Market Share Continues to Shrink, Regulators Say

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WASHINGTON — The Federal Housing Administration's share of the mortgage market continued to drop in 2012, falling to 27% of first-lien mortgages after years of representing more than 30% of originations, according to data released Wednesday by federal regulators.

The amount of FHA loans skyrocketed in the wake of the financial crisis, rising to a high of 37% of the market in 2009. Since then, it has steadily tapered off, dropping to 36% in 2010 and 31% a year later.

In its release of Home Mortgage Disclosure Act data, regulators said FHA and Veterans Administration-backed refinancings jumped by 78% and 90%, respectively, in 2012 from a year earlier. That was faster than conventional refinanced loans, which increased by 51% during the same period, but conventional refinancings represented roughly 85% of all refinancings during the year.

The data also revealed that higher-priced lending represented "a small minority of first-lien loans in 2012"except for conventional loans used to buy manufactured homes, regulators said. In such cases, 82% exceeded the reporting threshold for the year.

The HMDA data, which is a tool regulators use when examining banks for compliance with fair lending laws, also takes into account racial background of borrowers. The Federal Financial Institutions Examination Council said the racial background of applicants and denials in 2012 was similar to previous years in which black and Hispanic white applicants had higher denial rates than non-Hispanic white applicants. The denial rate for Asian applicants "was virtually the same as" the denial rate for non-Hispanic white applicants, regulators said.

There were 7,400 financial institutions covered by HMDA which reported the data in 2012. Roughly 54% of the 15.3 million home loan applications last year resulted in loan originations, plus an additional 3.2 million loan purchases totaling nearly 18.5 million actions.

Loans continued to rise by 38% from 2011, partly because of a 54% jump increase in refinanced mortgages. Home purchases also rose by 13% during the same period.

Following the FFIEC's release, the Consumer Financial Protection Bureau separately announced that it launched an online tool to help consumers dig through the HMDA data using interactive graphs and a "heat map" to break down the loans by type and geography. The Dodd-Frank Act transferred primary HMDA rulemaking authority from the Federal Reserve Board to the CFPB in 2011.

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