The mortgage boom of the past two years has been decidedly muffled in one key sector of the market: government-insured loans.
While originations of these loans are up, the rise hasn't been nearly as sharp as the increase in conventional lending. mortgage executives say.
Lenders generally pin the blame on years of policy changes that have diminished the consumer appeal of loans insured by the Federal Housing Administration and the Veterans Administration. Last year, the government programs accounted for just 8.4% of all new mortgages. versus 20% in 1980.
"What they, have done is to make the FHA the lender of last resort," said James B. Nutter Jr., executive vice president of Kansas City-based James B. Nutter & Co.
Several Active Players
Still, that company and a number of others remain active in the government market. (See accompanying table.)
Typically, lenders sell their FHA and VA loans on the secondary market - in the form of Government National Mortgage Association securities. Thus, Ginnie Mae issuance is a good proxy for a lender's commitment to government loans.
Many lenders are hoping that the Clinton administration will move to make FHA and VA loans more appealing to consumers.
Mr. Nutter, whose company is the nation's 21st largest Ginnie Mae issuer, said that originations of FHA loans have been hampered by increases in insurance premiums. After an increase of 50 basis points was imposed in 1991. "volume went down immediately." he said.
That increase was rescinded in the spring for certain types of refinancings. but Mr. Nutter said he has yet to see strong results. "Our conventional product is still outstripping the FHA/ VA stuff." he said.
Principal Mutual Life Insurance Co., the 12th-largest Ginnie Mae issuer, also has seen originations of conventional loans growing more quickly than FHA/VA lending, according to Gordon Jones. second vice president.
"One thing which may be slowing FHA volume is their turnaround time on loan insurance," he said. "It seems like it's taking forever to get a loan insured."
However, Mr. Jones maintained that the government programs have "hit bottom and are coming back."
A decision last fall to allow borrowers to roll more closing costs into the mortgage coupon was an important step forward. according to Mr. Jones.
Certainly not every lender is disappointed with its volume of FHA and VA loans. Margaretten Financial Corp., long a powerhouse in government lending, has actually seen its government Volume rise more rapidly than its conventional originations.
Margaretten, the 13th-largest Ginnie Mae issuer, has used some fancy footwork. For example, the company has begun a program that allows it to make VA loans above the government imposed $187,500 ceiling.
With the help of a third-party investor, Margaretten is now able to make VA loans up to $203.000. Essentially, Margaretten makes a standard $187,500 V.A loan and sells the remaining exposure to the investor.
Some lenders. like Sears Mortgage Corp. of Vernon Hills. Ill., have seen their amount of FHA/VA business as a percentage of total business remain steady.
Walter C. Klein Jr., chairman of Sears Mortgage. attributes this to the company's efforts to limit its amount of refinancing business. Mr. Klein said he believes that refinancings tend to use conventional mortgages.