Raised FHA premiums tank FHA purchase applications

FHA premiums rose

For the week ending April 22, 2011, the Mortgage Bankers Association (MBA) is reporting their Market Composite Index (MCI) which measures mortgage loan application volume, having declined 5.6% from the previous week while the Refinance Index (RI) dropped 0.6%.

The seasonally adjusted Purchase Index dropped 14% over the week and 29% over the same week in 2010. The MBA reports a drastic 27% drop in government purchase applications.

“Purchase applications fell last week, driven primarily by a sharp decrease in government purchase applications as new, higher FHA premiums went into effect,” said Michael Fratantoni, vice president of research and economics for the Mortgage Bankers Association (MBA).

“This decrease reverses a 20 percent increase in government purchase applications over a four week period, which was likely driven by borrowers attempting to beat this deadline.”

In March, AGBeat columnist Fred Glick wrote on the state of lending affairs as zero point mortgages threatened to go into effect on April 1, 2011 showing it may not be FHA premiums alone that impact the loan volumes. “Along with the higher cost of mortgages, the prohibited guidelines that the Mortgage Gestapo have been putting into effect, the higher monthly FHA premiums (1.1) that take hold next month, the HVCC-like 150% increase in appraisal costs due to AMCs and the lack of good, independent jumbo rates to move the American McMansion, we can assume any national housing recovery will only take 20 years to come around.”