Mortgage bankers originated $16.8 billion of Federal Housing Administration (FHA)-backed loans in February, a 27% decline from the prior month, and a sign that the spring home buying season may not be off to a rosy start.
FHA loans continue to be an important source of financing for homebuyers, particularly first timers who cannot manage much of a downpayment.
Then again, rates began rising in late December and continued on in an upward course through January and February — but have been falling over the past two weeks.
The government's mortgage insurance agency guaranteed only $8.3 billion of purchase money mortgages in February, compared to $11.4 billion the prior month. Nearly 75% of the financing in both months went to first time buyers.
The "FHA Single-Family" Outlook report shows demand for FHA-insured reverse mortgages held steady from January to February.
Lenders originated $1.8 billion in FHA Home Equity Conversion Mortgages (HECM) during the month, including 296 of the new 'HECM Saver' loans, up from 165 in January.
FHA launched the HECM Saver in October as a low-cost reverse mortgage product. Lenders say the adjustable rate HECM Saver is very competitive with home equity lines of credit and appeals to seniors because they don’t have to make monthly payments.
The HECM Saver has a nominal 0.01% upfront fee, compared to the 2% upfront fee on the standard HECM product.