Jumbo and FHA growth lagged further behind GSE loans in past year

The gap between the growth rate of government-sponsored enterprise mortgages and other loan types widened in the past year, TransUnion’s latest quarterly report shows.

The change in the number of loans purchased by Fannie Mae and Freddie Mac almost matched year-ago levels at 110%, while mortgages insured by the Federal Housing Administration were up 22% and jumbo products rose by 28%, according to first quarter data in TransUnion’s latest report. Comparable year-over-year growth rates in the first quarter of last year were 114% for GSE loans; jumbo, 50% and FHA, 42%.

Refinancing, high home prices, the concentration of pandemic-related hardships in government-insured loans, and borrowers’ tendency to refinance into lower-cost GSE products likely played a role in the intensified discrepancy for FHA products.

“Due to home price appreciation, entry-level homes have also gone out of reach for several first-time buyers who also tend to rely on FHA loans,” Matt Komos, vice president of research and consulting for TransUnion, said in an email. Refinance shares in the first quarter were 64% for Fannie and Freddie loans compared to 43% for FHA loans, he noted.

Meanwhile, lingering impacts of market disruption that affected the jumbo market last year likely put a drag on its growth through at least the first quarter of 2021.

“Several key jumbo lenders ... placed their ... programs on pause when pandemic headwinds began to be felt. Jumbo lending has improved, but not anywhere near pre-pandemic levels,” Komos said.

While some differences in growth rates did emerge in TransUnion’s report, it generally showed that the larger consumer credit market as a whole has largely recovered from any pullback in lending during the pandemic.

TransUnion’s Credit Industry Indicator rose to a high of 128 in the second quarter, up from 87 during the same period a year ago. (Numbers for mortgage originations were reported with a one-quarter lag in TransUnion’s report.)

While government intervention helped mortgage rebound fairly quickly from market disruption early in the pandemic, sectors like credit cards and auto loans have seen a slower recovery, TransUnion’s study showed.