The mortgage market was buffeted by a number of changes in 2013 and 2014 among them higher fees at the FHA. NAR Research’ s second Survey of Mortgage Originators includes questions about the impact of changes to the FHA program on consumers.
Since 2010, the FHA has increased the rates it charges for mortgage insurance. On average, responding lenders indicated that 5.7% of originations were lost because of the increase in FHA fees. The distribution clustered between a response of 1.1% to 2.0% and 6.1% to 7.0%. A loss of 5.7% in sales would correlate to roughly 200,000 to 250,000 home sales lost, near the mid-point of estimates NAR Research produced in April .
When asked how consumers impacted by the increase in mortgage insurance rates responded to the higher costs, 68.4% of originators indicated that they had a client(s) who chose not to buy or to put off buying indefinitely. Nearly as many originators found that their client(s) were able to find funding through VA and RHS, but only 42.1% cited having success shifting their client(s) to conventional financing with private mortgage insurance. Only 15.8% of originators cited that a client(s) could absorb the losses while 10.5% indicated that they had a client(s) who waited to save for a larger down payment.
Higher fees at the FHA have had an impact on affordability. While some buyers were able to shift to other more affordable programs, many consumers were shut out of the market for ownership.