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Government purchases bucking the downward trend
And then there are government purchases – the one bright spot in an otherwise rather dismal report. Such purchases rose 2.4% over the week, driven by increases in both FHA and VA purchase categories, per the MBA. “The ARM share of applications rose slightly to 7%, the highest since April 2023, as borrowers look for relief from higher fixed rates.”
The uptick in government loans could be seen on the balance sheet of United Wholesale Mortgage – the nation’s largest wholesale lender – during its recent second quarter earnings investors call. Responding to a reporter’s question, UWM’s CEO, Mat Ishbia, explained the reason for the activity surge – a 60% quarter-over-quarter increase at his firm.
“The FHA world competes a little bit with the home affordable programs from FHFA [Federal Housing Finance Agency], which is Fannie Mae and Freddie Mac,” he explained. “And so as Fannie Mae and Freddie Mac do less to help affordable homes, those borrowers go FHA. And if those borrowers go FHA, FHA is the best option for them.”
FHA loan originations volume up at UWM
Ishbia noted a recent reduction in the FHA’s insurance premiums has helped spur government-backed loan activity. The Department of Housing and Urban Development (HUD), through the FHA, earlier this year reduced its annual mortgage insurance premium (MIP) from 0.85% to 0.55% for most new borrowers. “Also, FHA did cut their MI [mortgage insurance] if you remember… which actually made it so it was more advantageous sometimes to use an FHA loan than a conventional loan. And so brokers are smart, borrowers are smart – they’re going to go to the cheapest payment.”
Ishbia said he sees another big opportunity in catering to military veterans. “Veterans is still another big opportunity,” he said. “We think veterans don’t necessarily get the best opportunities and we’ve got to get them to FindAMortgageBroker.com, to educate veterans because they can save a lot of money too.”
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