By Alan J. Heavens, The Philadelphia Inquirer –
PHILADELPHIA — If you tried to get a mortgage last year and failed, or were put through the wringer first, you are in good company.
Of the 11.7 million mortgages applications received by lenders in 2011, only 7.1 million resulted in loan originations, data on transactions covered by the Home Mortgage Disclosure Act show.
About 2.9 million loans were purchased for sale to investors on the secondary market.
The act, approved in 1975, requires lending institutions to report public loan data.
Mortgage lending actually fell to a 16-year low, the data show.
There also were fewer lenders in the market. In 2006, this data covered slightly more than 8,900 lenders. In 2011, it covered 7,632, according to the Federal Financial Institutions Examination Council, which made the data available earlier this week.
In the aftermath of the financial meltdown of September 2008 and as more home loans soured, lenders tightened their underwriting requirements.
To determine whether buyers could qualify for mortgages, real estate agents have been urging prospective clients to obtain prior approval of loan amounts needed to finance the purchase of a house.
Before the meltdown, the typical buyer was “prequalified,” meaning that the loan officer of the bank would, using income information provided by the potential borrower, detail the amount of the mortgage for which the applicant qualified.
The 2011 data showed that 186,000 of 483,000 requests for these preapprovals didn’t result in a mortgage loan.
The total number of originated loans of all types and purposes reported fell by about 780,000, or 10 percent, from 2010, in part because of a 13 percent decline in refinancings.
Lending for home purchases also declined 5 percent.
The data reflect a continued heavy reliance on loans backed by the Federal Housing Administration, or FHA, insurance that began with the start of problems in the mortgage market.
During the boom years of 2005 and 2006, only 3 percent of all loans originated for home purchases were insured by the FHA. In 2007, that percentage increased to 7 and then jumped to 26 percent in 2008.
The trend continued in 2009 and 2010, with 37 percent and 36 percent, respectively, of loans FHA insured. In 2011, the FHA share fell to 31 percent.
Edward Pinto of the American Enterprise Institute, a longtime critic of this kind of reliance on the FHA, told the American Mortgage Conference on Sept. 12 that the agency “needs to return to its traditional mission of being a targeted provider of mortgage credit for low- and moderate-income Americans and first-time homebuyers.”
“It performs a disservice to American families and communities by continuing practices that result in a high proportion of families losing their homes,” he said.
When it was established in 1934 by the Franklin D. Roosevelt administration, the FHA insured fully amortizing 20-year term loans combined with a 20 percent down payment.
“As a result, home buyers accumulated nearly 30 percent equity after four years without relying on inflation,” Pinto said.
By 1954, the FHA had insured 2.9 million mortgages, yet had paid claims on only 5,712 properties, for a cumulative claims rate of 0.2 percent.
“Today, the FHA has 7.5 million loans outstanding and pays 12,000 claims per month,” Pinto said. “This is not your great-grandmother’s FHA.”
First-lien lending for home purchases backed by Veterans Administration guarantees also has increased in recent years, although VA-backed lending represents a smaller share of the market.
The VA market share of first-lien home purchase loans increased from nearly 3 percent in 2007 to about 7 percent in 2009 and 2010, and to 8 percent in 2011.
Overall refinancing numbers were down in 2011 from 2010, even though fixed interest rates reached record lows during the year, remaining below 4 percent.
Refinancing volume fell primarily because many borrowers could not qualify for loans because of home-equity losses. Nearly 23 percent of all borrowers owed more on their mortgages than their properties were worth.
Although both the number of conventional and FHA-related refinancings fell from 2010 to 2011 — 12 percent and 37 percent, respectively — the volume of VA-guaranteed refinancing activity rose about 41 percent.
For the second full year, the data include reporting on whether a loan is “higher priced.” Under new rules, lenders now report loans with annual percentage rates 1.5 percentage points above the rates reported by Freddie Mac in its Thursday surveys for first lien loans and 3.5 percentage points for second mortgages.
The data show a minority of first-lien loans in 2011 with APRs exceeding the loan price reporting thresholds.
The principal exception was for conventional mortgages for manufactured homes — 82 percent exceeded the reporting threshold in 2011.
For conventional first lien loans used to purchase new homes, 3.9 percent exceeded the reporting threshold, which was a 3.3 percent increase from 2010. For FHA-insured loans for new homes, higher priced mortgages accounted for 3.8 percent.
Only 0.4 percent of VA loans were higher-priced in 2011.
Black and Hispanic white applicants experienced higher loan denial rates than non-Hispanic white applicants, the data show.
The denial rate for Asian applicants was virtually the same as the corresponding denial rate for non-Hispanic white applicants.
These relationships are similar to those found in earlier years, the data show.
