MBA studies lenders' FHA perspectives

According to an MBA release, the study, Lender Perspectives on FHA’s Declining Market Share, was commissioned by the Research Institute for Housing America, an MBA trust fund. The study included responses from 61 lending institutions.

Among the key findings:

• More than two-thirds of lenders believed that FHA’s lack of product offerings was a major factor underlying its declining market share.

• Nearly 70 percent of lenders reported that the addition of a zero-down payment product to FHA’s product line would result in a “significant” or “major” increase in the number of FHA loans that they originate.

• One-third of lenders believed that an expanded product line would lead to a “significant” or “major” increase in their FHA volumes.

• Forty-six percent of lenders believed that a stronger cash-out refinance program would make FHA programs significantly more competitive, particularly in the current interest rate environment.

• Sixty-two percent of lenders identified the closing and post-closing process of FHA loans as a “significant” or “major” contributor to higher origination costs of FHA loans.

Interest in FHA loans is consistent, according to the survey, and there are plenty of opportunities for improvements, some of which already have begun.

The U.S. House of Representatives passed the Expanding American Homeownership Act of 2006, designed to empower and revitalize the FHA.

“With legislation pending in Congress, this study provides relevant and timely information to MBA members and policymakers regarding the FHA program,” said Doug Duncan, MBA chief economist and senior vice president of research and business development, in the release. “Lenders see value in FHA, but there are barriers that FHA needs to overcome to allow it to provide additional options for borrowers and to be more user-friendly for lenders.”

The FHA also has made changes regarding paperwork for appraisers; the Department of Housing & Urban Development’s recently announced lender insurance program and new appraisal protocols are expected to address the cumbersome workload in the closing and post-closing process for FHA loans.

“Other issues that have been uncovered in this survey would require congressional action for changes to be made, and MBA plans to support such action,” Duncan said.