Magazine article American Banker

FHA, VA Mortgages Lost Market Share amid Hot Competition of First Quarter

Magazine article American Banker

FHA, VA Mortgages Lost Market Share amid Hot Competition of First Quarter

Article excerpt

The market share of government loans dropped sharply in the first quarter of 1995, to 12% from 17% a year earlier, according to a recent survey.

TRW Redi Property Data, a real estate research group based in Riverside, Calif., has statistics showing the volume of Federal Housing Administration and Veterans Administration loans declined 70% during the first three months of 1995, while originations of all loans declined only 51%.

The survey looked at loans originated in major metropolitan areas in Virginia, New Jersey, Texas, Nevada, Arizona, and Colorado, and all loans in Florida and California.

David Lereah, chief economist at the Mortgage Bankers Association of America, said FHA loans did better than all loans in the first quarter of 1994 and thus had farther to drop than other loans in the first quarter 1995.

Mr. Lereah said that in the first quarter this year, lenders were competing for "a share of a smaller pie, so they were easing credit standards, putting bells and whistles on" conventional loans. Credit standards of government loans are not as flexible, he said, so it was not as easy to change the FHA product to reflect the competitive market in the first quarter of 1995.

The largest decline in government loans was in Colorado, with an 80% drop. Government loans did best in New Jersey, which only experienced a 3% decline from the level in the year-earlier period. Lenders suspect that the loan limit for FHA loans did not keep up with the rising costs of homes in Colorado. …

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