Wed May 13, 2015 09:10 PDT

Government-backed loan programs, which represent roughly a ...

1. VA, USDA loan totals increase in first quarter, FHA down
Wed May 13, 2015 09:10 PDT
Government-backed loan programs, which represent roughly a quarter of the mortgage market and
are popular among lower-income borrowers, veterans and
first-time homebuyers, had a mixed start in the first quarter of fiscal-year 2015.
Federal Housing Administration (FHA) volumes and loan
numbers dropped year over year, while loan activity at the U.S. Department of Veterans
Affairs (VA) and the U.S. Department of Agriculture (USDA) increased dramatically in the same
period, according to figures released by the three agencies.
In the first quarter of fiscal-year 2015 (October to December 2014), FHA-endorsed loan volumes
declined by 2 percent to $35.2 billion compared to the same quarter a year
before, and total FHA loan endorsements
declined by 3 percent to 201,577 loans.
Fewer people have been refinancing out of conventional loans into FHA loans, or refinancing
existing FHA loans into new FHA loans, FHA said in its quarterly report to Congress. FHA, which is
the nation's major first-time homebuyer program, didn't get a big boost in purchase activity.
Jump in VA and USDA loans
In the first quarter of fiscal year 2015, VA loan totals increased to 150,906 loans and

2. volumes increased to $35.7 billion, representing year-over-year hikes of 50 percent and 59 percent,
respectively. Within the same period, USDA loan numbers increased by nearly 21 percent to 35,186
loans and volumes jumped by 22 percent to $4.8 billion.
These massive increases are not entirely due to natural growth, however. The huge gains in USDA
and VA loans can
partially be explained by abnormally low numbers in the first quarter of fiscal-year 2014 as a result
of the federal-government shutdown in October 2013.
In addition, the first quarter of fiscal-year 2014 also coincided with a low point
in the overall mortgage market.
In fiscal-year 2014, VA loan
refinancing volumes dropped by nearly 70
percent, according VA Spokesman Terry Jemison. He
noted, however, that the purchase volume increased by 13 percent overall in fiscal-year 2014, and
continued strong in the first quarter of fiscal-year 2015.
"While purchase loan volume remains strong, VA saw
that the pent-up demand for refinance loans slackened, causing an overall
decline in loan volume," Jemison said.
The USDA also saw a big drop in refinances in fiscal-year 2014, although the impact was smaller
because the agency only refinances preexisting USDA-guarantee loans. Refinances dropped from
close to 13,000 loans in FY 2013 to 1,753 in FY 2014, USDA data says.
Signs of a good year
The big leaps in VA and USDA loan numbers during this past first quarter,

3. however, also can't entirely be explained by a poor performance of government loans in the first
quarter in fiscal-year 2014.
VA loan volume for the first quarter of fiscal-year 2015 was slightly higher than in
the first quarter of fiscal-year 2013, which was an exceptional year for the VA
program.
Overall, fiscal-year 2014 was not a bad year for the VA although the volumes and loan numbers were
down compared to especially strong 2012 and 2013 numbers. Mortgages to Gulf War veterans have
risen steeply since 2008.
The USDA loan volumes and numbers have also rebounded. USDA officials said that although the
government shutdown skewed up the FY 2015 quarterly numbers, the program is showing solid
growth.
"Loan obligations are up 5 percent [in May] over this
time last year for [the guarantee program]," said Tony Hernandez,
administrator, Rural Housing Services, who oversees the program. "Heading
into the 2015 homeownership season, we project this upward trend will
continue."
FHA, though, clearly had down year in FY 2014, and that trend continued into the first three months
of this fiscal year. In the first quarter, FHA purchase loan numbers increased by just 1 percent over
the same quarter of fiscal 2014, which was an especially sluggish period for home-purchase loans.
To boost FHA volumes this year and attract more first-time homebuyers, the Obama
administration lowered the annual insurance premiums from 1.35 percent to
0.85 percent.
These loan types represent an important segment of the
mortgage market. In the most recent weekly survey, the Mortgage Bankers
Association reported that the FHA share was 14 percent of applications, the VA,
12 percent, and the USDA, 0.8 percent.

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