recently summarized a report from the Urban Institute (UI) about the apparent
reluctance of sellers to entertain offers from prospective buyers intending to
use FHA or VA financing. UI based its conclusion on both a survey of real
estate agents conducted by the National Association of Realtors and the recent
decline in the FHA and VA share of originations. Black Knight, in its new Mortgage
Monitor covering loan performance data for May, validates, to an extent, UI’s
suggestion, using recent issuances of mortgage-backed securities (MBS).
The company says that Ginnie Mac’s securities, composed
primarily of FHA and VA loans, represented about one third of the agency market
before the pandemic. It has dropped to less than 25 percent in recent months.
The loss has been driven in part by borrowers with higher balances, more
equity, and better credit scores reacting to the opportunity offered by low
rates and refinancing. Those borrowers are typically able to obtain GSE (Fannie
Mae and Freddie Mac) mortgages. There has also been a trend of FHA borrowers,
with increased equity, being able to refinance out of FHA mortgages and its lifetime
requirement of paying into the mortgage insurance fund.