TheMReport

34 | TH E M REP O RT O R I G I NAT I O N S E R V I C I N G A NA LY T I C S S E C O N DA R Y M A R K E T ORIGINATION THE LATEST New Home Purchase Applications Slide in June Tighter credit and higher down payments mean the buyers just won't—or can't—buy. A pplications for new home purchases slipped again in June, though the annualized rate of new home sales is forecast to have increased. The Mortgage Bankers Association's (MBA) Builder Applications Survey (BAS), a gauge of application volume from mortgage subsidiaries of home- builders, suggests new home purchase applications slipped 5 percent from May to June, the group reported in July. The change does not include any adjustments for typical seasonal movements. Using application data from the survey and other assumptions about the market, the MBA esti- mates that sales of new homes in June ran at a seasonally adjusted annual rate of 386,000 units, an increase of 3.2 percent from May's unrevised estimate of 374,000. Figures from the Census Bureau put new home sales at an adjusted annual pace of 504,000 in May, a significant increase and substantially higher than MBA's estimate. That data is based on contract signings. Government estimates for new home sales in June were sched- uled to come out July 24. On an unadjusted basis, the association estimates there were 36,000 new home sales in June, flat from May's total. MBA reports conventional loans made up 67.2 percent of new purchase applications in June. Mortgages backed by the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA) accounted for 17 percent and 14.6 percent, respectively, while loans through rural services agencies made up 1.2 percent. The average loan size of new homes was $296,078, down nearly $350 from May. Mortgage Credit Access Increases in June The FHA has kept credit open, despite some criticism. C onsumer access to mortgage credit in- creased slightly in June as criteria opened up on government-insured loans. The Mortgage Bankers Association (MBA) reported a 0.6 percent increase in its Mortgage Credit Availability Index (MCAI) from May to June, putting the index at 115.8. The group links the increase in the headline index to "a slight net loosening in lender crite- ria regarding Federal Housing Administration (FHA) and Department of Veterans Affairs (VA) loans with respect to mini- mum credit scores and maxi- mum loan-to-value (LTV) ratios." The FHA has drawn a mix of praise and criticism following the recent launch of its Homeowners Armed With Knowledge (HAWK) initiative, through which the agency seeks to provide price incentives and expand credit access for borrowers who partici- pate in housing counseling. Edward Pinto, resident fel- low at the American Enterprise Institute and outspoken critic of the FHA's current practices, says the agency is already too lax about accepting low credit scores, minimal down payments, and high debt ratios. According to Pinto's group, nearly a quarter of FHA-insured loans are at risk of default in the event of an economic downturn. The MBA's credit availabil- ity index measures changes in several factors related to bor- rower eligibility, including credit score and loan-to-value ratio, and combines those metrics with underwriting criteria for more than 85 lenders and investors. The index was benchmarked at 100 in March 2012.

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