Implode-o-Meter News - Resurgence of PMI Puts Pressure on FHA

PMI's volume of origination increased in the second quarter by 56 percent to $72 billion, the highest quarterly volume since the first quarter of 2008.Â When it reported this, the Urban Institute noted that, "if the shift back to PMI takes away a significant part of FHA's lower credit risk business it could put pressure on FHA's balance sheet, possibly pushing the agency to lure higher quality business back with another premium cut."
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Kaul says that in 2016 there has also been an increase in originations by large lenders of low-downpayment mortgages outside the FHA due to new programs from the GSEs (Fannie Mae and Freddie Mac.) These products allow for down payments as low as 3 percent along with reduced mortgage insurance. While these loans were introduced nearly 20 months ago there was no big move toward them because FHA still had a price advantage. The April restructuring of PMI premiums changed this, giving lenders an alternative. This, he says, was especially appealing to those "already wary of the FHA's heavy enforcement."

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Resurgence of PMI Puts Pressure on FHA