Strong demand for FHA mortgages continued to put the squeeze on the troubled private mortgage insurance industry during the third quarter. According to new numbers compiled by Inside Mortgage Finance, private MI activity at the six firms still active in the business fell 22 percent between the second and third quarters of 2009. For the first three quarters of this year, private MI volume was down an even larger 60 percent on a year-over-year basis.

Among the active MI firms, fifth place PMI Mortgage Insurance posted the biggest drop in third quarter total primary insurance written with a 42 percent decline. Meanwhile, second place United Guaranty, a unit of AIG, showed the only gain in the MI industry during the third quarter with a 4 percent increase in new business.

The National Association of Realtors yesterday urged the Federal Housing Finance Agency and the New York attorney general to clarify exactly when the controversial Home Valuation Code of Conduct will expire as part of an agreement hammered out back in 2008. The code, which was implemented by Fannie Mae and Freddie Mac earlier this year, has been criticized by real estate interests as being overly restrictive and limiting any housing recovery. At issue is whether the code will sunset in July or November of 2010, according to terms of the original agreement between the FHFA and the New York AG’s office.

The proposed move by federal lawmakers to extend and expand the homebuyer tax credit is likely to have a much larger impact on first-time homebuyers than trade-up homebuyers, according to results from the Campbell/Inside Mortgage Finance Monthly Survey of Real Estate Market Conditions. The proposal expected to be approved this week would extend an $8,000 tax credit for first-time homebuyers and add a new $6,500 credit for current homeowners who buy a new principal residence.

Because the credit would average 4 percent of the purchase price for first-time homebuyers but only 2 percent for current homeowners, a lot more first-time purchasers are expected to take advantage of the tax break. Campbell Surveys estimates an extension and expansion of the tax credits will generate about 300,000 additional home sales to first-time homebuyers and 150,000 extra sales to current homeowners. Click here for more info.

The fourth quarter didn’t start off particularly well when it came to new mortgage activity. According to the Inside Mortgage Finance MBS Database, government-related mortgage securitization–a barometer for new originations–fell a hefty 21 percent between September and October. The biggest decline took place in the Fannie Mae/Freddie Mac sector as new MBS issuance tumbled by 29 percent or $25.6 billion. The Ginnie Mae sector, which captures FHA and VA mortgage origination activity, held up much better with just a 3 percent or $1.3 billion dip in MBS issuance. Overall mortgage activity has been falling since July and the prospects for any rebound in the fourth quarter are very poor.

New 1-4 family mortgage originations tumbled a sizeable 26 percent between the second and third quarters of this year, according to new numbers compiled by Inside Mortgage Finance. Some $410 billion in new mortgages were made in 3Q09, the lowest quarterly pace seen in 2009. This brought mortgage originations for the first nine months of 2009 to $1.41 trillion or not far behind the $1.50 trillion seen for all of 2008.

Most of the decline in third quarter originations was due to a slide in refinance activity in the Fannie Mae/Freddie Mac sector of the market. But new FHA originations held up remarkably well in the third quarter as volume actually rose 6 percent from the second quarter. FHA originations for the first three quarters of 2009 already have set a new annual record at $283 billion.

Cash deals accounted for more than a quarter of home sale transactions tracked nationwide during the third quarter of 2009, according to the Campbell/Inside Mortgage Finance Monthly Survey of Real Estate Market Conditions. Not surprisingly, the survey found most of the cash deals were tied to sales of distressed properties–particularly damaged real estate owned, or REO. The growth in cash transactions, which is expected to continue for the foreseeable future, could put a damper on mortgage lender plans to grow their home purchase financing business in 2010.

For more information on the monthly survey contact John Campbell at john@campbellsurveys.com or (202) 363-2069.

Benefiting from the credit crunch and the evaporation of the non-agency mortgage market, credit unions have posted big gains in mortgage lending this year. According to a new Inside Mortgage Finance analysis, credit union mortgage originations jumped 18 percent in the first half of 2009 on a year-over-year basis to reach a record-high $66.7 billion. The industry is on track to break the $100 billion mortgage origination barrier for the first time ever in 2009.

Perhaps more significantly, the credit union share of total originations has risen from an historic 2-3 percent level to a record-breaking 7
percent in 2009. Most of the growth in credit union mortgage lending this year has taken place among the larger institutions who have stepped up to fill the void left by banks that curtailed their lending in the first part of the year.

A noticeable drop in refinance activity–particularly in the Fannie Mae/Freddie Mac sector–during the third quarter appears to have taken its toll on overall mortgage originations for the period. According to preliminary numbers analyzed by Inside Mortgage Finance, 3Q09 mortgage production slipped about 9 percent from the previous quarter to reach approximately $500 billion in volume. That would bring mortgage originations for the first nine months of the year to some $1.50 trillion.

Significantly, the biggest drop in third quarter originations took place in September when refinance activity declined the most. Nevertheless, the recent drop in 30-year mortgage rates to below 5 percent is likely to boost refinance business in the fourth quarter and limit any major decline in 4Q09 originations.

The Treasury Department’s latest scorecard on the government’s Home Affordable Modification Program reveals that most major mortgage servicers significantly increased the number of trial loan modifications they are doing between August and September. But the new data also show that some of the biggest servicers–most notably Bank of America–are way behind when it comes to HAMP modification activity. Treasury reported that only 11 percent of the Bank of America loans theoretically eligible for HAMP have seen trial loan modifications. Meanwhile, CitiMortgage had started trial mods on one-third of its eligible mortgages–the highest level recorded by any top five mortgage servicer.

A senior executive from CitiMortgage will be discussing the company’s approach to HAMP at an Inside Mortgage Finance audio conference on October 21 at 2 pm EDT. Click here for more info.

While more and more lenders have started selling mortgages to Fannie Mae and Freddie Mac this year, an increasing share of the two government-sponsored  enterprises’ business is coming from just two mega lenders. According to a new report in Inside Mortgage Finance, some 39 percent of Fannie’s and Freddie’s total business came from Wells Fargo and Bank of America in the first three quarters of 2009.

Wells was by far the biggest GSE customer in the year-to-date with a whopping $225 billion in volume and a 22 percent market share. BofA was in second place with $168 billion in GSE business and a 17 percent market share. Chase Home Finance and CitiMortgage rounded out the top four GSE customers in the first nine months with $88 billion and $55 billion, respectively, in volume.