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The Quality of FHA Lending in Pennsylvania, New Jersey, and Delaware

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FHA Lending in Pennsylvania, New Jersey, and Delaware

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FHA Lending Patterns Nationally and in the Third District States PDF (27 pages, 858 KB)

The HMDA data indicate that overall lending volume for FHA loans for Pennsylvania, New Jersey, and Delaware has largely followed national patterns over the past decade.9 As in the national case, total activity for FHA lending peaked early in the decade, fell to its lowest level mid-decade (2005 and 2006), and rose sharply after the onset of the housing crisis in 2007 and continuing through 2009 (Table 1).

While the Third District states, in general, follow national patterns, there are similarities and differences between the FHA’s lending patterns in Pennsylvania, New Jersey, and Delaware that are worth noting.

Home Purchase

FHA home purchase lending was at high levels in the three states in 2000 and 2001 and fell mid-decade. New Jersey and the nation both experienced their lowest levels of FHA home purchase activity in 2006, while Pennsylvania and Delaware experienced their lowest levels one year earlier in 2005. In Pennsylvania, there were 22,998 FHA home purchase originations in 2000, but this number fell to 9,355 in 2005 (a decrease of 59.4 percent) at the FHA program’s lowest point. FHA home purchase activity then began a sharp rise in 2008 and 2009, ending the decade at 39,081 (an increase of 318.7 percent from the low point). Similar patterns are evident in New Jersey: There were 20,030 home purchase originations in 2000, 4,566 home purchase originations in 2006 (a decrease of 77.2 percent), and 23,847 in 2009 (an increase of 422 percent). Similarly, in Delaware, home purchase loan originations were 2,331 in 2000, 810 in 2005 (a decrease of 65.3 percent), and 3,206 in 2009 (an increase of 295.8 percent). As this discussion indicates, fluctuations in FHA home purchase activity were less extreme in Pennsylvania and Delaware than in New Jersey (Table 1, Chart 1).

Home Refinance

The Third District states largely follow the national trend for FHA home refinance activity. As in the nation, FHA refinance activity in the Third District states hit a peak in 2003,10 then dropped through mid-decade in each state. Refinance activity turned around substantially after 2006 and was at new highs in each state in 2009. In New Jersey, the number of refinance loans in the FHA program was the highest for the three states in all years except 2008 and 2009, when the Pennsylvania count was slightly higher (Chart 1, Table 1).

Comparison of Home Refinance to Home Purchase

In the nation as a whole, only in 2003 was the total number of refinance loans in the FHA program higher than the number of FHA home purchase loans. FHA trends in the Third District states, however, varied from those in the nation. Of note, in New Jersey in 2002 and 2003, and more recently in 2007, 2008, and 2009, more mortgage borrowers used the FHA program to refinance a house than to purchase one. Even in the intervening years of 2004, 2005, and 2006, FHA refinance activity was nearly as large as its home purchase activity in that state. In 2008 and 2009, this phenomenon is present in Delaware as well. In Pennsylvania, the ratio of refinance to home purchase has fluctuated from a low of 4.5 percent in 2000 to a high of 92.75 percent in 2003, so that the FHA home purchase share has remained dominant in all years; overall, trends in Pennsylvania more closely resembled national trends than did those of the other two states in the Third District. (See Chart 1 and Table 2.)

  • 9 Background on total lending for the FHA program at the national level is provided in an earlier report from the Federal Reserve Bank of Philadelphia. Here we provide a similar background for the Third District states. See Federal Reserve Bank of Philadelphia, 2011, for a more detailed discussion of the national trends.
  • 10 Refinance activity likely increased early in the decade as a result of the low interest rate environment spurred by the Federal Reserve in response to economic difficulties following the 2001 recession.
  • Last updated: June 3, 2011