The Philadelphia Fed study, "FHA Lending Activity in the Past Decade: A National Overview," was designed to foster better understanding of both the FHA's recent history and its current role in mortgage finance.
The study reached no conclusions on whether FHA policy aggravated the already troubled mortgage situation, which includes a record number of foreclosures. It may have been motivated by concerns expressed by Treasury officials and others that borrowers with low credit scores and minimal down payments appeared to be defaulting at rapid rates, thus reducing FHA reserves to levels below what the government considered safe.
During the mid-decade housing boom, relaxed underwriting standards in the conventional-mortgage market fueled a turn away from the FHA, as did strict government rules about the condition of properties as a prerequisite - rules that have been relaxed in the last five or six years.
With the housing bust, conventional lenders pulled out of the market and the FHA filled the gap.
According to the Philadelphia Fed study, which uses Home Mortgage Disclosure Act data, total FHA loan volume grew from 841,531 in 2000 to 1.2 million in 2003 as low interest rates caused the number of FHA-to-FHA refinances to surge. By 2006, volume had plummeted to 387,548 loans.
In 2009, FHA loan origination climbed 46.6 percent, to more than 1.8 million - a decade high - and the total dollar amount grew 53.9 percent, to $331.9 billion.
As of 2009, the FHA's market share of mortgage originations was about 21 percent by loan count and 18.5 percent by dollar volume, the Philadelphia Fed study showed.
In early 2010, however, the lifeline FHA had thrown to the housing market began growing shorter, for many of the same reasons that had hamstrung conventional lending: bad loans, lots of them.
