FHA loan count down 17% in final three months of 2022

Loan endorsements decline for sixth straight quarter since recent peak in 2021

Loan endorsement activity at the Federal Housing Administration (FHA) fell 17.1% quarter over quarter to close 2022, according to a recent report from the U.S. Department of Housing and Urban Development (HUD).

FHA loan count is among the data points reported by HUD and FHA to Congress following every quarter of the fiscal year. In the fourth quarter of last year (which is concurrent to the first quarter of federal fiscal year 2023), the FHA backed 179,152 mortgages, down from 216,036 in the prior quarter. It was the sixth straight quarterly decrease in FHA loan endorsements since the current cycle peak was reached in Q2 2021.

In terms of dollar volume, FHA loans in Q4 2022 totaled $49.1 billion, down 17.5% quarter over quarter.

The FHA attributed the most recent decrease to the continued rise of interest rates, with the average 30-year fixed mortgage rate climbing above 7% in late October and early November. Notably, according to the Mortgage Bankers Association (MBA), mortgage credit availability also fell during the fourth quarter to its lowest level since March 2013. In December 2022, the FHA and U.S. Department of Veterans Affairs saw a 23% year-over-year decline in credit availability, per the MBA’s Mortgage Credit Availability Index.

Both purchase and refinance loan count fell during the last three months of 2022. Purchase activity was down 16.3% quarter over quarter, while FHA-to-FHA refinance endorsements were down 28% and conventional-to-FHA refinances fell 10.6%.

With interest rates high and minimal incentives to refinance, purchase loans continued to dominate total lending activity. Purchase loans comprised a 78.6% share of all FHA mortgages during the fourth quarter, up from 77.9% in Q3 2022 and well above the 65.9% share in Q4 2022. The purchase share of all FHA loans is now at its highest level since mid-2018, when it briefly climbed above 80%.

Reverse mortgage activity at the FHA is down as well, with the count of HECM endorsements during Q4 2022 at 9,555. That’s down 31.1% quarter over quarter, with HECM endorsement dollar volume shrinking by 34%.


More Headlines