A new study revelas that the decline in FHA market share in the mortgage industry is the lack of a zero down payment loan program.

The study, "Lender Perspectives on FHA's Declining Market Share," was commissioned by the Research Institute for Housing America. The study looked at 61 lending establishments of different sizes and levels of experience.

"With legislation pending in Congress, this study provides relevant and timely information to MBA members and policymakers reguarding the FHA program," said MBA Chief Economist Doug Duncan.

"Lenders see value in FHA, but there are barriers that FHA needs to overcome to allow it to provide additional options for borrowers and to be more user friendly for lenders," said Duncan.

Over two-thirds of lenders felt that the FHA's lack of product offerings is primarily responsible for the decreasing market share. Almost 70% of lenders reported that adding a zero-down payment product to FHA's products would result in a "major" increase in the amount of FHA loans originated.

Almost 62% of lenders recognized the closing and post-closing process of FHA loans as a "significant" factor in higher origination prices for FHA loans.

Forty-six percent of respondents believe that FHA programs would be more competitive with a more efficient cash-out refinance program.

A third of the lenders felt that FHA volume would be increased by a more developed product line.