Delinquency Rate on FHA-Insured Mortgages Increases
At the end of February, 7.46 percent of the Federal Housing Administration's single-family insurance-in-force was "seriously delinquent" -- either 90 days delinquent, in foreclosure or bankruptcy. February's rate of serious delinquencies is up considerably from the 6.16 percent seen at the same time last year, the Wall Street Journal first reported Tuesday. The agency paid claims on 3,951 foreclosures, or 0.08 percent of the FHA's insurance-in-force, in February, according to data provided to HousingWire by an FHA spokesperson, who was quick to point out that some 60 percent of delinquencies cure through the agency's loss mitigation program before reaching the foreclosure process. But critics of the program have said that its comparatively lenient terms -- requiring as little as 3.5 percent of the home's value as a down payment, for example -- in the wake of the subprime market collapse attracted many borrowers with less-than-ideal credit. The volume of FHA-insured loans as a portion of the total mortgage origination market has increased from 3 percent in Jan. 2007 to 37 percent in Dec. 08, according to a monthly mortgage monitor report released this month by Lender Processing Services Inc. (LPS) Critics say the FHA's delinquency woes have stemmed from an influx of borrowers and not enough agency manpower to handle the volume of new FHA lenders. The program's refinance appeal and "streamlined refinance" process -- combined with the Hope for Homeowners program through which the agency has urged troubled borrowers to refinance into FHA loans -- also opened the door to a wave of new mortgages borrowers may not be able to afford. Write to Diana Golobay at firstname.lastname@example.org. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.