The amount of seriously delinquent mortgages insured by the Federal Housing Administration increased in May for the first time since the beginning of the year.
The agency reported 713,104 seriously delinquent loans, up less than a full percentage point from the previous month but still 23% higher than one year ago.
The FHA serious delinquency rate still stands at 9.4%, more than double the 3.5% rate for the other the government mortgage financiers Fannie Mae and Freddie Mac.
Troubled loans for the struggling agency had been on the decline since reaching more than 733,000 at the beginning of the year. But job growth slowed and the economy has stalled since then.
Curing these mortgages continues to be more difficult than other loans.
Nearly 42% of FHA-backed loans modified in 2011 redefaulted after 12 months, compared to an 18.5% redefault rate for Fannie Mae mortgages and a 26.6% rate on loans packaged into private securities, according to data from the Office of the Comptroller of the Currency.
The agency expects foreclosures to begin increasing as servicers restart the process.
The FHA would have needed an unprecedented bailout from the Treasury Department this year were it not for a $1 billion settlement with Bank of America (BAC) over faulty mortgages written by Countrywide during the housing boom.
The agency raised insurance premiums in April to further protect the fund.
Still, the government funds more than 95% of the mortgage market, and FHA volume continues to rise. The agency insured $21.3 billion in forward and reverse mortgages in May, up 4.9% from the previous month and 18.9% more than one year ago.