FHA serious delinquency rate inches up while originations decline
The serious delinquency rate for Federal Housing Administration mortgages reached 9.6% in December, the highest level in more than two years, the Department of Housing and Urban Development said. More than 711,000 FHA-insured loans were seriously delinquent, up 18.9% from one year earlier, according to the HUD report. It's also a 3.2% increase from the month before. The delinquency rate has been steadily increasing since passing 8.2% last summer. Meanwhile, originations are down. In December, the FHA insured 93,700 mortgages, a nearly 30% decline from the 133,000 insured in December 2010. In its fiscal year 2011, the FHA Mutual Mortgage Insurance Fund slipped to a 0.24% capital ratio from 0.5% the year prior. By law, the fund must remain above 2%. FHA officials attempted to temper fears that the fund would need a bailout. An independent study done showed home prices would have to deteriorate significantly before an injection of tax dollars would be needed. "It would take very significant declines in home prices in 2012 to create a situation where FHA would need additional support," said FHA Acting Commissioner Carole Galante when the projections came out. American Enterprise Institute Fellow Edward Pinto isn't convinced. His study claimed that FHA is actually undercapitalized by as much as $53 billion using more traditional accounting rules. The FHA put new guidelines in place this week that would tighten restrictions on lenders seeking approval to write FHA mortgages. Also, the changes would force more firms to buyback defaulted home loans and reduce seller concessions, which Pinto said would have the most impact, according to Pinto. "We need to get back to where the mortgages themselves stand on their own regardless of what happens with house price inflation or deflation," Pinto said. Write to Jon Prior. Follow him on Twitter @JonAPrior.