26. Mortgage Defaults, Delinquencies Rise
March 30, 2009 § Leave a comment
Defaults on home mortgages insured by the Federal Housing Administration in February increased from a year earlier.
A spokesman for the FHA said 7.5% of FHA loans were “seriously delinquent” at the end of February, up from 6.2% a year earlier. Seriously delinquent includes loans that are 90 days or more overdue, in the foreclosure process or in bankruptcy.
Since the collapse of the subprime mortgage market in 2007, most home loans for people who can’t afford a sizable down payment are flowing to the FHA. The agency, which is part of the U.S. Department of Housing and Urban Development, insures mortgage lenders against the risk of defaults on home mortgages that meet its standards. FHA-insured loans are available on loans with down payments as small as 3.5% of the home’s value.
The FHA’s share of the U.S. mortgage market soared to nearly a third of loans originated in last year’s fourth quarter from about 2% in 2006 as a whole, according to Inside Mortgage Finance, a trade publication. That is increasing the risk to taxpayers if the FHA’s reserves prove inadequate to cover default losses.
As of January, the cities with the highest FHA default rates in January were Punta Gorda, Fla., at 18%; Detroit, 15.6%; Flint, Mich., 15.1%; Fort Myers-Cape Coral, Fla., 15%, and Elkhart-Goshen, Ind., 12.1%, according to a HUD report.
Foreclosed FHA homes owned by HUD totaled 39,687 in January, up 22% from a year earlier.