FHA loan originations down, default rate increases

The rate at which borrowers were seriously delinquent on Federal Housing Administration home loan payments increased slightly in December, the Department of Housing and Urban Development reports.

The rate at which borrowers were seriously delinquent on Federal Housing Administration home loan payments increased slightly in December, the Department of Housing and Urban Development reports.

According to the agency's mortgage records, the seriously delinquent rate increased to 9.6 percent during the month as roughly 711,000 were more than 90 days late on their payments. The rate is a significant increase from both December 2010 and the previous month.

In addition, HUD indicated the rate has been steadily rising since mid-2011.

Meanwhile, the report also showed that the number of mortgage originations decreased on an annual basis as only 93,700 mortgages were insured by the FHA during the month. In December 2010, there were roughly 133,000 mortgage originations.

Additionally, the report indicated that the FHA fund fell to a 0.24 percent capital ratio during 2011 from 0.5 percent the previous year.     

Since by law the fund must remain above 2 percent, the FHA stated it has continued to work to reassure industry experts and lawmakers that the agency's Mutual Mortgage Insurance Fund would be in need of the next major government bailout.

"It would take very significant declines in home prices in 2012 to create a situation where FHA would need additional support," FHA acting commissioner Carole Galante told HousingWire.

However, some critics of the FHA don't agree with the statement made by the agency. A recent study conducted by the American Enterprise Institute indicated that the agency is currently undercapitalized by more than $53 billion and called for action to keep the FHA from requiring taxpayer funds.

"We need to get back to where the mortgages themselves stand on their own regardless of what happens with house price inflation or deflation," said American Enterprise Institute fellow Edward Pinto.

In order to further strengthen the agency's Mutual Mortgage Insurance Fund, the FHA recently announced changes that would be made to the guidelines for lenders writing new FHA mortgages.

Some of the announced changes include regulation that would require some lenders to buyback defaulted loans. Some lenders could be forced to repurchase loans or reimburse some insurance claims to the FHA if they wrote a mortgage that had an indicators suggesting that the loan could default in the future.



blog comments powered by Disqus