Loan Modification

FHA Shows Progress On Delinquencies

By Peter G. Miller

Four times the government comes out with figures showing how well the nation’s federally-regulated banks and thrifts are doing in the mortgage department. Critics who dislike the FHA mortgage program are going to be very disappointed by the latest results.

The Office of the Comptroller of the Currency (OCC) tracks prime loans, subprime loans, Alt-A financing and government guaranteed loans. In the government-guaranteed category we have FHA loans (78%), VA financing (18 percent) and other federally-backed mortgages (4%).

According to OCC figures here’s what’s been happening with government-guaranteed mortgages:

Delinquencies

___82.7 percent were current and performing as of the end of 2009 — that’s down 1.8 percent. Given the hideous economic conditions of 2009 this is not much more than a rounding error.

___ 5.9 percent were 30-59 days delinquent. That compares with 6.6 percent at the end of 2008. In other words, delinquencies in this category have fallen.

___2.6 percent were 60-89 days delinquent. Opps, this category is down from 2.8 percent at the end of 2008.

___ 5.0 percent were 90 or more days delinquent. This is up from 3.6 percent a year earlier.

What these numbers suggest is that at the end of 2009 the FHA loan program had reached a high level of delinquencies at 90 days which may be falling as shown with far-lower delinquency rates for 30-day and 60-day late payments levels. Given the tough economics of 2009 this is a surprisingly-good result.

Foreclosures

The OCC reports that foreclosures in process rose to 2.8 percent from 1.6 percent at the end of 2008 for government guaranteed mortgages.

Is 2.8 percent a big number?

To find out we need to switch over to numbers from the Mortgage Bankers Association for context.

“The non-seasonally adjusted foreclosure inventory rate for all loans at the end of the fourth quarter of 2009 was 4.58 percent,” says the MBA.

Translation: The foreclosure rate for government-guaranteed loans — meaning in large measure FHA mortgages — was 1.78 percent less than the rate of all mortgages. That’s 39 percent lower.

What’s Next

Given the firestorm of unwarranted criticism faced by the FHA mortgage program is nice to be able to say that the program is doing better than most other mortgage formats. That said, there’s more to be done.

It would not be surprising to see substantial restraints for the reverse mortgage program. The problem here is that such mortgages routinely terminate on a relatively short schedule, meaning there is little opportunity to build-up equity even in good markets. Of course, when markets are steady or headed down for several years the program is a guaranteed loser for any insurance plan, including the FHA.

Also, HUD has embarked on a get-tough policy with lenders, requiring them — oh my — to actually follow FHA loan guidelines. In fact, HUD has just announced the appointment of a new mortgage compliance manager and the decision to create a new national compliance center in Oklahoma City. That will mean another 75 to 100 people trying to make sure that lenders get loan applications right.

Full post as published by FHA Mortgage Guide on March 30, 2010 (boomark / email).