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Government Loans Show Low Foreclosure Rates

by Peter G. Miller
December 9th, 2007

Anyone notice something curious about the chart below? It comes from the latest foreclosure and delinquency study produced by the Mortgage Bankers Association and it shows that foreclosed government loans — FHA and VA financing — have little impact on national foreclosure levels.

How come? For the most obvious reasons.

You can’t get an FHA or VA loans with a stated-income loan applications — a liar loan.

You will never face a prepayment penalty with an FHA or VA mortgage, so they’re easy to refinance if you can get better terms.

There are no insane re-sets with either FHA or VA loans.

However, as good as these numbers are, they could be better. The FHA ARM program used to have annual caps of 1 percent per year and 5 percent over the life of the loan. Lenders pushed the FHA to make a “technical” change that raised the caps to 2/6. That means rates rise faster for FHA loans than they did before, something which surely hurts affordability and the FHA’s core mission.

Percent of Outstanding Loans

Percent of Foreclosures
Started

Prime Fixed

63.1%

17.6%

Prime ARM

14.5%

18.7%

Subprime Fixed

6.3%

12.0%

Subprime ARM

6.8%

43.0%

FHA & VA

9.3%

8.7%

More of the MBA release is below:

Delinquencies and Foreclosures Increase in Latest MBA National Delinquency Survey

WASHINGTON, D.C. (December 6, 2007) – The delinquency rate for mortgage loans on one-to-four-unit residential properties stood at 5.59 percent of all loans outstanding in the third quarter of 2007 on a seasonally adjusted (SA) basis, up 47 basis points from the second quarter of 2007, and up 92 basis points from one year ago, according to MBA’s National Delinquency Survey.

The delinquency rate does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process was 1.69 percent of all loans outstanding at the end of the third quarter, an increase of 29 basis points from the second quarter of 2007 and 64 basis points from one year ago.

The rate of loans entering the foreclosure process was 0.78 percent on a seasonally adjusted basis, 13 basis points higher than the previous quarter and up 32 basis points from one year ago.

The total delinquency rate is the highest in the MBA survey since 1986. The rate of foreclosure starts and the percent of loans in the process of foreclosure are at the highest levels ever.

The increase in foreclosure starts was due to increases for all loan types. From the previous quarter, prime fixed rate loan foreclosure starts increased 4 basis points to 0.22 percent, prime ARM foreclosure starts increased 40 basis points to 1.02 percent, subprime fixed foreclosure starts increased 3 basis points to 1.38 percent, subprime ARM foreclosure starts increased 88 basis points to 4.72 percent, and FHA foreclosure starts increased 16 basis points to 0.95 percent.

Since the third quarter of 2006, the foreclosure start rates for prime ARMs increased from 0.30 percent to 1.02 percent and the rate for subprime ARMs increased from 2.19 percent to 4.72 percent. The foreclosure starts rate for prime fixed loans increased from 0.13 percent to 0.22 percent and the rate for subprime fixed loans have increased from 0.97 percent to 1.38 percent.

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This entry was posted on Sunday, December 9th, 2007 at 3:26 pm and is filed under , . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

6 Responses to “Government Loans Show Low Foreclosure Rates”

  1. Rob Aubrey Says:

    You mentioned that FHA has a lower foreclosure rate, because of income documentation. I also think that because FHA was almost nonexistent in the last few years at least in my market.

    I also believe that the FHA requirements on the lender helps weed out some of the, let’s say creative LOs.

    As a REALTOR I personally do not refer anyone to a non FHA lender.

  2. Lora B Says:

    I was just wondering if there is a way to apply for an FHA loan for your house if it has already been forclosed on? If so what do i need to do.
    Thank you

    Lora

  3. James Harrison Says:

    Funny…, I had the same exact question as Lora right above me.

  4. FHA Mortgage Hysteria From The Wall Street Journal | FHA Loan Advice Says:

    [...] Take a look at Peter Miller’s FHA Mortgage Guide post “Government Loans Show Low Foreclosure Rates” to get a better idea of what is going on with these numbers. Also take note of Commissioner Montgomery’s statements referenced above on actual FHA foreclosure numbers. [...]

  5. Guadalupe Mendoza Says:

    I am interested in the government loans. I am a homeowner and cannot afford my high mortage of $4,300. I am a single parent earning $2500 per month. My house was valued as $750K several years ago and know is value less than $400K. I don’t want to loose my home, which I have lived for almost thirteen years.

    Please call me at (831) 801-8409

  6. WANDA COOK Says:

    NEED HELP IN SAVING MY HOME AND THE LENDER WILL NOT DO ANYTHING TO WORK WITH US AFTER ASKING FOR HELP BEFORE IT GOT BAD. I HAVE TO MOVE OUT BY NOV 28TH AND WANT SO BAD TO KEEP MY HOME IN KANSAS. PLEASE HELP WHEN I CALL THE MORTAGAGE COMPANY TO ASK ABOUT GOVERMENT LOANS THEY TELL ME THERE IS NONE THAT CAN HELP ME. PLEASE HELP ME I AM RUNNING OUT OF TIME .

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