FHA Foreclosure Levels Hold Steady

by Peter G. Miller
December 9th, 2008

The news on the foreclosure front is woeful — or is it?

The latest numbers from the Mortgage Bankers Association have been front-page news for the past few days. The figures getting the most play have concerned delinquencies and foreclosures, but as we shall see there is some good news on the FHA front that has largely gone unreported.

Here’s what the MBA says:

___ The delinquency rate for mortgage loans on one-to-four-unit residential properties stood at 6.99 percent of all loans outstanding at the end of the third quarter of 2008, up 58 basis points from the second quarter of 2008. The delinquency rate includes loans that are at least one payment past due but does not include loans somewhere in the process of foreclosure.

___ The percentage of loans in the foreclosure process at the end of the third quarter was 2.97 percent, an increase of 22 basis points from the second quarter of 2008 and 128 basis points from one year ago. The percentage of loans in the process of foreclosure set a new record this quarter.

Now let’s dig a little deeper and see how FHA loans compare:

“For prime loans, foreclosure starts on fixed rate loans were 0.34 percent, unchanged from last quarter, while prime ARM foreclosure starts fell five basis points to 1.77 percent. For subprime loans, fixed rate foreclosure starts increased 16 basis points to 2.23 percent and subprime ARM foreclosure starts decreased 16 basis points to 6.47 percent. FHA foreclosure starts were unchanged at 0.95 percent and VA foreclosure starts increased two basis points to 0.59 percent, all on a non-seasonally adjusted basis.”

Yup. That’s what it says. For all the braying and worry with regard to the FHA program its foreclosure level is rock-steady, unchanged and unmoved.

In fact, the real news is even better.

“On a year-over-year basis,” says the MBA, “the seasonally adjusted delinquency rate increased for all loan types, except FHA loans. The delinquency rate increased 122 basis points for prime loans, increased 372 basis points for subprime loans, and increased 70 basis points for VA loans. The seasonally adjusted delinquency rate was unchanged for FHA loans on a year over year basis.”

The MBA also says that “the percent of loans in the foreclosure process increased 79 basis points for prime loans and 566 basis points for subprime loans. The rate increased 10 basis points for FHA loans and 43 basis points for VA loans.”

In other words, the FHA program is doing better than prime loans, subprime mortgages or VA financing.

Given the vast increase in foreclosure filings during the past year the FHA figures are impressive, evidence of what happens when lenders are required to fully document loans.

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