Monday, April 6, 2009

FHA Disaster Looming

Zach Fox at the North County Times reports Delinquencies for FHA surpassed those of subprime loans last year

First American CoreLogic, a prominent mortgage data firm, reported this week that 20.7 percent of all FHA loans issued in 2008 were at least 60 days late by 10 months after the origination date. By the same metric, 14.1 percent of subprime loans issued in 2007 were 60 days delinquent.

The main problem with the delinquent FHA loans was low down-payment requirements, said Sam Khater, senior economist for First American CoreLogic.

While most mortgages issued by private banks now require at least 10 percent down payments, FHA loans allow borrowers to buy a home who put up just 3.5 percent of the cost.

That’s an incredible number…1 in 5 FHA loans from 2008 is 60 Days or more past due. Considering how prevalent these loans have were (and still are), we can probably expect yet another wave of foreclosure activity.