Even with improvements beginning to peek through the debris of the housing crisis, mortgage defaults continue to rise at an incredible rate, and the story is no different for the federal government's mortgage insurance agency.[IMAGE]
The latest numbers from the ""Federal Housing Administration"":http://www.fha.gov (FHA) show that the percentage of loans it backs that are at least 90 days past due hit 9.12 percent at the end of 2009. That figure is up from 6.82 percent one year earlier Ã¢â‚¬" a 34 percent increase.
FHA officials have repeatedly cited a rise in loan defaults as inevitable given the agency's exponential growth in market share. The FHA currently backs about 30 percent of all new loans for home purchases and 20 percent of refinanced loans. Those figures represent an increase of nearly 1,000 percent since 2006, when private lenders began to pull back and the credit crunch set in.[COLUMN_BREAK]
According to the agency, the bulk of its problem loans stem from originations made in 2007 and 2008. Officials say tighter underwriting standards make more recent and new loans less likely to default. In fact, HUD said in its ""fiscal year 2011 budget"":http://portal.hud.gov/portal/page/portal/HUD/press/press_releases_media_advisories/2010/HUDNo.10-026 that it expects new business from FHA to generate a $6 billion overall profit, although that number will be eclipsed by projected losses of $19 billion from insuring soured loans.
In the fourth quarter of 2009, lenders originated $86.1 billion in FHA single-family loans, up 21 percent compared to the same period in 2008. Sixty percent, or $51.8 billion, of the fourth-quarter financing was used to fund home purchases.
For the full 2009 year, FHA insured 5.8 million loans, with an aggregate balance of $752.6 billion Ã¢â‚¬" a 24 percent increase compared to 2008's business.
Foreclosures on loans guaranteed through FHA soared 41 percent in the fourth quarter from year-ago levels, to 20,650. The agency also reported that 2,925 short sale transactions were completed during the three-month period Ã¢â‚¬" that's a 140 percent increase compared to one year earlier.
FHA ""announced extensive policy changes"":http://www.dsnews.com/articles/fha-makes-extensive-policy-changes-to-address-default-risk-2010-01-20 last month to get a better handle on default risk and minimize problem loans. The agency has raised homebuyers' up-front costs for mortgage insurance, tripled downpayment requirements for borrowers with low credit scores, and cut seller concessions in half. Officials say they will also be keeping a close eye on FHA lenders to ensure the agency's standards are being followed and plan to institute new rules that force mortgagees to assume liability.