10 Most-Threatened Metros Based on FHA Delinquency Rates

Industry experts are keeping a close eye on delinquency rates, as the U.S. economy gradually emerges from a pandemic-caused recession and an end to forbearance programs loom on a not-too-distant horizon. The experts at AEI Housing Center, which provides market predictions and studies, recently published a report covering February data and revealing the 10 metros most threatened by high numbers of delinquencies.

While Atlanta and Houston are the metros most at risk from FHA delinquency rates, elevated FHA delinquency rates threaten homeowners and neighborhoods in numerous other metro areas across the country.

The share of February FHA delinquent and seriously delinquent loans are both higher than in the prior month," noted Edward Pinto and Tobias Peter for AEI. "Of FHA’s roughly 8 million loans outstanding in February, 17.5% were delinquent and 12.0% were seriously delinquent as reported in FHA Neighborhood Watch (includes loans in forbearance)."

The authors say that, as forbearance periods end, one of two things will happen:

"Those borrowers who are able to resume normal payments may elect to have arrearages deferred until the loan is paid off, which would result in these loans becoming current. Borrowers who are unable to resume normal payments or who elect not to, remain delinquent."

Thus, overall delinquency levels will probably drop as serious delinquencies, 90-plus days overdue, are likely to stay high.

Those borrowers who remain seriously delinquent will have to sell their homes or face foreclosure. That has the pundits concluding that we could see a buyers market form in ZIP codes with heavy FHA and other high-risk loan activity.

Homeowners who live in these markets of higher-risk mortgages tend to have a lower-income and are largely members of minority groups.

Readers can download FHA foreclosure rates for the largest 169 metros or explore the concentration of FHA loans in their areas of interest here.