A number of metros in seven states are under enhanced siege by a percolating number of FHA delinquencies, jeopardizing homeowners and neighborhoods, according the AEI.org [1].
A cocktail of factors place them at pronounced risk. They include, a large FHA portfolio containing a high percentage of delinquent loans (>17%) or seriously delinquent loans (>10%); these percentages include loans in forbearance; and an FHA share of all purchase loans in 2019 >15%.
There reportedly were 1,363,753 delinquent loans. Among FHA foreclosure rates for top 169 metro areas, the 10 most profoundly threatened by a mounting number of FHA delinquencies were Atlanta-Sandy Springs-Alpharetta, Georgia, leading the way with 52,865. Following were Houston-The Woodlands-Sugar Land, TX, 46.025; Riverside-San Bernardino-Ontario, CA, 22,788; Baltimore-Columbia-Towson, MD, 21,078; San Antonio-New Braunfels, TX, 16,764; Orlando-Kissimmee-Sanford, FL, 16,643; and Tampa-St. Petersburg-Clearwater, FL, 16,153.
Over time, those delinquency percentages are expected to climb and, at some point, a significant chunk of the then delinquent loans, it’s also anticipated, would be placed on the market by owners facing distressed conditions or convert into foreclosures prior to hitting the market. Then, buyers’ markets would be expected to develop in zip codes particularly vulnerable to FHA and other high-risk lending mixed with high levels of delinquencies. Mostly low income; zips will be at about 50-90% of area median income) and contain high percentages of households of color will be among homeowners in these zip codes
In July, 17% of FHA’s approximately eight million loans were delinquent, the FHA Neighborhood Watch, which consists of loans in forbearance, reported. Furthermore, also during the month, 10.5% of FHA’s approximately eight million loans were seriously delinquent.
In April, not only did the share of loans that became delinquent outpaced anything experienced during the Great Recession, it’s the highest rate on record in 21 years, according to CoreLogic’s data, as previously reported [2].
During the month, 3.4% of mortgages went from current to 30 days past due--outpacing the 2% high recorded in late 2008.
Despite the scale and suddenness of the pandemic, mortgage delinquency has yet to emerge as a major issue, thanks to government COVID-19 relief programs and other housing finance industry efforts, said Frank Martell, President and CEO of CoreLogic. “As the true impact of the economic shutdown during the second quarter of 2020 becomes clearer, we can expect to see a rise in delinquencies in the next 12-18 months—especially as forbearance periods under the CARES Act come to a close.”