Fears on FHA Defaults Unfounded, Says Commish

Although the Federal Housing Administration is on a pace to insure some 2 million mortgages in fiscal year 2009 — a 30% market share or better — fears that the agency will soon be mired in a sea of defaults are "premature," said FHA Commissioner Brian Montgomery.Mr. Montgomery told the Mortgage Bankers Association's Government Housing and Loan Production Conference in Washington that FHA-insured loans "continue to outperform" the subprime loans that helped bring the mortgage market to its knees. He said only 7% of FHA loans are past due 90 days or more compared to nearly one in four subprime loans. One reason for the agency's success is that it is attracting "better quality borrowers," Mr. Montgomery told the meeting. The average FICO score of an FHA borrower was 680 at the end of fiscal 2008 compared to 640 the year prior. Another factor cited by the commissioner, who was making his last official appearance in the nation's capital, is that the agency doesn't have a lot of exposure in high-flying markets such as California, where the cost of housing has made the insurance program all but a non-entity until its loan limits were raised recently. Senate confirmation of Mr. Montgomery's replacement, David Stevens, is expected to come any day.