FHA Defaults Spur Loss Mitigation Efforts

With the Federal Housing Administration single-family default rate above 6%, servicers have increased the use of pre-foreclosure sales and other loss mitigation tools over the six months ended March 31.During the first half of fiscal year 2004, servicers increased their use of loss mitigation tools by 19%, compared with the same six-month period last fiscal year. Loan modifications are up 20.5% to 16,000 as of March 31. The use of pre-foreclosure sales is up 34% to 2,440. And total foreclosure claims are up 6% to 37,582, according to an FHA monthly report. The FHA default rate was 6.37% at the end of February. At the end of last August, the percentage of FHA loans 90 days or more past due was 6.11%. Meanwhile, originations have remained strong. The FHA endorsed 576,250 single-family loans during the first half of fiscal 2004, down only 6.4% from the same period of last fiscal year. Refinancing activity still makes up over 40% of FHA originations.