The serious delinquency rate on the Federal Housing Administration's $1 trillion single-family loan portfolio edged closer to 10% in December as the pace of originations slowed in the fourth quarter.
FHA reported Friday that 9.6% of its 7.4 million insured loans are 90-days or more past due in December, up from 9.3% in the prior month.
FHA servicers reported that 711,082 mortgages are seriously delinquent as of Dec. 31, according to the “FHA Single-Family Outlook” report. “It should be noted that the November through February period is the seasonal high-point for serious delinquencies,” the agency said.
A year ago the FHA serious delinquency rate was 8.8%.
The agency also reported that lenders originated $47.9 billion in mortgages in the fourth quarter, including $16.7 billion in December.
On a quarterly basis, FHA lending is down 37.5% from a year ago.
It appears that seasonal factors and slowing originations are pushing the default rate up.
In addition, most the delinquencies are legacy loans, according to FHA's Neighborhood Watch system that tracks early delinquencies over the most recent two-year period.
NW shows only 47,180 loans originated in the prior two years (2010 and 2011) have defaulted. With 711,080 in total defaulted loans -- that is a 6.7% early default rate.
American Enterprise Institute resident fellow Edward Pinto is warning that FHA's delinquencies are headed north because 25% of FHA loans originated in 2009 though 2011 are very risky.
Pinto has started publishing “FHA Watch” and he is calling on FHA to “stop lending to people who cannot afford to repay loans” and “concentrate on homebuyers who truly need help purchasing their first home.”
FHA consultant Brian Chappelle said delinquency rates on newer originations are steady dropping.
“You have this great performance on recent loans. If you tighten the screws more, we are just going to choke off any demand,” Chappelle said. “The number one problem we have to today is the lack of demand,” he added. Chappelle is a founder of Potomac Partners.
