FHA May Lose $800-$900 Million on TBW

The mortgage banking firm Taylor, Bean and Whitaker, which recently ceased making mortgages, originated an estimated $22 billion in Federal Housing Administration-insured loans over the past 24 months, which represents 4.5% of the FHA's total business during that period. TBW was FHA's third largest direct endorsement lender and it approved 119,800 loans over the past two years. However, 7.1% of those FHA-insured loans are 90 days or more past due or in foreclosure, according to FHA's Neighborhood Watch System. The average default rate for FHA loans is 4.6%. Based on a higher than average claim rate and loss severity rate of 40%, FHA could face possible losses of $800 million to $900 million due to its exposure to TBW, one source said. As previously reported, the Department of Housing and Urban Development on Aug. 4 suspended the Ocala, Fla., mortgage banking firm from making FHA loans. Freddie Mac also terminated TBW on Aug. 4. In a recent securities filing, Freddie said approximately 5.2% of its mortgage purchase volume in 2008 came from TBW and TBW accounted for 2.7% of its mortgage purchases during the first half of this year.