FHA Sees No Early Default Increase

The rapid growth in FHA originations during 2008 has many concerned the federal mortgage insurance program is headed for trouble, but so far agency officials say they have not seen deterioration in loan performance, even when it comes to borrowers missing their first or second payments. "We have not seen any increase in early payment defaults," said Meg Burns, director of Federal Housing Administration single-family program development. FHA data and analysis show that only 0.6% of the over one million FHA loans originated in the first nine months of 2008 experienced first or second payment defaults, down from 0.8% in the same period in 2007. In addition, the default rate on FHA loans where borrowers miss three of the first six payment months has declined slightly. Early defaults generally are caused by income, martial or illness problems and they don't necessarily lead to foreclosures or claims on the FHA insurance fund. "There really is no correlation there," Ms. Burns said.