FHA Volume to Decline in 2010 and 2011

The Federal Housing Administration is forecasting a dropoff in single-family originations during the current 2010 fiscal year and FY 2011 along with an increase in claims and foreclosures. In FY 2009, which ended Sept. 30, FHA lenders originated $330.5 billion in single-family loans, not counting reverse mortgages. FHA expects a 9% decline in originations in FY 2010 to $300 billion followed by an 18% decline in FY 2011 to $246 billion. The President's FY 2011 budget proposal also projects a jump in claim payments to lenders due to defaults on FHA guaranteed single-family loans. In FY 2009, FHA lenders paid $8.5 billion on defaulted loans. Budget estimates show these payments could jump to $15.7 billion in FY 2010 and $19.7 billion in FY 2011. The FHA mortgage insurance fund managed to stay in the black in FY 2009 by a very thin margin. Despite the jump in claims, FHA's financial performance should improve slightly in FY 2010, according to budget projections. FHA is expected to get a boost in revenues from a mortgage insurance premium increase that goes into effect this spring.