FHA Mortgages: Delinquencies Have Hit 17.5%!

By | March 26, 2021

Chart: WolfStreet.com

We are all aware of the significant and often tragic financial hardships that currently exists for a great many American households due to Covid-19, and the associated impact it has had on the U.S. economy!

For homeowners who currently have FHA mortgages, a report from American Enterprise Institute titled ‘10 metros most threatened by high numbers of FHA delinquencies (February 2021)‘ indicates that when forbearance is no longer an option for those who currently can’t pay their mortgage, the U.S. housing market could face an avalanche of motivated home sellers. These sellers could be current delinquent homeowners with no choice but to sell, or banks who have taken a property back from the owner.

An article at Wolf Street notes…

On the other side of the red-hot housing market, a historic delinquency problem has been fermenting since last spring, largely put on ice and on hold by forbearance programs, waiting to be dealt with. The Federal Housing Administration (FHA) which insures nearly 8 million high-risk mortgages, reported that the delinquency rate of its mortgages rose to 17.5% in February, up from 17.0% in January, matching the all-time records of September and November last year…

…The delinquency rate exceeded 20% in 30 of the 169 largest MSAs, topping out in the metro of Nassau County-Suffolk Country, NY, at 24.8%. Among those 30 metros with 20%+ delinquency rates were 4 metros in Texas, 4 metros in Louisiana, 3 metros in New York, 3 metros in New Jersey, and 2 metros in Pennsylvania…

…in markets with a large concentration of delinquent FHA mortgages, this would unleash a flood of homes coming on the market – and it would instantly cure, and more than cure, the inventory shortage now being lamented, and when large enough, the sudden supply of homes for sale would send bigger ripple effects through the market…

How, when and how hard the proverbial s–t hits the fan will depend on different factors, among them any political appetite to bring forbearance programs to a close.

For now it’s a wait and see, although because FHA mortgages are ultimately backstopped by the taxpayers, the buck will stop with us!


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