FHA foreclosures up, reserves down


As the Federal Housing Administration rapidly increases its role in the mortgage lending business, it's starting to face a growing number of foreclosures. While in 2006 the FHA's market share was just 2.7 percent, now that the subprime market is just about dead, the FHA has picked up the slack and its market share reached 23 percent in the second quarter of 2009. The FHA and Veterans Administration combined now back 40 percent of all home sales.

With the growth in market share comes a growth in delinquency rates as well because the FHA has taken on riskier loans to fill the gap left by the disappearing subprime lenders. Foreclosures rates inched up to 1.76 percent in June from 1.6 percent a year ago. Delinquency rates jumped to 6.88 percent up from 5.57 percent a year ago. And the number will likely increase rapidly. About 7.8 percent of FHA loans at the end of the second quarter were 90 days late or more, or in foreclosure, according to the Mortgage Bankers Association.

Originally published