Home > Mortgages > Delinquencies on FHA-Backed Loans Spike

Comments 1 Comment

Though consumers have generally been far more conscientious in paying down their mortgage debts on time and in full, a government agency has seen instances of delinquency rise sharply in the last year.

While mortgage delinquency on loans held by banks and the government-sponsored enterprises Fannie Mae and Freddie Mac have slid consistently over the last year, those on financing backed by the Federal Housing Administration have spiked, according to a report from CNNMoney. Between the first quarter of 2011 and the same period this year, bank-held mortgage delinquency dipped 39 percent, and there was a 14.7 percent drop for loans held by Fannie and Freddie. However, the FHA has seen instances of loans that were 90 days or more behind on payments rise 26.6 percent.

During that time, foreclosures on these FHA-backed properties have risen nearly 17 percent, while those for banks have dipped close to 10 percent, as Fannie- and Freddie-backed loans saw more than 6 percent fewer foreclosures, the report said. Further, when the FHA has restructured loans for borrowers, more than 48 percent of those consumers defaulted within 12 months of modification. That’s higher than the 36.2 percent of loans overall.

The reason why these FHA-backed loans aren’t performing nearly as well as those backed by other financial institutions is that they are typically granted to far more problematic borrowers, the report said. In the past, many experts have warned that they were perhaps too risky, and that problem has only become more pronounced during the current housing issues being experienced nationwide.

“These are very risky loans,” Ed Pinto, resident fellow at the conservative think tank the American Enterprise Institute, told the news agency. And loans made in the past three years are “moving into the beginning of the peak delinquency period and they are very big books of business.”

Now, because delinquency on FHA-backed loans continues to expand and might do so for another few years, according to some projections, it seems that taxpayers could end up footing the bill, the report said. The agency is currently in significant financial difficulties and some experts believe that it will have to be bailed out.

The housing market is still largely stagnant, as many homebuyers are still trying to scoop up distressed properties at extremely affordable prices.

Image: moppet65535, via Flickr

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other sponsored content on Credit.com are Partners with Credit.com. Credit.com receives compensation if our users apply for and ultimately sign up for any financial products or cards offered.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team