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.
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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