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Uh Oh! FHA Mortgage Delinquencies are the Highest Ever!

FHA loans have the highest delinquency rates on record, going back to 1979.

Should we push the panic button?  Is a tidal wave of foreclosures coming?

I read an article recently from Bloomberg regarding Federal Housing Administration mortgages or FHA loans. The path to homeownership quite often starts with these loans as they are geared toward the first-time home buyer, minorities and low-income families. They now have the highest delinquency rates on record, going back to 1979.

“This allows homeowners experiencing coronavirus related hardships to defer payments.”

Delinquency rates went up to 16% in the second quarter of 2020, up nearly 7% from the 1st quarter. The delinquency rate for conventional loans, by comparison was only 6.7%

Millions of Americans stopped paying their mortgages after losing jobs, losing hours or getting furloughed because of the coronavirus crisis.

However, don’t panic yet. It was expected and predicted by the federal government who implemented immediate measures to protect homeowners from foreclosure using the CARES Act and the forbearance program within that Act.  This allows homeowners experiencing coronavirus related hardships to defer payments for an initial 180 days and up to a year without penalty or risk of foreclosure. Obviously the government learned a lot from the great recession of the late 2000’s. They are focused on avoiding the same foreclosure rates that caused housing prices to decline and put the economy into a tailspin. According to the Mortgage Bankers Association about 4.1 million homeowners, or about 8.2% of loan balances, were in forbearance.

Housing has held up quite well for now, fueled by record-low mortgage rates and the government providing stimulus packages for the people. Even if those distressed homeowners are in default beyond the 1 year forbearance period, they will more than likely have the equity to sell the home. Home prices have been continually on the rise for the last 8 9 years and unlike the last recession, currently 59% of homeowners have equity. 

If you do know of anyone in trouble with their mortgage, make sure they reach out to us.  We can help them understand a little more about the Forbearance portion of the CARES Act and help them get pointed in the right direction.