FHA Watch, June 2012

Article Highlights

  • About 1.5 million recent FHA borrowers are underwater.

    Tweet This

  • FHA has lost $4 billion in net worth in FY 2012.

    Tweet This

  • Destructive FHA lending practices increase foreclosure risk for homeowners.

    Tweet This

Read Issue 5, May 2012.
Read Issue 4, April 2012.


This Issue's Highlight

FHA Watch, No. 6, June 2012

Download PDF
FHA Is Responsible for 1.5 Million New Underwater Loans:
The Federal Reserve estimates that about one-third of the 11.1 million underwater home loans in the United States are insured by the Federal Housing Administration (FHA). These 3.6 million underwater FHA loans account for nearly half of the FHA’s 7.4 million outstanding loans. Since about 72 percent of all outstanding FHA loans date from 2009 or later, a reasonable estimate would be that about 1.5 million of recent FHA borrowers are underwater.

This comes as no surprise since the FHA continues to combine minimal down payments (average of 4 percent) with slowly amortizing thirty-year loan terms. As a result, earned homeowner equity (the combination of down payment and scheduled loan amortization) amounts to less than 10 percent after four years, or about enough to sell a home at the break-even point if home prices stay steady. However, prices have declined nationally about 7 percent since mid-2009, with lower-priced homes declining even more. When combined with borrowers’ low FICO scores and high debt-to-income (DTI) ratios, the result is a continuation of the FHA’s destructive lending—lending that has resulted in 20–25 percent of recent borrowers facing a 10 percent or greater likelihood of foreclosure.

This Month’s Features

Spotlight on Insolvency
FHA’s Position Worsened in May, with an Estimated Current Net Worth of –$22.11 Billion and a Capital Shortfall of $41–61 Billion

Spotlight on Delinquency
Total Delinquency Rate Increased in May to 16.23 Percent Because of Increase in Both Thirty- and Sixty-Day Delinquencies; Serious Delinquency Rate Ticked Up to 9.43 Percent

Spotlight on Underwater Loans
FHA Is Responsible for 1.5 Million New Underwater Loans

Spotlight on Best Price Execution
The Government Mortgage Complex’s Ginnie Brands Demonstrate Continued Pricing Dominance over Fannie Mae

The Road Map to FHA Reform
Specific Steps to Reform and the Status of Each

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Edward J.
Pinto

What's new on AEI

In year four of Dodd-Frank, over-regulation is getting old
image Halbig v. Burwell: A stunning rebuke of a lawless and reckless administration
image Beware all the retirement 'crisis' reports
image Cut people or change how they're paid
AEI on Facebook
Events Calendar
  • 21
    MON
  • 22
    TUE
  • 23
    WED
  • 24
    THU
  • 25
    FRI
Monday, July 21, 2014 | 9:15 a.m. – 11:30 a.m.
Closing the gaps in health outcomes: Alternative paths forward

Please join us for a broader exploration of targeted interventions that provide real promise for reducing health disparities, limiting or delaying the onset of chronic health conditions, and improving the performance of the US health care system.

Monday, July 21, 2014 | 4:00 p.m. – 5:30 p.m.
Comprehending comprehensive universities

Join us for a panel discussion that seeks to comprehend the comprehensives and to determine the role these schools play in the nation’s college completion agenda.

Tuesday, July 22, 2014 | 8:50 a.m. – 12:00 p.m.
Who governs the Internet? A conversation on securing the multistakeholder process

Please join AEI’s Center for Internet, Communications, and Technology Policy for a conference to address key steps we can take, as members of the global community, to maintain a free Internet.

Thursday, July 24, 2014 | 9:00 a.m. – 10:00 a.m.
Expanding opportunity in America: A conversation with House Budget Committee Chairman Paul Ryan

Please join us as House Budget Committee Chairman Paul Ryan (R-WI) unveils a new set of policy reforms aimed at reducing poverty and increasing upward mobility throughout America.

Event Registration is Closed
Thursday, July 24, 2014 | 6:00 p.m. – 7:15 p.m.
Is it time to end the Export-Import Bank?

We welcome you to join us at AEI as POLITICO’s Ben White moderates a lively debate between Tim Carney, one of the bank’s fiercest critics, and Tony Fratto, one of the agency’s staunchest defenders.

No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.