Number of Fed-backed troubled mortgages rises

 

The mortgage woes of FHA borrowers are gaining ground. From an Associated Press brief  at latimes.com:

The government says the number of troubled loans backed by the federal mortgage insurance program is on the rise as economic troubles mount.

However, Housing and Urban Development Secretary Shaun Donovan is telling Senate lawmakers Thursday that the Federal Housing Administration is "unlikely to face the catastrophic losses borne in the subprime sector." He says in prepared remarks that that is partly because it didn't back loans for more expensive properties that have plummeted in value.

As of February, 7.2 percent of loans backed by the FHA were either 90 days overdue or in foreclosure, up from 5.8 percent last August.

The FHA is the main source of home loans to borrowers with poor credit and low down payments after the subprime lending market's collapse.

I'd be curious to know what percentage will qualify as a "catastrophic." The trend line sure doesn't look good.

-- Lauren Beale

Thoughts? Comments?

Photo: Housing Secretary Shaun Donovan, left, Treasury Secretary Timothy F. Geithner and FDIC Chairwoman Sheila Bair gather at Dobson High School in Mesa, Ariz., for President Obama's recent unveiling of his plan for preventing home foreclosures. Credit: Gerald Herbert  / Associated Press

 

Comments

[SoCalJim]

And... consumer loan delinquencies at record high

http://money.cnn.com/2009/04/02/news/economy/loan_delinquencies.reut/index.htm?postversion=2009040209

"The ABA said the fourth-quarter rate was the highest since it began tracking the data in 1974, with delinquencies rising in nearly every category. It said these credit trends are unlikely to improve before 2010. Many consider the deep recession the worst since the Great Depression of the 1930s."

CA, the queen of consumer debt. People are drowning in debt, especially in LA/OC, with a house they can't afford, credit cards (gotta buy those LV purses...), leased cars, sending kids to private school if they don't live in a good public school district.

Looks like this housing correction has a way to go... Numbers don't lie, only people who try to spin the numbers lie. No money (and no jobs) = no housing correction. Pretty simple really.

[SoCalJim]

And...

"U.S. Jobless Claims Hit 26-Year High - Labor market takes a beating as 669,000 new unemployment claims emerge last week."

No job, no money, can't pay credit card bills... Realtors (for those that are still employed), I hope you eventually receive what's coming to you as you have ruined the lives of many. It is your nature that you need to lie, or bend the truth, in order to rake in a commission for your low value work, work that adds no value to society. I guess that is why RE and finance jobs are at 7 yr lows. They don't add anything significant, and it takes very little knowledge and skill to do it.

[CompaJD]

"unlikely to face the catastrophic losses borne in the subprime sector."

I see no difference between subprime and FHA loans. As a matter of fact their worse because we actually know that people who recieved the loans had a low income to begin with and didn't have the prudence to save 20% to give as a down payment. The less skin in the game the easier it is to walk away.
I know 2 people personally who are able to pay their home mortgage but decided to stop paying to get a tax payer funded workout. Isn't this a wonderful world.

[Laker]

Quoted from FHA: "unlikely to face the catastrophic losses borne in the subprime sector."
Today's FHA loans are the sub prime.
When you give a buyer 3.5% down payment loan and also let the seller kick in credit...and don't bother with the borrower's credit....It has very high chance of default.
You put nothing down, nothing down to lose. You put 20% down, you'll stay there unless you want to part away from your money...many will not like that idea.
I expect 50% default rate on all FHA loans.
Add to this that today, FHA is giving loans up to $625K and i think it is going up to $729K. They can cover pretty much 80-90% of houses in LA.

[Nelcisco]

Best story all week Lauren thank you.

What drives me crazy about stories like this is that when its all said someone somewhere is getting appointed,nominated or elected as the savior to fix problems like this, its just more political shell games or 3 card monty, no one is going to fix this until two things happen and it has to happen NOW, faster decrease in home prices or increase in household wages or both.

For nostalgia's sake I went to the LA Land archives especially during the months between Feb '08 and the end of October when Pete Viles left, reading what was commented then and fast forwarding to now one would think they were reading the book of Daniel or Revelation its scary, many of vets don't comment as much now than when Pete was at the helm but Laker and Cal are the ones that most jump out at me regularly and their overall messege and their concerns of what we're seeing today months later.

Nothing has gotten better out there in Real Estate and Mortgage banking, they've gotten progressively worse and I've said this before on serveral occasions INCOME INCOME INCOME, sustainable real estate is whats needed and letting the free market determine it THATS it....not more government shell games.

No more talks about forth coming catastrophic events,fix it and fix it right!

[el pez]

all above- ditto, ditto! the good doctor at http://www.doctorhousingbubble.com/ wrote about this the other day... It amazes me- even after all of this mess the feds are still in the business of increasing home ownership... never learn... I guess if one thinks that evil Wall Street is the culprit behind every problem in our national life then this is rational, but as many of us know there are many culprits to blame for our current predicament including the Feds. IMO blame Wall St., the feds for looking other way over the last 9+ years, and the average joe who believed the hype and made bad decisions all bear culpability. All of this and the government still wants to look the other way?? Way to prolong the agony sirs and madams.

Here are the numbers for campaign contributions from Fannie May/Freddie Mac to congress:

http://www.opensecrets.org/news/2008/07/top-senate-recipients-of-fanni.html

In their short time in Congress Obama manages to come in at number 3 and his chief of staff at number 13... Sure Congress is awash in crony everything and it crosses both parties, but FM/FM were serious heavy duty culprits in our current mess. Somehow I don't expect current leadership to get serious about trying to slowdown FHA stuff since they sure as hell didn't mind the fiasco at FM/FM including the accounting scandal (they lied about earnings) when Rahm Emanuel was on the board of Freddie Mac. Want a culprit?

Down payments, down payments.... People should have them to be able to buy a house... Worked pretty good for the greatest generation, oughtta work good for us as well.