FHA mortgage delays pose the greatest risk to these subways: AEI

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According to a study by the American Enterprise Institute, 10 metropolitan statistical areas have high rates of FHA loan delinquencies, and they appear to be very similar to those that also struggled during the Great Financial Crisis.

These metro areas, partially ranked by the number of bad loans, include Atlanta (42,268), Houston (40,147), Chicago (28,792), Dallas (22,302), Washington DC (20,285), Baltimore (17 851), Riverside, California. … (17,622), San Antonio (14,491), Fort Worth (12,866) and Philadelphia (12,490).

“This is a double whammy that happened even though the pandemic was a completely different event. Many of these neighborhoods – which tend to be classified as low-income and minority populations – have not yet fully recovered, ”said Ed Pinto, AEI Senior Research Fellow and Director of the Institute’s Housing Center. Pinto co-authored the study with Tobias Peters, Research Fellow and Director of the Institute.

Research findings indicate that FHA officials and service providers may want to think about how they can avoid exacerbating problems in these areas, such as: a wider range of loan repayments resumes in certain parameters this summer, Pinto said.

The institute singled out in its ratings the areas in which either the total overdue payments exceeded 16%, or the level of overdue payments exceeded 10% for more than 90 days. MSA was also required to have an FHA share of over 12.5% ​​based on the number of loans. (These percentages include, and largely reflect, temporary payment suspensions due to the pandemic, known as patience… Delinquent loans could resume as borrowers recover from the hardships of the coronavirus.)

The AEI additionally included municipalities that did not meet the previous criteria, but had both an FHA share and an overall delinquency rate above 12%. He then ranked the subways by the number of loans with overdue or suspended payments. The Institute determined the FHA loan share based on the 2019 Home Mortgage Disclosure Act and looked at more recent late payment data as of May 31 from the FHA Neighborhood Watch program. Thus, his analysis of the Atlanta metro area, for example, shows that the region has a 17.4% NPL ratio, a 90-day NPL ratio, and an FHA ratio of 21% or more.

The average delinquency on FHA loans in May was 14.7%. The average 90-day debt for the same month was 10.5%.

Loans insured by the Federal Housing Administration, a division of the Department of Housing and Urban Development, tend to have a relatively higher delinquency rate as the program caters to low-income and first-time buyers. The FHA uses the Neighborhood Watch program to monitor and compare the performance of mortgage companies’ loans against peers and identify potential risks to their insurance fund.

Pinto noted that the way metropolitan statistical areas were delineated has led to the omission of some regions where both FHA and arrears are high, citing Miami as one example of this.



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