Key Highlights
- Nearly 16% of FHA loans now delinquent, the highest level since 1979, according to Mortgage Bankers Association
- Requiring only small down payment, FHA mortgages are path to homeownership for many lower income, minority and first-time homebuyers
The good news – the job market is improving. The nation’s unemployment rate has fallen for the third consecutive month from 14.7% in April to 10.2% in August. And, struggling homeowners can get help through forbearance to skip mortgage payments for one year and get an affordable repayment plan. Also Freddie and Fannie extended their respective eviction bans through the end of this year.
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The bad news – renters have no forbearance protection and the partial federal ban on renter evictions has expired. State and local eviction moratoriums are also expiring with evictions currently happening in Texas, Wisconsin, Georgia South Dakota and other states.
More bad news – nearly 16% of all loans insured by the FHA (Federal Housing Administration) are now delinquent, according to the Mortgage Bankers Association (MBA). This near 16% delinquency rate for FHA-insured loans is the highest level of delinquencies for FHA-insured loans since 1979.
Due to its low down payment requirements compared to conventional, much higher down payment requirements, the bulk of FHA-insured borrowers are lower income, minority and first-time homebuyer. The fact that such a high percentage of FHA borrowers are delinquent on their mortgage payments underlines the fact that many, particularly those in low income and minority households, are in financial trouble in the midst of this COVID economy.
According to Marina Walsh, the MBA’s vice president of Industry Analysis, “The COVID-10 pandemic’s effects on some homeowners’ ability to make their mortgage payments could not be more apparent.” Add the ongoing uncertainty of now expired enhanced unemployment benefits, the resurgence of COVID cases in some states that have forced businesses to close businesses and schools to remain shut, and the -32.9% drop in GDP in Q2, according to Walsh, “delinquencies are likely to stay at elevated levels for the foreseeable future.”
Thanks to National Public Radio.
Also read: Why It’s Now Harder to Get a Mortgage/Refinance, Mortgage Applications Surge +155% from One Week to the Next, Summer Home Buying Ready to Take Off
