This is important since, the FHA program is the main source of low downpayment loans and about 30% of all home sales. Also, private mortgage insurance (PMI) companies are having financial troubles and can't write as much insurance for these low downpayment loans.
And"We believe that an increase in delinquencies in the FHA program was the biggest contributor to the pickup in overall national delinquencies in the second quarter," KBW said.
But in the second quarter, the delinquency rate jumped to 11.7%. Seasonally adjusted, the increase was 59 bps to 12.62%.
Mirroring the MBA report, the FHA second-quarter delinquencies increased the most in the early stages of default, according to KBW. For instance, 30-day delinquencies increased 87 bps to 5.27% in the second quarter, while those in 90-day delinquency dropped 5 bps to 4.55%. Seriously delinquent loans, those in 90-plus day delinquency or foreclosure dropped 13 bps to 7.65%.
At what point can the government keep financing these losess."FHA delinquency rates fell in 2010 as the FHA loans outstanding grew very sharply. We believe that the moderation in FHA loan growth will likely result in further increases in delinquencies on this portfolio which will likely push up the national averages," KBW analysts said. "However, this credit risk resides with the government since these loans are guaranteed by FHA."
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