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(Bloomberg) – Federal Housing Administration mortgages – the affordable route to homeownership for many first-time buyers, minorities, and low-income Americans – now have the highest delinquency rate since at least four decades.
FHA’s share of late loans reached nearly 16% in the second quarter, down from around 9.7% in the previous three months and the highest level in 1979, the Bankers Association said on Monday. mortgage. The default rate for conventional loans, by comparison, was 6.7%.
Millions of Americans have stopped paying their mortgages after losing their jobs in the coronavirus crisis. Those at the lower end of the income scale are the most likely to have FHA loans, which allow borrowers with weak credit to buy homes with small down payments.
For now, most of them are protected from foreclosure by the federal forbearance program, in which borrowers facing challenges from a pandemic can delay payments for up to a year without penalty. Last month, the MBA said about 4.1 million homeowners, representing 8.2% of loan balances, were forborne.
Housing has held up better than expected in an otherwise fragile economy, with historically low mortgage rates fueling sales of new and old homes. With job losses increasing and Congress slow to act on a new stimulus package, that momentum could be threatened.
New Jersey had the highest FHA delinquency rate, at 20%. The state also recorded the largest increase in the overall rate of late payments, from 4.7% to 11% in the second quarter. Next are Nevada, New York, Florida and Hawaii – all states with a high proportion of leisure and hospitality jobs that have been particularly affected by the pandemic, the MBA said.
But the current spike in delinquencies is different from the Great Recession, in part thanks to years of home price gains and equity accumulation, according to Marina Walsh, vice president of industry analysis at the Bankers’ Group. .
(Adds comment from MBA analyst.)
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