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Many FHA insured loans face foreclosure

Posted on Wednesday, July 11, 2012 at 6:25:11 PM

A growing number of Federal Housing Administration (FHA) backed loans are facing foreclosure. In contrast to the positive trend of bank-backed housing loans, the number of Americans with FHA loans featuring a 90 day delinquency rate increased to almost 27 percent during the year ending on March 31, reports CNN Money.

According to the news source, bank loan improvements saw a dramatic improvement, with delinquencies decreasing by 39 percent and foreclosures by 10 percent. In addition, Fannie Mae and Freddie Mac portfolios turned in a positive direction with a loan delinquency drop of almost 15 percent, states a quarterly report by the Office for Comptroller of the Currency.

Housing experts have been warning the FHA that lending to at-risk borrowers could negatively impact the success and stability of the entire program. Residential financing options from banks often became difficult to attain for first-time homebuyers due to tightening loan requirements, creating an overwhelming flow of new borrowers applying for FHA-backed loans. Almost four percent of these applicants took advantage of the low downpayment requirements of FHA loans, which many real estate experts believed was too low. ADNFCR-16001052-ID-800816596-ADNFCR