Industry experts are keeping a close watch on delinquency rates as the US economy gradually emerges from a pandemic-induced recession and the end of forbearance programs looms on the not-so-distant horizon. Experts from AEI Housing Center, which provides forecasts and market research, recently published a report covering data for February and revealing the 10 metros most threatened by a high number of delinquencies.
While Atlanta and Houston are the subways most at risk for FHA delinquency rates, high FHA delinquency rates threaten homeowners and neighborhoods in many other metropolitan areas across the country.
The share of FHA’s delinquent and severely delinquent loans in February is higher than the previous month, ”noted Edward Pinto and Tobias Peter for AEI. “Of the approximately 8 million FHA loans outstanding in February, 17.5% were in arrears and 12.0% were in arrears. as reported in FHA Neighborhood Watch (including forbearance loans). “
The authors say that at the end of the abstention periods, one of two things will happen:
“Borrowers who are able to resume normal payments may choose to defer arrears until the loan is repaid, which would cause these loans to become current. Borrowers who are unable to resume arrears payments that are normal or who choose not to do so remain in arrears. “
Thus, overall delinquency levels are likely to fall, as serious delinquencies, over 90 days overdue, are likely to remain high.
Borrowers who remain seriously delinquent will have to sell their home or face foreclosure. This allowed experts to conclude that we could see a buyer’s market forming in the form of zip codes with high FHA and other high risk lending activity.
Homeowners who live in these subprime mortgage markets tend to have lower incomes and are largely members of minority groups.
Readers can download FHA foreclosure rates for the 169 largest subways or explore the concentration of FHA loans in their areas of interest. here.