Early Defaults on FHA Loans Lowest in 14 Years
Early defaults and claims on loans insured by the Federal Housing Administration dropped to their lowest level in 14 years, National Mortgage News reported June 18.
Fewer than 1 percent of the loans originated from June 2011 through May 2013 were delinquent by 90 days or more.
Brian Chappelle, founding partner at consultant Potomac Partners, told National Mortgage News that the latest data reflects the higher credit quality of FHA loans. He noted that the average credit score on an FHA loan has been about 700 since 2010.
National Mortgage News reported that FHA’s early default and claim rate peaked at 5 percent in December 2009. In June 2011, the rate dropped below 2 percent for the first time in the 14-year history of FHA’s Neighborhood Watch system, which is a program that allows FHA to monitor lenders and programs.
As of May 31, the FHA reported that 23,000 of the 1.8 million loans originated during the last two years were in default or claim status. National Mortgage News also reported that the overall delinquency rate on FHA-insured loans fell to 8.45 percent in May.