FHA Delinquencies Are Up

The Federal Housing Administration’s reserve’s are approaching their minimum level.  Orange County mortgage applications have risen, but will tightening lending standards make it more difficult to get a loan?

Rising FHA delinquencies and foreclosure rates are pushing the required reserve into the red zone.  The reserve level was 6% a couple years back, and is now approaching it’s statutory minimum.  David Stevens, the commissioner of FHA commented on a Wall Street Journal report that “FHA will not need a congressional subsidy even if the congressional capital reserve ratio falls below 2%”.  Nearly 7% of FHA’s single family loans are 90 days or more past due.  FHA foreclosures are up 17% year over year.

Last year the minimum FICO score for an FHA loan was increased from 580 to 620 for most lenders.  With rising losses related to past due mortgages, are we going to see more tightening?  There have recently been rumors of some lenders increasing their minimum credit score requirements to 640.  FHA also modifies it’s guidelines at the end of the year.  I would speculate that they will continue to make lending more conservative, and close the door on a few potential homebuyers in the process.

If you’re a potential homebuyer on the fence, this may be something you want to consider.  You’re idea of a perfect time for the real estate market might be adversely affected by the mortgage market.  Good luck out there!

Best,

Matt Cady