Via Wolf Street

Atlanta metro, over 53,000 FHA mortgages are delinquent. Houston metro, over 47,000. Just FHA, not including other delinquent mortgages. And when forbearance ends? By metro.

By Wolf Richter for WOLF STREET.

Even as the housing market is being whipped into a mad land rush, with new single-family house sales spiking 46% year-over-year, highest since 2007, with existing home sales jumping to the highest since 2006, and with prices in many metros soaring to new records, the other end of the housing market – high-risk government-insured mortgages – is falling apart, and delinquencies rose to another all-time historic high.

The Federal Housing Administration (FHA) which insures about 8 million high-risk mortgages with lower requirements – “low down payments,” “low closing costs,” and “easy credit qualifying,” it says – reported that an all-time record of 17.4% of its mortgages were delinquent in August, up from what had been the all-time record in July of 17.0%, and having doubled from a year ago.

The FHA’s mortgage portfolio always has higher delinquency rates than more risk averse portfolios. Over the past two years, about two-thirds of mortgages had credit scores at origination of 679 or below. To tamp down on the risks, the FHA began tightening up its lending standards in 2019. But it wasn’t prepared for what came next.

“Seriously delinquent” mortgages in the FHA portfolio – meaning, 90 days or more delinquent – rose to an all-time record of 11.2% in August, from 10.9% in June, having nearly tripled from 3.8% August 2019.

This data, released by the FHA’s Early Warning System, differs slightly from the data the FHA releases later in its official monthly report.

The delinquency rate for the top 169 metros (table at the bottom), which account for about 6 million of FHA-insured mortgages, rose to 18.0%, and seriously delinquent mortgages rose to 11.7%.

In 29 of these metros, the delinquency rates are between 20% and 27.7%! Other metros have much lower delinquency rates. Because of these huge differences by metro, we’ll look at them by metro.

The delinquency rates include mortgages that were delinquent and were subsequently moved into forbearance programs, where the lender agrees to not pursue its legal rights due to nonpayment of the mortgage, and where the borrower doesn’t have to make payments for a set period. A form of “extend and pretend.”

During the term of forbearance – six months, under the CARES Act, extendable by another six months – while the borrower doesn’t have to make payments, the unpaid interest is added to the mortgage principal balance, because there is nothing free about this, and eventually the interest and principal payments will need to be made.

The FHA specializes in low-down-payment higher risk mortgages, including subprime mortgages. A FICO credit score below 620 is considered “subprime.” And down-payment requirements are minimal for subprime mortgages:

  • Credit score of 580 or higher: down payments as low as 3.5%.
  • Credit score below 580: down payment of 10%.

Many of these borrowers are precisely the ones who got hit hardest by the unemployment crisis.

These delinquencies are not happening because home prices have plunged and people could, but refuse to, make mortgage payments because they’re underwater, the sort of strategic default that happened massively during the Mortgage Crisis, often with investment properties. Home prices have risen, and most of these borrowers are not underwater. The delinquencies are occurring because people lost their jobs or their contract work and cannot make the payments for economic reasons.

In some of the Metropolitan Statistical Areas (MSAs), the FHA insures a relatively small share of mortgages, and a high delinquency rate among FHA mortgages in those metros has less impact on the market. But in other MSAs, the FHA insures a large share of mortgages, and a high delinquency rate in those MSAs puts the housing market at serious risk.

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At some point, forbearance will end, and borrowers will have to make payments again, or sell the house and pay off the mortgage, or find themselves in a foreclosure.

The highest delinquency rates among FHA-insured mortgages occur in Nassau County-Suffolk County, NY (27.7%); and New York-New Jersey City-White Plains, NY-NJ (27.0%); in both MSAs, over 20% of the FHA mortgages are “seriously delinquent.”

In the Nassau-Suffolk MSA, the share of FHA-insured mortgages of all mortgages is 12.2%, whereas in the MSA of New York-New Jersey City-White Plains, its share is less than half, 5.9%, which makes that market somewhat less threatened.

The most at-risk metros are those where FHA-insured mortgages have a high market share and a high delinquency rate. The table shows the Top 10 of those markets, according to the American Enterprise Institute’s Housing Center, which collected the data from FHA Neighborhood Watch, sorted by the combination of highest FHA delinquency rates (4th column) and highest shares of FHA mortgages (6th column).

10 Most at Risk Metros, FHA Delinquency Rates, August 2020
MSA #  Delinquent % Delinquent % Seriously Delinquent FHA Share
1 Atlanta-Sandy Springs-Alpharetta, GA 53,135 21.2% 14.2% 21%
2 Houston-The Woodlands-Sugar Land, TX 47,410 22.2% 14.3% 19%
3 Chicago-Naperville-Evanston, IL 39,740 22.4% 15.5% 14%
4 Washington-Arlington-Alexandria, DC-VA-MD-WV 29,855 22.1% 15.5% 14%
5 Dallas-Plano-Irving, TX 27,712 19.2% 12.2% 15%
6 Riverside-San Bernardino-Ontario, CA 22,894 17.3% 11.1% 21%
7 Baltimore-Columbia-Towson, MD 21,425 19.9% 13.2% 19%
8 San Antonio-New Braunfels, TX 17,156 19.0% 11.4% 19%
9 Orlando-Kissimmee-Sanford, FL 16,811 20.2% 13.9% 22%
10 Tampa-St. Petersburg-Clearwater, FL 16,355 17.4% 11.8% 20%

It’s not the lenders that carry the risk, it’s the FHA that insures these mortgages; the taxpayers carry the risk. For taxpayers, it’s a good thing that home prices have risen in recent years, which will in theory allow many defaulted homeowners to sell their home and use the proceeds to pay off the mortgage, and maybe have a little cash left over. That’s why there isn’t a whole lot of official wailing and gnashing of teeth here – in addition to the hope that after forbearance everything will just go back to the old normal.

In practice, a wave of forced sellers like this – and that’s where those housing markets are most at risk – will put sudden downward pressure on home prices, which then suddenly causes other sellers to be underwater.

For example, in the Atlanta metro (#1 above), 53,000 FHA mortgages are delinquent and over 33,000 mortgages are “seriously delinquent.” Those delinquencies that cannot be cured will lead to forced sales. And that’s a lot of houses to suddenly hit the market. In the Houston metro, 47,000 houses with delinquent mortgages are waiting in the wings.

And those are just FHA mortgages and do not include any of the other delinquent mortgages.

The table below shows the 167 MSAs and their FHA loans, in order of the delinquency rate of those FHA loans (4th column), the number (not dollars) of delinquent FHA mortgages in that MSA (3rd column), and the share of FHA mortgages in that market as a percent of total mortgages (5th column). You can use your browser’s search box to find an MSA (if your smartphone clips the 6th column, hold your device in landscape position).

MSA  # Delinquent Loans % Delinquent % Seriously Delinquent FHA Share
1 Nassau County-Suffolk County, NY 15,715 27.7% 20.8% 12%
2 New York-Jersey City-White Plains, NY-NJ 24,348 27.0% 20.6% 6%
3 Newark, NJ-PA 13,854 26.1% 19.0% 14%
4 Fort Lauderdale-Pompano Beach-Sunrise, FL 12,577 25.6% 18.5% 15%
5 Poughkeepsie-Newburgh-Middletown, NY 3,639 25.2% 18.0% 15%
6 Bridgeport-Stamford-Norwalk, CT 3,881 24.2% 17.4% 7%
7 Miami-Miami Beach-Kendall, FL 13,181 23.8% 17.3% 15%
8 New Orleans-Metairie, LA 8,682 23.2% 15.2% 12%
9 McAllen-Edinburg-Mission, TX 4,421 22.4% 14.3% 32%
10 Chicago-Naperville-Evanston, IL 39,740 22.4% 15.5% 10%
11 San Rafael, CA 53 22.3% 19.7% 1%
12 Houston-The Woodlands-Sugar Land, TX 47,410 22.2% 14.3% 14%
13 Lafayette, LA 2,324 22.2% 14.0% 15%
14 Washington-Arlington-Alexandria, DC-VA-MD-WV 29,855 22.1% 15.5% 10%
15 West Palm Beach-Boca Raton-Boynton Beach, FL 7,371 21.9% 15.4% 13%
16 Camden, NJ 12,714 21.6% 14.7% 22%
17 Naples-Marco Island, FL 1,645 21.3% 15.4% 10%
18 Atlanta-Sandy Springs-Alpharetta, GA 53,135 21.2% 14.2% 15%
19 Philadelphia, PA 15,095 20.5% 13.1% 11%
20 Barnstable Town, MA 612 20.5% 13.6% 6%
21 Corpus Christi, TX 2,832 20.5% 12.6% 20%
22 Baton Rouge, LA 5,764 20.4% 12.5% 16%
23 Frederick-Gaithersburg-Rockville, MD 5,808 20.3% 14.5% 10%
24 New Haven-Milford, CT 5,725 20.2% 13.7% 17%
25 Beaumont-Port Arthur, TX 2,058 20.2% 11.5% 21%
26 Orlando-Kissimmee-Sanford, FL 16,811 20.2% 13.9% 17%
27 Boston, MA 4,423 20.1% 13.2% 7%
28 Gary, IN 6,406 20.0% 12.4% 20%
29 Shreveport-Bossier City, LA 3,057 20.0% 12.2% 18%
30 Baltimore-Columbia-Towson, MD 21,425 19.9% 13.2% 15%
31 Las Vegas-Henderson-Paradise, NV 13,984 19.6% 13.8% 13%
32 Dallas-Plano-Irving, TX 27,712 19.2% 12.2% 11%
33 Charleston-North Charleston, SC 4,164 19.2% 12.2% 9%
34 Port St. Lucie, FL 3,322 19.1% 12.6% 22%
35 Cambridge-Newton-Framingham, MA 4,470 19.0% 12.8% 7%
36 San Antonio-New Braunfels, TX 17,156 19.0% 11.4% 16%
37 Oakland-Berkeley-Livermore, CA 3,935 18.9% 13.0% 5%
38 Birmingham-Hoover, AL 7,458 18.8% 11.5% 13%
39 Savannah, GA 2,373 18.8% 11.5% 12%
40 Lakeland-Winter Haven, FL 6,007 18.8% 12.4% 31%
41 Mobile, AL 3,205 18.8% 11.5% 21%
42 Wilmington, DE-MD-NJ 5,630 18.7% 12.3% 20%
43 Columbia, SC 5,681 18.7% 11.4% 14%
44 Elgin, IL 4,697 18.5% 12.1% 18%
45 Fort Worth-Arlington-Grapevine, TX 15,533 18.5% 11.6% 15%
46 Cape Coral-Fort Myers, FL 4,831 18.4% 12.1% 16%
47 El Paso, TX 6,651 18.4% 11.1% 24%
48 San Jose-Sunnyvale-Santa Clara, CA 810 18.4% 13.5% 2%
49 Worcester, MA-CT 3,770 18.4% 11.6% 13%
50 Los Angeles-Long Beach-Glendale, CA 16,826 18.3% 12.3% 7%
51 Urban Honolulu, HI 852 18.3% 13.6% 3%
52 Hartford-East Hartford-Middletown, CT 7,859 18.2% 11.8% 16%
53 San Diego-Chula Vista-Carlsbad, CA 4,661 18.2% 12.8% 6%
54 Springfield, MA 2,862 18.0% 11.0% 16%
55 Greeley, CO 2,089 18.0% 10.8% 19%
56 Allentown-Bethlehem-Easton, Pa-NJ 5,422 18.0% 11.8% 19%
57 Oxnard-Thousand Oaks-Ventura, CA 1,362 17.9% 12.6% 7%
58 Charlotte-Concord-Gastonia, NC-SC 13,587 17.8% 11.0% 10%
59 Albany-Schenectady-Troy, NY 4,440 17.8% 11.9% 10%
60 Jacksonville, FL 8,732 17.8% 11.8% 13%
61 Anaheim-Santa Ana-Irvine, CA 2,652 17.7% 13.0% 4%
62 Memphis, TN-MS-AR 10,396 17.7% 11.1% 18%
63 Lake County-Kenosha County, Il-WI 3,929 17.6% 11.7% 9%
64 Vallejo, CA 1,670 17.6% 11.7% 16%
65 Little Rock-North Little Rock-Conway, AR 4,798 17.5% 11.2% 13%
66 Tampa-St. Petersburg-Clearwater, FL 16,355 17.4% 11.8% 15%
67 Riverside-San Bernardino-Ontario, CA 22,894 17.3% 11.1% 18%
68 Durham-Chapel Hill, NC 1,899 17.3% 10.7% 6%
69 Raleigh-Cary, NC 5,243 17.2% 10.8% 7%
70 Montgomery County-Bucks County-Chester County, PA 7,262 17.2% 11.6% 9%
71 Cleveland-Elyria, OH 11,789 17.1% 11.3% 13%
72 Stockton, CA 3,148 17.0% 11.0% 16%
73 Greensboro-High Point, NC 4,040 16.9% 10.2% 12%
74 Augusta-Richmond County, GA-SC 3,553 16.8% 9.8% 14%
75 Detroit-Dearborn-Livonia, MI 7,798 16.7% 10.6% 15%
76 Austin-Round Rock-Georgetown, TX 8,905 16.7% 10.4% 8%
77 Reading, PA 2,504 16.6% 10.8% 19%
78 North Port-Sarasota-Bradenton, FL 3,074 16.5% 11.2% 12%
79 Providence-Warwick, RI-MA 7,546 16.5% 10.5% 17%
80 Virginia Beach-Norfolk-Newport News, VA-NC 10,238 16.4% 10.3% 11%
81 Sacramento-Roseville-Folsom, CA 7,063 16.4% 11.1% 12%
82 Lubbock, TX 1,904 16.2% 9.3% 17%
83 Denver-Aurora-Lakewood, CO 11,534 16.2% 10.5% 12%
84 Greenville-Anderson, SC 4,171 16.2% 10.0% 13%
85 Winston-Salem, NC 3,212 16.1% 9.5% 12%
86 Anchorage, AK 1,857 16.0% 10.8% 13%
87 Punta Gorda, FL 810 16.0% 10.3% 14%
88 Tacoma-Lakewood, WA 3,948 16.0% 10.1% 15%
89 Warren-Troy-Farmington Hills, MI 10,452 16.0% 10.2% 9%
90 Toledo, OH 2,672 15.9% 10.1% 10%
91 Scranton–Wilkes-Barre, PA 2,298 15.9% 9.8% 18%
92 Syracuse, NY 3,491 15.9% 10.1% 13%
93 Milwaukee-Waukesha, WI 4,165 15.9% 10.3% 6%
94 Santa Rosa-Petaluma, CA 525 15.9% 11.7% 6%
95 St. Louis, MO-IL 15,572 15.8% 9.5% 11%
96 Richmond, VA 8,167 15.8% 9.6% 13%
97 Wichita, KS 3,426 15.7% 9.4% 13%
98 Deltona-Daytona Beach-Ormond Beach, FL 3,523 15.6% 9.7% 20%
99 Salisbury, MD-DE 1,548 15.6% 9.4% 8%
100 Indianapolis-Carmel-Anderson, IN 13,427 15.6% 9.4% 15%
101 Columbus, OH 10,232 15.6% 9.9% 10%
102 Tulsa, OK 5,414 15.6% 9.5% 16%
103 Oklahoma City, OK 8,282 15.5% 9.5% 15%
104 Flint, MI 2,100 15.5% 9.6% 17%
105 Bakersfield, CA 5,270 15.5% 9.9% 24%
106 Seattle-Bellevue-Kent, WA 5,496 15.5% 10.7% 5%
107 Rochester, NY 5,233 15.4% 9.8% 12%
108 Chattanooga, TN-GA 2,894 15.4% 9.2% 14%
109 Modesto, CA 2,277 15.3% 9.6% 21%
110 Daphne-Fairhope-Foley, AL 882 15.1% 9.8% 9%
111 Palm Bay-Melbourne-Titusville, FL 2,676 15.1% 9.9% 14%
112 Minneapolis-St. Paul-Bloomington, MN-WI 13,935 15.1% 9.7% 9%
113 Myrtle Beach-Conway-North Myrtle Beach, SC-NC 1,636 15.1% 9.4% 8%
114 Tallahassee, FL 1,517 15.1% 9.8% 11%
115 Nashville-Davidson–Murfreesboro–Franklin, TN 9,977 15.0% 9.2% 13%
116 Huntsville, AL 2,351 15.0% 8.8% 10%
117 Cincinnati, Oh-KY-IN 10,889 14.9% 9.3% 12%
118 Wilmington, NC 888 14.9% 9.1% 7%
119 San Francisco-San Mateo-Redwood City, CA 132 14.9% 11.7% 0%
120 York-Hanover, PA 2,688 14.8% 9.0% 19%
121 Ogden-Clearfield, UT 3,216 14.8% 8.2% 15%
122 Boulder, CO 411 14.8% 9.6% 3%
123 Clarksville, TN-KY 1,263 14.8% 9.1% 12%
124 Ocala, FL 1,457 14.8% 9.0% 19%
125 Asheville, NC 789 14.7% 8.8% 6%
126 Fort Wayne, IN 2,382 14.7% 8.4% 13%
127 Pittsburgh, PA 10,016 14.7% 9.0% 11%
128 Killeen-Temple, TX 1,704 14.7% 8.3% 10%
129 Kansas City, MO-KS 10,316 14.7% 8.9% 12%
130 Salt Lake City, UT 5,271 14.5% 8.5% 13%
131 Lancaster, PA 1,974 14.5% 9.0% 12%
132 Akron, OH 3,372 14.4% 9.1% 13%
133 Phoenix-Mesa-Chandler, AZ 19,636 14.4% 8.6% 12%
134 Fort Collins, CO 672 14.4% 9.4% 8%
135 Des Moines-West Des Moines, IA 2,651 14.4% 8.6% 8%
136 Youngstown-Warren-Boardman, OH-PA 2,264 14.4% 8.8% 17%
137 Pensacola-Ferry Pass-Brent, FL 1,885 14.3% 8.9% 10%
138 Grand Rapids-Kentwood, MI 3,488 14.3% 8.5% 9%
139 Manchester-Nashua, NH 1,435 14.2% 9.1% 12%
140 Crestview-Fort Walton Beach-Destin, FL 736 14.2% 8.9% 5%
141 Buffalo-Cheektowaga, NY 4,991 14.1% 8.8% 10%
142 Louisville/Jefferson County, KY-IN 6,487 14.0% 8.6% 13%
143 Omaha-Council Bluffs, NE-IA 4,107 14.0% 8.2% 9%
144 Knoxville, TN 3,468 14.0% 8.1% 12%
145 Colorado Springs, CO 2,527 14.0% 8.6% 9%
146 Albuquerque, NM 5,389 13.9% 8.3% 16%
147 Portland-Vancouver-Hillsboro, OR-WA 5,252 13.9% 9.5% 9%
148 Tucson, AZ 4,358 13.8% 8.3% 13%
149 Fresno, CA 3,671 13.8% 8.5% 16%
150 Canton-Massillon, OH 2,011 13.8% 7.9% 17%
151 Dayton-Kettering, OH 3,907 13.7% 8.3% 12%
152 Provo-Orem, UT 1,986 13.6% 7.9% 12%
153 Madison, WI 647 13.5% 8.6% 4%
154 Harrisburg-Carlisle, PA 2,355 13.3% 8.2% 12%
155 Lansing-East Lansing, MI 1,890 12.8% 7.7% 12%
156 Visalia, CA 2,208 12.8% 7.3% 28%
157 Eugene-Springfield, OR 829 12.5% 7.8% 10%
158 Bend, OR 377 12.5% 8.1% 8%
159 Kalamazoo-Portage, MI 828 12.4% 7.5% 10%
160 Prescott Valley-Prescott, AZ 509 12.2% 7.1% 10%
161 Lexington-Fayette, KY 1,651 12.0% 7.4% 10%
162 Spokane-Spokane Valley, WA 1,707 11.8% 7.0% 10%
163 Salem, OR 1,168 11.7% 7.1% 15%
164 Reno, NV 1,105 11.6% 7.6% 11%
165 Boise City, ID 2,435 11.6% 6.3% 10%
166 Panama City, FL 495 11.4% 7.2% 12%
167 Springfield, MO 1,464 11.0% 6.5% 12%
168 Lake Havasu City-Kingman, AZ 463 10.9% 6.1% 12%
169 Fayetteville-Springdale-Rogers, AR 1,723 10.5% 5.9% 10%

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