New Wave of Foreclosures Expected
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Roughly 9.1 percent of the homeowners who borrowed money from the Federal Housing Administration had missed at least three payments as of December, reports The Washington Post. This is up nearly 3 percent since last year, and could be a sign of another round of mass foreclosures. The culprits: mortgages made in 2007 and 2008, which are entering into the danger zone. Defaults are most likely to occur when they are about two- to three-years-old. And if the already cash-strapped agency can't cover the losses, the taxpayers will have to pick up a piece of the tab.
But the news isn't all bad. The FHA has been taking steps to improve its financial health. Loans made in 2009 typically went to those with higher credit scores, and the agency has been cracking down on poorly performing lenders.
Borrowers are also facing tougher scrutiny from the agency. People taking out FHA loans will have to pay higher upfront fees, perhaps as early as this spring. Those with especially weak credit scores will also have to put down at least 10 percent instead of the usual 3.5 percent down payment. The amount of money sellers can kick in toward closing costs and other fees will also be limited.
(Photo by respres; C.C. 2.0)
