Nowcast: 10 Subways Most At Risk With High FHA Defaults (Based on FHA Data on Delinquency Rates from July 2020) | American Enterprise Institute

Rising FHA delinquency rates threaten homeowners and neighborhoods in many metropolitan areas across the country. However, 10 subways in 7 states present particularly significant risks due to the combination of:

  • A large FHA portfolio containing a high percentage of overdue loans (> 17%) or severely overdue loans (> 10%).
    • These percentages include loans in forbearance, and
  • An FHA share of all purchase loans in 2019> 15%.

These percentages of delinquency are expected to increase over time. At some point, a significant percentage of the loans past due at the time are expected to be put on the market by unfavorable homeowners or become foreclosures and then enter the market. It is at this point that we expect buyer markets to develop in zip codes with high exposure to FHA and other high risk loans combined with high levels of delinquency. Owners of these zip codes will be mostly low-income (zips will account for around 50-90% of the area’s median income) and contain high percentages of households of color.

As reported in FHA Neighborhood Watch (includes forbearance loans):

  • 17% of the approximately 8 million FHA loans were in arrears as of July 2020, and
  • 10.5% of the estimated 8 million FHA loans were seriously past due as of July 2020.

This spreadsheet provides FHA foreclosure rates for the 169 major metropolitan areas.

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About Christopher Easley

Christopher Easley

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