The Federal Housing Administration (FHA) released its August 2020 Credit Risk Report. The overall non-seasonally adjusted rate of seriously delinquent (SDQ) loans increased from 10.58 percent in July 2020 to 11.35 percent in August 2020. This increase is lower than the increase from June 2020 to July 2020, when SDQ rate increased by 18 percent from 8.97 percent to 10.58 percent.
Below are some observations on FHA’s SDQ portfolio of loans as of August 31, 2020:
- Number of SDQ Loans: There are about 909,000 seriously delinquent loans.
- Origination: About one in eight loans originated in 2014 through 2019 are seriously delinquent. Originations in 2018 have the highest rate of serious delinquencies in this range of years.
- Foreclosures: The foreclosure moratorium’s effects are clearly seen as the foreclosure rate in August 2020 (0.24 percent) is half of what it was in August 2019 (0.59 percent) and one-third of what is was in August 2018 (0.77 percent). The increase in SDQ rate raises the question on whether there is a foreclosure pipeline brewing at FHA.
- Expectation for September SDQ Loans: Based on the 30-days and 60-days delinquency rates, we expect that September 2020 SDQ rate will see another small increase of about 1 percent or less.