April 1st, 2009 2:19 PM by Sherry Lee
While FHA serious delinquencies have soared since last summer, nowhere is that more true than in Florida, at least according to the Monthly Report to the FHA Commissioner for January (released last week).
Of the 50 metro areas with the highest default rates in the FHA’s Single-Family Mortgage Program in December 2008 (the latest data shown in the report), 14 were from Florida – with five Florida metros making the top-ten list. In December 2007, only two Florida metros – Punta Gorda and Fort Myers-Cape Coral – made the top 50 list.
What is most disturbing about these numbers is that a large portion of the loans in the FHA’s book in these areas represent loans originated last year, suggesting that defaults are occurring very early in the life of the loans. The number of FHA-insured homes was more than 25% higher in December 2008 than in December 2007, and in some areas ( Fort Myers-Cape Coral, Naples, Fort Pierce-St. Lucie) it was up by over 40%. Defaults are defined by the FHA as loans that are 90 days or more delinquent.
While plunging home prices and a sharply deteriorating economy were behind much of the horrible performance of FHA loans in Florida, there appears to be something else going on: sloppy underwriting, and probable fraud. Reports of sharply increasing early payment defaults (where borrowers either make no or just one payment before defaulting) are apparently heavily concentrated in Florida (sadly, I can’t get any hard data).
Florida, as folks may know, consistently shows up in various industry reports as one of the worst in terms of incidence of mortgage fraud, coming in at the top spot of the Mortgage Asset Research Institute’s list in 2006 and 2007 before falling to number 2 in 2008 (Rhode Island was a controversial No. 1 based on a high incidence of appraisal fraud).
Given the plunge in home prices and the surge in the unemployment rate in most of Florida over the last year, it is almost certain that the credit performance of FHA’s Florida book has continued to deteriorate this year – in all likelihood in a big way.