FHA-Backed Mortgages Face Growing Problems

Washington, DC, July 9, 2012 -- The Federal Housing Administration may need a bailout as the loans it backs are increasingly falling into foreclosure or delinquency.

That's in contrast to loans guaranteed  by Fannie Mae and Freddie Mac and those held by banks, which are all showing signs of improvement, according to government reports.

The share of government-guaranteed loans, a majority of which are backed by FHA, that were 90 days or more delinquent surged nearly 27% during the year ending March 31. Foreclosures rose nearly 17%.

Bank loans, however, saw a substantial improvement, with delinquencies declining 39% and foreclosures falling nearly 10%.

Loan held by Fannie and Freddie also improved as delinquencies dropped by nearly 15% and foreclosures slid by more than 6%, according to government reports.

FHA doesn't make loans, but it backs lenders if borrowers stop paying. This encourages banks to offer mortgages to riskier borrowers.


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