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Spike in FHA Foreclosure Starts It is a case of good news and bad news where
foreclosures are concerned, for the month of April. But it’s the starting numbers
for FHA foreclosures that captures the report released recently by the LPS. While foreclosure
initiations increased only a slight bit in April, FHA Foreclosures that have begun, have
shot up significantly.
The Lender Processing Services, or LPS, reports that foreclosure starts actually dropped 2.6
percent in April, but FHA foreclosure starts spiked an incredible 73 percent during April.
The reason given by LPS for this terrible number is being blamed on defaults in 2008
and 2009 vintage loans. While it’s true that all of the FHA vintage loans experienced
increases in foreclosure beginnings in April, the more recent vintages from 2009 to current
have experience improved credit performances.
Herb Belcher, the senior vice president for LPS Applied Analytics explains that when the
loan origination market basically dried up, the FHA tried to fill in. That is when FHA
originated loans tripled, and even increased up to five times the averages in 2009. When
you have high volume loans like that, Belcher explains, there are going to be large numbers
of foreclosure starts, even when you are working with low default rates, which is not the case
during these recessionary times. In fact, the 2008 vintage loans by themselves account
for approximately $14 billion worth of unpaid mortgage balances in foreclosure, and there
is no end in sight.
Other data for the month of April also indicates that foreclosure sales are staying low nation-wide,
dropping 2.6 percent in a month-over-month statistic. The sale of foreclosures in non-judicial
states have also dropped 2 percent, and those in judicial states have remained flat, moving
a small margin down of .01 percent in April. The total loan delinquency rate is currently
at 7.12 percent, which is an increase of .4 percent for the month of April.
As previous history indicates, Mississippi, Nevada, Illinois, New Jersey and Florida continue
to house the highest percent of delinquent loans while Alaska, South Dakota, Wyoming,
Montana and North Dakota bring in the lowest percentage of late mortg