
In a recent post, I noted that FHA mortgage delinquencies skyrocketed more than 25%. Since most FHA borrowers only put 3.5% down, when factoring in a 6% commission, 2% closing costs, and a declining market, nearly all FHA borrowers over the last five years are effectively underwater. When these borrowers sell or quit paying, the losses will be huge because the capital recovery will be far less than the original loan balance. With a 9.4% serious delinquency rate, the FHA is facing 713,104 future foreclosures. This rate has been rising steadily, and many more delinquencies are coming because many borrowers will want to move before prices regain peak values. Many borrowers may opt for a strategic short sale or strategic default,…[READ MORE]