Monthly FHA Delinquency and Default Report for May 2010

It is that time again for the monthly FHA delinquency and default report as per HUD Neighborhood Watch May 2010 data.

In May 2010, the number of defaults in all categories increased.  However, the serious delinquency rate fell from 9.04% to 8.97% in May 2010 due to a 1.17% increase in the FHA active portfolio.  Serious delinquencies increased from 553,028 in April 2010 to 555,051 in May.  This represents an increase of .37%% from the prior period despite a decline to the serious delinquency rate.

Most media follows the FHA Outlook report rather than extracting HUD Neighborhood Watch website data, so it is always interesting to look at FHA Outlook reporting.  According to the FHA Outlook report for May 2010 there was a  slight decline to May serious deliquencies:

Excerpt from FHA Outlook Report from May 2010:

In May 530,140 loans were reported in serious delinquency, for a portfolio default rate of 8.4 percent –
marginally below last month’s rate.

Link to FHA Outlook Report for May 2010:

http://www.hud.gov/offices/hsg/comp/rpts/ooe/olcurr.pdf

Nonetheless, total FHA delinquencies and defaults increased by 5.04% in May 2010 as per the HUD Neighborhood Watch data.  Although the numbers reported on HUD Neighborhood Watch Website and FHA Outlook Report differ, the FHA Outlook Report still reflects a 41.40% increase in the number of serious delinquencies from the prior year while HUD Neighborhood Watch data is showing a 40.63% increase for the same period.

The numbers still do not add up with what Commissioner Stevens claimed as volume for the FHA-HAMP program.   According to HUD Neighborhood Watch data for May 2010,  there were only 205 FHA-HAMP related actions.  Yet Commissioner Stevens’ testimony in May 2010 painted an entirely different picture as to the success of FHA-HAMP.  According to Steven’s Testimony, thousands of trial periods had been extended under FHA-HAMP as of January 2010, and FHA-HAMP volume was above projections for the three year period:

Excerpt from Stevens’ Testimony May 13, 2010:

“At the initiation of FHA HAMP in August of 2009, it was projected to provide assistance to over 45,000 households over the next three years. As of January 31, 2010, lenders have sent over 15,000 trial plans and over 10,000 borrowers have made at least 1 payment on their trial plan. FHA-HAMP loan volume is currently above projections for the three year milestone and all but one major lender has borrowers under a trial program.”

Link to Stevens’ May 13, 2010 testimony:

http://portal.hud.gov/portal/page/portal/HUD/press/testimonies/2010/2010-05-13

Why the difference in reported FHA-HAMP actions is important is because at the end of January 2010, reporting of codes 39 and 41 for FHA-HAMP loans became mandatory (Code 39 is used for loans where the borrower has been approved for a FHA-HAMP trial- Code 41 is used for borrowers who have been approved for a FHA-HAMP modification).  The following month (Feb-2010), the total number of delinquent loans declined by 81,192 or 6.80%.  It is interesting to note that the HUD Neighborhood Watch website does not show that codes 39 and 41 are included in the total number of seriously delinquent loans reported on HUD Neighborhood Watch.  According to Help Topic shown on HUD Neighborhood Watch, only loans with the following delinquency status codes are included in seriously delinquent loans:

Seriously Delinquent Loans reported as delinquent by the servicing lender as of the last reporting cycle updated in Neighborhood Watch, where the delinquent status code is one of the following; and the insurance status code is marked active:

1A = Foreclosure Sale Held
1G = Eviction Completed
AS = (HUD FC Moratorium)
AO = Ineligible for Loss Mitigation
3B = Prequalified for 601
09 = Special Forbearance
10 = Partial Claim Started
12 = Repayment
15 = Preforeclosure Acceptance Plan Available
17 = Preforeclosure Sale Completed
22 = Servicing Transferred or Sold to Another Mortgagee
24 = Government Seizure
26 = Refinance Started
28 = Modification Started
31 = Probate
32 = Military Indulgence
34 = Natural Disaster
42 = Delinquent
43 = Foreclosure Started
44 = Deed-in-Lieu Started
45 = Foreclosure Completed
46 = Property Conveyed to Insurer
47 = Deed-in-Lieu Completed & Property Conveyed
48 = Claim without Conveyance of Title
49 = Assignment Completed
59 = Chapter 12 Bankruptcy
65 = Chapter 7 Bankruptcy
66 = Chapter 11 Bankruptcy
67 = Chapter 13 Bankruptcy
68 = First Legal Action to Commence Foreclosure
69 = Bankruptcy Plan Confirmed
76 = Bankruptcy Court Clearance Obtained
77 = Deed Recorded

As you can see, codes 39 and 41 are not included.  As to FHA-HAMP Actions reported on HUD Neighborhood Watch, the Help Topic provides this definition for FHA-HAMP actions reported on the servicer loss mitigation report:

FHA – HAMP ActionsOn May 20, 2009, the President signed the “Helping Families Save Their Homes Act of 2009.” This new law provides the Federal Housing Administration (FHA) with additional loss mitigation authority to assist FHA mortgagors under the Making Home Affordable Program (MHA). The MHA Program is designed to help homeowners retain their homes and to prevent the destructive impact of foreclosures on families and communities. Loans with a Status Code 39 have a mortgagor approved for the FHA – HAMP trial modification payment play option. Loans with a Status Code 41 have a mortgagor approved for the FHA – HAMP loan modification and partial claim, after successful completion of the Trial Modification payment plan.

This shows that codes 39 and 41 are related to FHA-HAMP actions and are supposed to be reported on the HUD Neighborhood Watch delinquency report.   Either the number of FHA-HAMP actions is being exaggerated by HUD, or there is a reporting error.  Please note that the servicer report that shows the number of FHA-HAMP actions is a loss mitigation report on delinquent loans.  Is it possible that all the FHA-HAMP actions are not being reported because the loans are not considered delinquent due to the exclusion of codes 39 and 41?  It is a valid question.

In looking at servicer loss mitigation data, Flagstar Bank FSB shows a glaring anomaly.  Flagstar Bank FSB is showing that 64% of their currently delinquent loans are ineligible for loss mitigation.  Out of 18,632 delinquent loans, 12,098 loans are ineligible for loss mitigation.  This is quite extraordinary.  In addition to Flagstar’s unusually high percentage of ineligible loans, total loss mitigation actions declined in May.

Here is the comparison of monthly default statistics reported on HUD Neighborhood Watch from June 2009 to May 2010:

And here is the FHA Portfolio Summary from May 2008 to May 2010: (Note: May and December 08 are included, but the information was not tracked regularly until April 09):

Here is information on FHA Loss Mitigation Action on Delinquent Loans from March 2010 to May 2010:

And here is a chart of FHA delinquent and defaulted loans from March 2010 to May 2010:

Finally, let’s take a look at loss mitigation actions on the FHA portfolio from March 2010 to May 2010:

Please let me know if you have any questions or would like to know how to download information directly from the HUD Neighborhood Watch website.