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FHA: Loss Mit Claims Rising.(Federal Housing Administration)
Washington -- The Federal Housing Administration is paying loss mitigation claims on 90,000 delinquent loans so the borrowers have a chance to remain in the homes and resume their regular monthly mortgage payments again.
The FHA is paying off the delinquencies, bringing the loans current and taking back an interest-free subordinated mortgage, according to FHA director Joseph McCloskey.
"These are substantial investments by FHA in order to bring those loans current. As a result, FHA has avoided losses of over $2 billion this year," he told a FHA conference sponsored by the National Real Estate Development Center.
The FHA expects to pay its servicers $27 million in incentive fees for loan modifications and other loss mitigation efforts in fiscal year 2005, which just ended Sept. 30.
Servicers collected $25.4 million in incentive fees in FY 2004, when the FHA paid 78,000 loss mitigation claims. "We believe the loss mitigation program is very strong and we believe it is becoming the dominant approach to address a default," he said. Mr. McCloskey is a director of single-family asset management.
The FHA has a 6% default rate and a 1.38% foreclosure rate. FHA estimates show foreclosures declined in FY 2005 to 61,000, compared to 71,000 in FY 2004. This 14% drop in foreclosures occurred while the FHA's insured portfolio is shrinking at a 10% annual rate and loss mitigation claims rose 15.4%.
Meanwhile, FHA officials are telling servicers not to worry about a "treble damages" ...
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Source: HighBeam Research, FHA: Loss Mit Claims Rising.(Federal Housing Administration)