Job Loss, Price Decline Push Up FHA Foreclosures

Industry experts are pointing to the worsening labor market condition and dropping home prices as factors that will likely trigger a flood of FHA foreclosures. They said that these factors are contributing to the growing number of loan defaults and delinquencies.

The increasing number of foreclosures means trouble for the Federal Housing Administration (FHA), an insurance fund unit of the U.S. Housing and Urban Development. Industry experts said that the FHA has been insisting that it does not need any bailout from the federal government. But they believed that the agency would likely need about $50 billion in capital infusion in 2010 to cover all the losses it incurred when borrowers, who took out loans guaranteed by the FHA, defaulted on their mortgages.

But what really scares industry experts is that the flood of FHA foreclosures would greatly affect whatever progress has been made towards the housing market recovery. It is expected that sales of repossessed houses will hit 1.9 million next year, an increase of 1.7 million from 2009. Before the collapse of the housing market in 2007, annual foreclosure sales were about half a million.

By Cassiano Travareli