FHA Oregon Purchase Loans 2005-2007: Non Profit "Gift Fund" Loans 2+ Times More Likely to Default.

As previously posted HERE, HUD is once again proposing regulations to eliminate the use of non profit gift funds as they are seen as a significant factor in losses to the FHA insurance fund.

As part of the rule making HUD has released purchase loan level data which includes information about the source of down payment and whether an individual loan has had a default that has lasted 90 days or more (through February of 2008).

I have isolated Oregon FHA home purchase loans for 2005-2007 and created a two page PDF file HERE, which includes both a graph and a table. Key results for the more than 6,000 Oregon loans analyzed:

1. The overall default rate was 5.2%
2. For loans where borrowers used non profit "gift funds" the default rate was 9.2%
3. Borrowers who used their own funds for down payments had a default rate of 3.6%
4. Non profit gift fund home purchase loans defaulted at a rate that was 255% of loans where down payment funds came from the borrower; 168% of the rate when the funds came from family, and 221% when down payment funds came from any other source.