New FHA State Graphs and Tables for Home Purchase Loans, 5 Years 2003-2007.

I have just completed a comprehensive analysis of data on FHA home purchase loan by state and HUD region covering loans endorsed from FY 2003-2007. Nearly 2.2 million FHA home purchase loans are included in the analysis. (Special thanks to HUD for posting SF home purchase endorsement data for FY 2000-FY 2007 HERE; that new data, current through May 2008, allowed me to construct this first of a kind posting of state claims rate data for FHA home purchase loans).

Note that data includes home purchase loans ONLY; no refinances or HECM's included. Data includes total loans, insurance claims(usually foreclosures), claim rates, and loan terminations (full loan repayments without a claim).

HERE is the 7 page PDF document with my analysis of data from this 5 year period. It includes graphs, and a series of state and HUD regional tables. All states, Guam and Puerto Rico are included, along with a table with breakouts for the 10 HUD Regions (Oregon and other NW states are in HUD Region 10).

Some observations for the 5 Year, FY 2003-FY 2007 period:

1. The overall US claims rate was 3.8%. As I have said about the FHA program many times over the years, there are very, very few government programs like FHA that can demonstrate a multi-year success rate of 90-95% +.
   
2. Colorado had the highest state/area claims rate at 8.2%.
   
3. Oregon ranked slightly better than the middle of 52 states/areas, with the 22th. lowest claims rate at 1.4%.(pg. 1 graph).[I excluded the Virgin Islands and Guam from the rankings because of low total loans].
   
4. NW states ALL had relatively low claims rates, Alaska had the 9th. lowest, Idaho 19th., and Washington the 21st. (pg 1 graph).
5. Higher claims rates in HUD Regions 4-8 resulted in 56,000+ more claims than would have occurred if the claims rate for those regions (4.8%) had been at the same rate as Regions 1-3 and 9-10 (.21%).(page 3). Note that the home purchase claims rate in HUD regions 4-8 was 4 times the claim rate for combined regions 1-3, 9-10.
6. The US claims rate would have been reduced by 68% if the Region 4-8 claims rate was at same rate as HUD regions 1-3 and 9-10. (page 3).
7. KEY NOTE A: Claims rates shown here are calculated on total loans. If actuarial/financial analysis were goal, termination/prepayment rates would be significant factor in setting needed premium levels; 34% of FHA FY 2003-2007 home purchase loans nationwide had been terminated /prepaid as of the end of May 2008, including 55% of loans from high volume year FY 2003. With recent reports of FHA fund losses, and this data, it seems clear to me that the claims rate by itself is NOT likely the problem. Instead my speculation is that declining home prices likely are impacting losses per foreclosure, and high rates of voluntary loan prepayments/terminations means premium collections have also declined sharply.
   
8. KEY NOTE B: My guess, given market deterioration in last year, is that it is highly likely that home purchase loans made in FY 2005-FY 2007 will see increased claims rates in the future, and higher costs per claim. It takes a while for defaults, foreclosures, and claims to work through all the administrative and legal processes and it remains to be seen what the increase in claims rates and costs will turn out to be for those years.
   
9. I found the loan data for Nevada with the 8th. lowest FHA home purchase claims rate for FY 2003-2007 AND much higher rates of sub prime foreclosures, especially interesting. FHA endorsed 21,787 home purchase loans in Nevada during the 5 year period. (Only slightly more than Oregon's 19,373 home purchase loans). The Nevada claims rate for FHA home loan purchases for that period is LOWER than Oregon , and near IVORY SOAP LEVELS-- 8/10ths of 1% with ONLY 171 claims out of a universe of 21,787 home purchase loans; this compares to the higher (but still low) 1.4% claims rate in Oregon. (Page 1 graph and pages 4-6).
   
10. In CONTRAST, a click on the Nevada map from within the Federal Reserve Sub prime mapping site HERE shows the April 2008 sub prime foreclosure rate in Nevada as 11.2%, with only 58.1% of sub prime borrowers current on their mortgage payments. (Nevada sub prime data also includes refinances, and could include some FHA borrowers who terminated their FHA loan and refinanced into sub prime products).