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Mortgage Financing: Changes in the Performance of FHA-Insured Loans

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Report Type Reports and Testimonies
Report Date July 10, 2002
Report No. GAO-02-773
Subject
Summary:

Federal Housing Administration (FHA) loans made in recent years have experienced somewhat higher foreclosure rates than loans made in earlier years. However, recent loans are performing much better than loans made in the 1980s. Although economic factors such as house price appreciation are key determinants of mortgage foreclosure, changes in underwriting requirements, as well as changes in the conventional mortgage market, may partly explain the higher foreclosure rates experienced in the 1990s. Factors not fully captured in the model GAO used may be affecting the performance of recent FHA loans and causing the overall risks of FHA's portfolio to be somewhat greater than previously estimated. Thus, the Mutual Mortgage Insurance Fund may be somewhat less able to withstand worse-than-expected loan performance resulting from adverse economic conditions.

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