Delinquency rates for the State Housing Finance Agencies' single family whole loan programs rose again in 2012 for the sixth straight year despite improvements in the US housing market, says Moody's Investors Service.
A Moody's survey of the HFAs found 90-plus day delinquencies at 3.18% at the end of 2012, almost three times its lowest reported level of 1.15% recorded in December 2006.
Seriously delinquent loans (which includes both loans in foreclosure and the 90-plus day delinquencies) also reached their highest level to date, 5.92%, almost triple the December 2007 level of 2.05%. In all, Moody's reports total delinquencies, as of December 31, 2012, reached 8.03%, the highest level thus far and an almost 4% year-over-year increase.
Although the high delinquencies weaken the HFA's single family loan portfolios, Moody's does not expect a substantial number of rating downgrades or outlook changes based exclusively on the higher delinquencies, the rating agency says in the report "State HFA Delinquencies Continue to Climb Despite Improvement in Housing Market."
"HFAs' asset-to-debt ratios have remained stable, and HFAs remain profitable due to the overcollateralization of loans to bonds and the positive spread between the loan and bond rates," says Eileen Hawes, a Moody's Assistant Vice President and Analyst. "Continued profitability has allowed the programs to maintain strong financial positions despite weaker-performing portfolios."
Although the US housing market has been showing signs of improvement, these trends have not yet translated into better performance for the HFA loans because of persistently high unemployment levels. Levels of employment are a key driver of HFA loan performance, says Moody's.
Unemployment in the U.S. is expected to continue to be comparatively high in the near term.
Also contributing to the high rate of delinquencies has been a slowdown in the foreclosure process in several states.
"HFAs' portfolios have been challenged by loan modification programs, loss mitigation initiatives and various state foreclosure moratorium policies, all of which have lengthened delinquency periods," says Hawes.