FHA losing customers rapidly as premiums spur refinancing

WASHINGTON — The Federal Housing Administration’s financial health is benefiting from continued reductions in delinquencies and foreclosures, but the FHA is also losing some of its best customers at a fast clip.

The “serious” delinquency rate (90 days or more past due) on FHA-insured home loans dropped to 4.28% in the third quarter of fiscal year 2017, according to an FHA quarterly report delivered to Congress late last month. That was down from 5% in a year earlier, and nearly 10% in 2011. The FHA is also enjoying a sharp decline in total claim and loss mitigation expenses. It paid $2.3 billion in total claims expenses in the third quarter, compared with $4.5 billion a year ago.

But at the same time, more FHA homeowners than expected are refinancing out of the program and into conventional mortgages, despite an increase in mortgage rates over the past year.

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