By Roberta Maynard. The increase in delinquencies of both conventional and FHA mortgages in the second half of 2002 has some industry-watchers concerned. One is Ivy Zelman, housing analyst with Credit Suisse First Boston, who says the reason for concern is the potential of constraint on supply. "In the event that a large amount of homes are forced into the marketplace via foreclosures, it could have a negative impact on prices and therefore margins [of the public builders]," she says.

While FHA loans represent just 16 percent of total originations, the trend of rising delinquencies is troublesome. An added concern associated with FHA loans, Zelman says, is a "dramatic increase" in the mortgages with loan-to-value ratios higher than 97 percent. In 2001, the FHA loans in that category accounted for 58 percent of total FHA loans compared with 43 percent in 1990.

Published in BIG BUILDER Magazine, December 2002