Multifamily Housing

Status of HUD's Multifamily Loan Portfolios Gao ID: RCED-94-173FS April 12, 1994

The Department of Housing and Urban Development (HUD), through the Federal Housing Administration (FHA), insures mortgages on multifamily properties. In cases of default, a lender may turn over the mortgage to HUD and be paid for an insurance claim--HUD, in effect, becomes the new lender for the mortgage. The number of insured multifamily loans that have defaulted and been assigned to HUD has grown significantly, and the agency believes that even greater numbers of multifamily loans could default in the future, producing additional losses. This fact sheet provides information on the financial state of HUD's multifamily insured and assigned loan portfolio. For the insurance-in-force portfolio, GAO discusses the number of current and delinquent loans. For the HUD-held portfolio, GAO discusses the number of current and delinquent loans, the ratio of loan delinquencies to the unpaid principal balances, and steps that HUD has taken to resolve the delinquencies.

GAO found that: (1) about 97 percent of HUD multifamily insurance loans are current, while about 3 percent are either delinquent or have defaulted; (2) the precise number of delinquent loans is unknown because the reporting of delinquencies is voluntary, but lenders must notify HUD of loans that have defaulted; (3) HUD increased its loss reserves to $11.9 billion as of September 30, 1992; (4) as of July 1993, the HUD-held loan portfolio consisted of 2,432 loans, of which 1,152 were current and 1,280 were delinquent; (5) although slightly more than one-half of all HUD-held loans are delinquent, they account for 80 percent of the portfolio's total unpaid principal balance; (6) about 53 percent of the 1,280 delinquent HUD-held loans have delinquencies that are equal to or less than 20 percent of their unpaid principal balances; (7) loans are more likely to be brought current when the ratios of delinquency to unpaid principal are higher than 20 percent; (8) only about 6 percent of the 1,280 delinquent HUD-held loans were under a formal workout plan as of July 1993; and (9) HUD officials have taken steps to improve the management and oversight of insurance-in-force and HUD-held loan portfolios.

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