on those sold to new owners; that foreclosures even in the peak years represented only a small part of total terminations; that FHA property acquisitions, as expected, tend to parallel foreclosures with a rate consistently somewhat lower than that of foreclosures; and that foreclosure rates react not only to economic conditions (as evidenced by the peak following the 1937-38 recession and the 1948-49 inventory adjustment) but may also rise after a period of heavy new loan activity, as in 1944 when foreclosures of Section 603 War Housing increased following the peak years of activity under that program. In 1954, as the chart shows, the termination rate inched upward, reflecting a very slight increase in the prepayment ratio, while the foreclosure rate tripled (to only 0.17 of 1 percent) and the FHA acquisition rate doubled (to only 0.08 of 1 percent).

DEFAULT STATUS OF HOME MORTGAGES.-FHA home mortgage defaults at the end of 1954 included 16,200 cases-50 percent over 1953 and the highest level in three years. This is indicated by the data in Table 49, which shows the total number of FHA home mortgages in default at the close of the years 1939 and 1944 and at each year end from 1949 through 1954. The table also shows the number of these defaulted cases where foreclosure was in process and the number in the mortgagee inventory, i. e. where foreclosure had been completed but the properties were retained by the mortgagees pending the expiration of the redemption periods provided by the laws of individual States or for other reasons.

Over one-half of the December 31, 1954, defaults involved Section 203 mortgages, one-fourth involved Section 903 mortgages, and about one-sixth involved Section 603 cases. The greatest relative increase during the year occurred under Section 903, bringing the number reported under this program to more than two and a half times the number reported at the end of 1953.

Despite the increases noted above, only eight of every 1,000 FHAinsured mortgages in force were in default at the end of 1954-somewhat more than at the close of 1952 or 1953, but significantly less than for the other years shown in the table. In the individual programs, Section 903 had by far the highest default ratio-involving nearly 80 out of each 1,000 cases as compared with 9 per 1,000 for Section 603 and about 5 per 1,000 Section 203 cases. Of the mortgages in default as of December 31, 1954 only 7 percent (representing 5/100ths of 1 percent of all mortgages in force) were in process of foreclosure and only 8 percent (7/100ths of 1 percent of those in force) were foreclosed and in the mortgagee inventory.

The uptrend in defaults during 1954 is probably a reflection of the economic adjustments in many communities throughout the nation during the year. Another factor was the cutback in the demand for Section 903 defense housing in many areas of the country.

TABLE 49

Default status of FHA-insured home mortgages, 1939–54

2 Titles to foreclosed properties subject to redemption or held by mortgagees pending final disposition. 3 Includes Sec. 603-610 cases.

1 Includes Sec. 222.

Chart 30 shows the monthly trend of FHA home mortgages in default during the 5-year period from 1950 through 1954, the top line depicting the number in default and the lower line indicating the default ratio.

STATE DISTRIBUTION OF HOME MORTGAGE TERMINATION AND DEFAULT STATUS.-Table 50 provides an indication of FHA home mortgage experience in each State and Territory through the end of 1954. The first four columns show total number of mortgages insured, the percent of these terminated, the percent terminated by foreclosure, and the percent foreclosed with property transferred to FHA. The fifth column shows the number of insured mortgages in force at the year end.

The last four columns of the table show the default status of FHA home mortgages in force at the year end-the percent delinquent, the percent of the delinquent in process of foreclosure, and the percent of the delinquent on which foreclosure had been completed and the properties were in the hands of the mortgagees awaiting decision as to disposition or termination of the redemption period.

The proportion of terminations ranged from none in Guam (where mortgages are of recent origin) to 63 percent in Vermont. The largest number of States had termination rates between 40 and 50 percent,

TABLE 50

Terminations and default status of FHA-insured home mortgages, by States, as of

Dec. 31, 1954

1 Includes terminations with titles transferred to FHA or retained by mortgagees; also foreclosed properties held by mortgagees that are subject to redemption or held by mortgagees pending final disposition. Less than 0.005 percent.

Cases tabulated in Washington through Dec. 31, 1954, excluding Title I, Section 2 homes.

while 13 had rates of 30 to 40 percent and a like number had rates of from 50 to 60 percent. Four States (Arizona, Florida, Nevada, and New Mexico) and two Territories (Alaska and Hawaii)-had termina

tion ratios of 20 to 30 percent. In all States prepayments accounted for the bulk of the terminations. The foreclosure rate ranged from none in Guam and the Virgin Islands to 4.23 percent in Connecticut, with an overall average for all States and Territories of 0.66 percent. Less than one-half of 1 percent of the insured mortgages had been terminated by foreclosure in 18 States, the District of Columbia and the Territories; one-half to 0.99 of 1 percent in 14 States, 1 to 1.99 percent in 11 States, and 2 percent or more in only 5 States. In most of the States with foreclosure rates in excess of 1 percent the greater number of the foreclosed cases had been insured under Section 603. Section 203 foreclosures predominated in Arkansas, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont.

Properties transferred to FHA in exchange for debentures through the end of 1954 averaged less than one-half of 1 percent for the nation as a whole. In 27 States, the District of Columbia, and all the Territories, the FHA acquisition ratio was less than one-half of 1 percent; between one-half and 1 percent in another 8 States; and 1 percent or more in 13 States. In only 2 States did the acquisition ratio exceed 2 percent.

Home mortgages in default at the end of 1954 ranged from none in Guam and the Virgin Islands to nearly 1 of every 5 in Alaska. The overall average was only 8 of every 1,000 mortgages. In 13 States and 2 Territories the default rate was less than one-half of 1 percent; in 19 States, the District of Columbia, and Hawaii, between one-half and 1 percent; in 9 States and 1 Territory between 1 and 2 percent; and in 7 States and 1 Territory more than 2 percent. Most of the defaulted mortgages in the States where the rates exceeded 1 percent had been insured under Section 203 or Section 903.

Foreclosures in process averaged only five one-hundredths of 1 percent of the cases with insurance in force at the year end. In only 4 States did the proportion of foreclosures in process reach one-fourth of 1 percent of mortgages in force. Defaulted cases on which foreclosure had been completed averaged seven one-hundredths of 1 percent of the cases with insurance in force at the end of 1954. In only 8 States did the proportion of these defaulted cases on which foreclosure had been completed exceed one-tenth of 1 percent.

Terminations and Defaults of Project Mortgages

Through the end of 1954 terminations of FHA-insured project mortgages had involved 1,129 mortgages with original face amounts totaling $515.5 million, accounting for 10.6 percent of the $4.9 billion insured by the FHA, 1935-54. Insurance in force at the year end covered the remaining 7,321 mortgages with original face amounts aggregating $4.4 billion.