Speaking before Congress last week, newly-installed HUD Secretary Shaun Donovan had this to say:

“As is the case with other mortgage market participants,”  said Donovan, “currently FHA is experiencing elevated defaults and foreclosures and with it, losses that exceed prior estimates. In contrast to the subprime sector, where unsafe loan features and poor underwriting made those mortgages risky from the start, for FHA, the primary reason for defaults and foreclosures continues to be loss of income combined with low or negative home equity, economic factors present in today’s environment. Although this is a challenging time for all entities in the mortgage market, FHA is unlikely to face the catastrophic losses borne in the subprime sector. FHA loans continue to substantially outperform subprime loans: only 7 percent of FHA loans are seriously delinquent (greater than 90 days delinquent or in foreclosure) compared to more than 23 percent of subprime loans.”