FHA lending contracts as delinquency pressures crystalize
The availability of mortgage credit score rose 1.1% in February, pushed by expanded refinance alternatives for lenders, the Mortgage Bankers Association (MBA) mentioned in a month-to-month mortgage credit score report launched Tuesday.
The progress in credit score availability was significantly concentrated in mortgage applications centered on cash-out refinances and investor households, though these have been largely restricted to debtors with decrease loan-to-value ratios, noticed Joel Kan, deputy chief economist on the MBA, in evaluation accompanying the index replace.
But authorities lending, together with Federal Housing Administration (FHA) loans, noticed a notable downtick in mortgage credit score extension final month.
“The government index was the only component that saw a decline in credit supply over the month, as lenders likely tightened underwriting standards given the recent increase in FHA mortgage delinquency rates,” Kan famous.
The MBA’s part index monitoring typical mortgage availability aligning with Fannie Mae and Freddie Mac underwriting pointers noticed outsized good points at 2.7% progress, whereas the federal government part index measuring entry to loans insured by the FHA or Department of Veterans Affairs (VA) loans declined 0.8% over the month.
The jumbo mortgage part index expanded practically 3% in February, persevering with the prior month’s progress and signaling continued energy within the non-QM sector.
A pullback in FHA lending was additionally noticed in Optimal Blue’s February rate-lock information, with the FHA share of whole lock volumes greater than 3% decrease over the yr at 17.1%, a month-to-month slide of 0.26% and three-month drop of 1.7%. First-time purchaser buy share amongst all FHA buy locks was down simply 1% over the yr to land at 70%.
Amid a nationwide crime rate of 4.26% on all excellent mortgages on one- to four-unit residential properties within the fourth quarter of 2025, FHA delinquencies elevated to 11.52%, in response to MBA reporting final month. That’s the very best degree because the second quarter of 2021.
The most up-to-date figures from Ginnie Mae, the government-run issuer of presidency mortgage-backed securities, point out the intense delinquency price on FHA loans has rise every month since a 2025 low of three.06% final May to land at 4.93% on the finish of January.
Ginnie Mae MBS issuance rose sharply final yr to $526 billion, up practically 32% over the previous two years, from $423 billion in 2024 and $404 billion in 2023. Unpaid principal steadiness on its portfolio has elevated about 14.6% over that interval, from about $2.47 trillion in 2023 to $2.83 trillion in 2025.
Ten states accounted for barely greater than half of all single-family Ginnie Mae issuance on the finish of September 2025, led by 10.7% market share in Texas, 8.3% share in Florida and 6.4% share in California. Georgia and Virginia rounded out the highest 5 with 4.6% and three.9% market share, respectively.
Deteriorating efficiency in FHA loans stems from a confluence of things. Rising taxes and insurance costs have eroded the affordability of long-term homeownership, whereas the top of COVID-19 pandemic-era loss mitigation insurance policies successfully ceased FHA foreclosures from flowing via the mortgage servicing system for a number of years.
As Daren Blomquist of Auction.com beforehand famous in a Scotsman Guide columna rising variety of householders who made use of these pandemic-era FHA applications “are now falling back into default and facing foreclosure with little or no equity left, making foreclosure harder to avoid, with a short sale often the only option.”
