FHA Delinquencies: A Canary in the Coal Mine?

The latest mortgage data isn’t painting a pretty picture. Numbers from a key corner of the housing market suggest that those who purchased homes during the pandemic are feeling the financial squeeze. Consequently,? rising delinquencies on certain loans are making that crystal clear.

According to the Mortgage Bankers Association (MBA), late payments on Federal Housing Administration (FHA) loans jumped significantly in the fourth quarter—way more than on conventional mortgages. The same trend is playing out with loans backed by the Department of Veteran Affairs (VA).

Mortgage professionals understand that FHA loans are a popular choice for first-time buyers, especially those with lower incomes or less-than-stellar credit. But while conventional mortgage delinquencies remain near record lows, FHA and VA loans are heading in the opposite direction. “Compared to a year ago, the seriously delinquent rate for FHA loans increased by 70 basis points, and VA loans went up by 57 basis points. Meanwhile, conventional loans barely budged—up just two basis points,” said Marina Walsh, MBA’s vice president of industry analysis.

And it’s not just a blip. Intercontinental Exchange’s? (ICE) February Mortgage Monitor Report found that FHA delinquencies are 2.5 percentage points higher than before the pandemic. However, for context, the national delinquency rate is still sitting 22 basis points below pre-pandemic levels. While mortgage delinquencies ticked up through 2024, some loan types—particularly FHA and VA—are getting hit the hardest.?

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So what’s behind all this? A perfect storm of economic challenges we’ve covered here on HECMWorld: inflation, rising debt, falling personal savings, higher property taxes, and soaring insurance costs as just a few of the hurdles facing recent homebuyers and established homeowners alike.

While national delinquency rates are troubling keep in mind that the highest delinquency rates are primarily concentrated in south and southeastern states. These markets are more exposed to increasing inventory and softening home values.?

What does this surge in FHA mortgage delinquencies mean for the broader mortgage market?

It’s a red flag. “FHA and VA loan delinquencies tend to be the canary in the coal mine for the mortgage market, so expect this to become a bigger talking point in 2025,” ICE analysts warned. A talking point that may sink the hopes of the MBA and others who’ve been advocating for lower FHA mortgage insurance premiums.