For thousands of borrowers, the dream of homeownership is turning into a struggle. Federal Housing Administration or FHA loans now make up nearly half of all delinquent mortgages as rising costs and shrinking savings leave many families falling behind on payments.
Federal Housing Administration loans account for 47% of all delinquent mortgages and 52% of serious delinquencies (defined as loans 90+ days past due but not in foreclosure), according to the November Mortgage Monitor report from Intercontinental Exchange or ICE, a leading provider of data and analytics for the mortgage and housing industry.
Separately, data from Mortgage Bankers Association found that mortgage delinquencies increased in the third quarter of 2025, which was led by worse Federal Housing Administration loan performance, reflecting broader financial pressures homeowners are facing.
Still, experts stress that the broader mortgage system is not in danger. The Federal Housing Administration has a strong financial safety net and better policies to help struggling homeowners. These safeguards are helping banks and lenders avoid big losses and are preventing a wave of foreclosures, even as more people fall behind on their payments.
Newly built homes and certain regions, especially Florida and Texas, are seeing higher rates of delinquencies and missed payments, with builder-affiliated lenders and local market trends playing a major role.
The gap underscores the unique challenges Federal Housing Administration borrowers are facing in today’s housing market. Unlike conventional mortgage holders, Federal Housing Administration borrowers often have a smaller financial cushion and higher debt burdens, making them more vulnerable to economic strain.
Federal Housing Administration loans serve a different set of homeowners than conventional mortgages. These loans tend to cater to entry-level buyers with lower credit scores and smaller down payments.
The average Federal Housing Administration loan credit score is 677, compared to 763 for government-sponsored enterprises Freddie Mac and Fannie Mae — which guarantee but do not make loans — and 769 for bank-held mortgages. Nearly 30% of Federal Housing Administration borrowers carry student debt — more than 10 percentage points higher than non-FHA borrowers.
A debt-to-income ratio shows how much of your monthly income goes toward paying your bills and debts. If most of your paycheck is going to debts, it's harder to keep up if something unexpected happens.
The Federal Housing Administration considers a debt-to-income ratio above 43% risky, because it means most of your income is going to your bills. According to the November Intercontinental Exchange Mortgage Monitor report, almost two out of three FHA borrowers last year had a debt-to-income ratio above that level — meaning a lot of people were stretched thin and struggled to make payments.
While Federal Housing Administration loans in the past were plagued with bad underwriting and relaxed lending standards, those are not the issues driving the delinquencies today, said Jun Zhu, clinical associate professor of finance at the Indiana University Kelley School of Business.
“Inflation is rising faster than wages, and [borrowers are] less able to establish adequate emergency savings to absorb those shocks,” Zhu said.
The Federal Housing Administration did not respond to a request for comment.
Builder-affiliated lenders see higher delinquencies
Yet, some parts of the housing market are showing signs of deeper trouble — particularly among Federal Housing Administration borrowers who purchased newly built homes.
Recent analysis by John Comiskey, founder of Reverse Engineering Finance, a newsletter that explains the underlying mechanics of how the financial system works, asserts that the mortgage divisions of big homebuilders are showing up most often among lenders with the highest share of underwater Federal Housing Administration loans made from 2022 to 2024.
For example, 27% of the 28,300 Federal Housing Administration loans that Lennar Mortgage originated over that period are now underwater, according to Comiskey’s review of Ginnie Mae’s Mortgage-Backed Securities database. D.R. Horton’s lending division shows a similar trend, with 18% of its 55,000 Federal Housing Administration borrowers owing more on their mortgage than their home is currently worth.
By comparison, Quicken Loans, which makes about as many Federal Housing Administration loans as D.R. Horton mortgage division but isn’t owned by a builder, has a lower rate, with only 10% of its Federal Housing Administration loans are underwater.
D.R. Horton did not respond to a request for comment. Lennar declined to comment.
Regional hotspots under pressure
Certain markets are feeling the brunt of this pressure. In Florida and Texas, the impact was more pronounced.
For example, Cape Coral, Florida, where home prices have dropped 15% from their peak, now has 11% of loans underwater. The loans were originated in 2023 and 2024.
Meanwhile, in Austin, Texas, prices are down 21% and has nearly 7% of mortgages underwater. Federal Housing Administration and Veterans Affairs or VA borrowers are the most exposed, according to data from Intercontinental Exchange.
Both regions saw rapid home price appreciation during the pandemic, attracting many first-time buyers, especially Federal Housing Administration and Veterans Affairs borrowers. Now, home prices have corrected and recent buyers, often with low down payments are more likely to owe more than their homes are worth.
By contrast, in New York City, San Jose and Boston, home prices have remained stable and negative equity is virtually nonexistent. Larger down payments and stronger local economies help insulate borrowers in these regions.
Even though FHA delinquencies are notable, several factors help keep broader risks in check.
“Do we need to worry about this? My answer is no,” Zhu said. “We don’t need to solve this issue because improved loss mitigation has cut the serious delinquency to home loss rate substantially, and the [FHA’s Mutual Mortgage Insurance] fund is well capitalized. Nothing near the level of the financial crisis.”
Zhu said that recent policy enhancements have sharply reduced the rate at which seriously delinquent loans have become foreclosures. As a result, fewer families are losing their homes, even if they fall behind on their payments. Still, missed payments can harm credit scores and can limit the borrower's ability to access affordable credit in the future.
Additionally, the FHA’s Mutual Mortgage Insurance Fund acts like a financial reserve, insuring Federal Housing Administration loans against losses from borrower defaults. When borrowers are behind on payments or go into foreclosure, the fund covers the losses, protecting the lenders and helping keep the Federal Housing Administration program stable.
While today’s delinquency levels are elevated, they are nowhere near those seen during the financial crisis. Zhu said the Federal Housing Administration is in a much stronger position, both in terms of policy tools and financial reserves.