Recent changes to FHA loss-mitigation policies led to a sharp increase in the share of delinquent FHA-insured loans in Ginnie Mae mortgage-backed securities in the fourth quarter of 2025, according to a new analysis by Inside FHA/VA Lending.
The total FHA delinquency rate hit 11.86% at the end of 2025, up 96 basis points from September, and the third-highest reading in the past decade. It was also larger than the typical seasonal uptick seen during the fourth quarter.
The rise was attributed to the FHA’s decision to move away from streamlined loan modifications, as it now requires distressed borrowers to make trial payments before formally receiving a loan mod.
The servicing change is expected to cause some shorter-term increases in foreclosures, as it will limit the frequency with which borrowers can take loss-mitigation options. Donna Schmidt, President and CEO at DLS Servicing, said she expects FHA foreclosures tied to servicing changes to materialize in the second quarter of this year and increase from there.