Mortgage Delinquencies Climb in Q3, Led by FHA Loan Strain

Mortgage delinquencies increased in the third quarter (Q3) of 2025, reaching a seasonally adjusted rate of 3.99% of all loans outstanding on one-to-four-unit residential properties. The rise in delinquencies was primarily driven by FHA loans, which saw their delinquency rate increase sharply by 21 basis points to 10.78%. This increase in FHA loan delinquencies marks a significant contributor to the overall delinquency rate growth, while delinquency rates for conventional and VA loans remained relatively flat or changed modestly.

Key details include:

• The overall mortgage delinquency rate rose by 6 basis points from the previous quarter and 7 basis points year-over-year.

• The seriously delinquent rate (loans 90+ days past due or in foreclosure) for FHA loans surged nearly 50 basis points year-over-year.

• Conventional loan delinquency remained stable at around 2.62%, and VA loan delinquency increased slightly to 4.5%.

• Economic pressures such as a softer labor market, increased personal debt, rising property taxes and insurance, and home price declines in some areas are stressing borrowers, particularly those with FHA loans.

• States with the largest quarterly delinquency rate increases include Arizona, Louisiana, Indiana, Iowa, and Texas.

• Foreclosure starts also rose slightly to 0.20% of loans during the quarter.

Overall, the FHA loan segment is the main source of strain in the mortgage market in Q3 2025, reflecting increased financial stress on lower-income borrowers who typically use these government-backed loans. Other loan types show more stable delinquency trends, but the overall climb in delinquency signals caution in the housing finance sector.​