The MBA says FHA delinquencies are running 900 basis points above conventional. One lender says that is just the beginning
FHA loans were designed to open homeownership to first-time and lower-income buyers. Right now, they are showing stress in ways that are starting to draw uncomfortable comparisons to what happened before the 2008 financial crisis.
According to the Mortgage Bankers Association's Q1 2026 National Delinquency Survey, the FHA delinquency rate is running approximately 900 basis points higher than the conventional rate. Marina Walsh, MBA's vice president of industry analysis, described the results as reflecting "notable increases among FHA and VA loans" while conventional delinquencies remained relatively flat.
As lenders pulled back from risky mortgage products after the housing crash, FHA absorbed the demand. One lender who has watched that shift play out over multiple cycles thinks the industry is underestimating where it leads.
Glen Weinberg (pictured top) is COO and partner at Fairview Commercial Lending. He is concerned that FHA is building up a portfolio of subprime loans that are starting to show signs of weakness.
"If you put up a chart of what FHA is doing and what the old subprime did, you can see that as the old subprime mortgages went down, FHA has increased exponentially," Weinberg told Mortgage Professional America. "We've just transferred risk from the private market to taxpayers."
Limited equity adding to concerns
Weinberg said the first thing he looks at in any cycle is equity. With FHA's low down payment requirements, most borrowers start with very little of it. And if these home values fall, as they’ve done in some neighborhoods, there might not be equity to draw from to help bail out struggling borrowers.
"I've been through so many cycles. Number one indicator above anything else is equity," he said. "FHA is still going lending gangbusters. We're at the peak of a market, and people only put 5% down. I mean, you've already seen places like Denver, (prices are) off probably 10%, 15% from the peak in 2022. So those FHA mortgages, anything that was originated near the top, they're already underwater."
Weinberg said the addition of VantageScore complicates matters. The alternative model incorporates non-traditional data like utility bills and cell phone payments, which he said gives borrowers a way to show a stronger credit profile on paper than their financial behavior reflects.
"Who in their right mind should be doing a 95% mortgage to someone with like a 620 credit?” he said. “And by the way, we aren't even going to use the FICO score anymore. We're going to use the VantageScore. So if they have a cell phone bill now, they have like a 650 credit score."
The government won't foreclose
Weinberg said his deeper worry is not just the quality of the loans being made. It is what happens when they go bad, and the government has to decide whether to act.
"I think what compounds that fear is the private market got rid of this stuff because they had an incentive, they had to survive," he said. "But if you get that same cycle in FHA, they aren't going to have the political will, nobody will, neither party, to foreclose on all of these people. And it's just going to prolong the downturn and actually make it worse."
Weinberg said the buy now pay later (BNPL) market adds another layer of hidden risk that he finds particularly troubling. Only one BNPL company reports data to the credit industry, and it reports to only two of the three credit bureaus. This means a borrower can carry significant debt that never shows up on a mortgage application.
Weinberg said Fannie, Freddie, and FHA are not built to catch it.
"Think of those people that Fannie or Freddie or FHA, they're basically just passing through, selling it to them," he said. "All they have to do is meet the guidelines and kick the can to someone else. So someone's going to be holding a big bag when this thing gets interesting."
Weinberg said his own servicing data is not yet showing the cliff drop he would expect to see if a serious wave were imminent. But despite that, he can’t shake the feeling that there could be a major crisis right around the corner.
"My gut says something's going to happen in the next six months," he said. "What is going to break in this cycle? FHA is one of them that we discuss."
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
