Mortgage delinquencies are on the rise again, with recent data showing early-stage late payments growing faster than any other debt category in May 2025. As housing costs soar and student loan collections resume, financially strained homeowners are struggling to keep up.
FHA and VA loans under pressure
Data from Intercontinental Exchange’s July Mortgage Monitor revealed diverging mortgage performance trends. While overall delinquency rates dipped slightly month-over-month, certain segments are flashing red.
- FHA loan delinquencies are 250 basis points above 2019 levels.
- VA loans also show rising stress.
- GSE and portfolio loans remain relatively stable.
Andy Walden of ICE noted that there are 110,000 more delinquent mortgages than in May 2024, with 15,000 more loans in active foreclosure.
“FHA is now the main source of funding for borrowers with lower credit scores and low down payments,” said Gunnar Blix, ICE housing research manager. “This is where we’re seeing more financial stress.”
Student loan repayment tied to mortgage strain
Another growing risk: student loan delinquencies. In May 2025, federal student loan collection efforts resumed after a five-year pause, pushing serious delinquencies on those loans to 31%.
About 20% of mortgage holders also carry student debt — and ICE analysts confirmed a link between student loan and mortgage delinquencies.
Affordability crunch fuels missed payments
As of May, the average back-end debt-to-income (DTI) ratio for new borrowers hovered near 40%, driven by high mortgage interest rates and non-mortgage expenses like auto loans and credit card debt.
Key financial stressors:
- Mortgage balances rose 2.8% year-over-year, hitting $267,700 on average.
- Only 3 out of 50 metro areas are still considered affordable for homebuyers.
- Home prices and inflation continue to outpace wage growth.
“Everything is more expensive,” said VantageScore’s Anthony Hutchinson. “Inflation, both on goods and home prices, is hitting homeowners hard.”
Negative equity and market correction risks
Negative equity remains low nationally at 1%, but ICE warns that risk is rising quickly in hotspot markets. Among FHA loans issued since 2021 in Cape Coral, Florida, 70% are now underwater.
“Nine out of 10 loans that are underwater were originated in 2021 or later,” Walden noted.
Inventory is also rebounding, with a 32% year-over-year increase nationally. That surge could push prices lower in areas like Denver and parts of California already back to pre-2020 levels.
Key takeaways for homeowners and lenders
- Early-stage mortgage delinquencies (30–89 days late) posted the highest month-over-month jump among all debt categories.
- FHA and VA loan holders are most vulnerable to delinquency and negative equity.
- Affordability-driven mortgage products like ARMs and temporary buydowns are gaining traction.
- Lenders have improved operational efficiency, with average loan closing times falling to 41 days — the fastest in over six years.
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