The FHA mortgage program has 7.8 million active loans. Nearly 14% of them are currently in default, which means over 1 million homeowners in this program are in missing payments.
Most of these defaulted loans are being prevented from foreclosures by government programs instituted during the pandemic, which the Biden Administration continued extending. They include incentive payments to borrowers to stay in their house. As well as automatic 25% reductions in payments.
If these programs were lifted, about 300,000 to 400,000 seriously delinquent houses could quickly go into foreclosure or short sale. Which could increase US housing inventory by as much as 40%, and in some cities/neighborhoods, inventory would double or triple.
The Trump administration needs to take a hard look at what’s happened at the FHA / HUD. If they’re serious about reducing fraud, waste, and regulation, then these subprime mortgage foreclosure protections need to go. Probably should also re-evaluate if it makes sense to keep giving out 50% DTI / 3% down payment mortgages to people with low credit.
The current FHA mortgage system, where people put almost no money down and can’t be foreclosed on, is not fair at all to the people who have been saving up responsibly to buy a house.
And it’s killing the American dream by preventing a record housing affordability crisis from correcting.
