WASHINGTON — The national mortgage delinquency rate declined slightly in the second quarter, but the improvement masked growing problems among borrowers who have fallen further behind on their payments, particularly those with Federal Housing Administration-insured mortgages, according to analysis by National Mortgage Professional.
The seasonally adjusted delinquency rate for mortgages on one- to four-unit residential properties declined to 4.37% of outstanding loans at the end of the second quarter, National Mortgage Professional reported, citing the Mortgage Bankers Association’s National Delinquency Survey.
That was down seven basis points from the first quarter but up 44 basis points from a year earlier.
Moving in Opposite Direction
More serious delinquencies continued moving in the opposite direction. The share of mortgages at least 90 days past due or in foreclosure increased for the fourth consecutive quarter to 2.06%, up 3 basis points from the first quarter and 49 basis points from a year earlier.
FHA loans showed the greatest deterioration.
The seasonally adjusted FHA delinquency rate declined 9 basis points during the quarter to 11.79%, but remained 122 basis points higher than a year earlier. The serious delinquency rate for FHA mortgages jumped 227 basis points year over year, according to National Mortgage Professional.
“Mortgage delinquencies decreased slightly across all loan types in the second quarter of 2026,” Marina Walsh, the MBA’s vice president of industry analysis, said. “Nonetheless, the broader trend is that both delinquencies and foreclosures have increased over the past year.”
Improvement May Be Temporary
Donna Schmidt, president and CEO of DLS Servicing, told National Mortgage Professional that some of the quarterly improvement could be related to the timing of FHA loss-mitigation trial payment plans rather than a significant improvement in borrowers’ finances.
“Part of the decrease in delinquencies for the second quarter is that the FHA new waterfall trial payment plans were at full maturity, meaning that elevated delinquency rates we saw beginning in October 2025, as a result of all loss-mitigation loans being put on TPP, were finally balancing out,” Schmidt said.
Borrowers approved for loss mitigation in October or November would not have been brought current until March or April after completing three trial payments, Schmidt said. Several more months would then be needed for the typical post-trial reinstatement cycle to resume.
Seasonal Factors Play Role
Seasonal factors also may have helped reduce early-stage delinquencies.
Based on 15 years of DLS Servicing data, Schmidt said loss-mitigation applications typically decline during the second quarter, in part because of income tax refunds and lower household spending following the holidays.
Applications generally begin increasing modestly in July before rising more sharply from September through the end of the year as households face back-to-school, winter and holiday expenses, she said.
Foreclosure Inventory Increases
The share of mortgages in foreclosure increased to 0.67%, up 3 basis points from the first quarter and 19 basis points from a year earlier, according to National Mortgage Professional.
Foreclosure starts, however, declined four basis points during the quarter to 0.20%.
Schmidt said changes to FHA loss-mitigation requirements could be forcing some borrowers to determine whether they can sustainably afford their homes.
“Some of the improvement may be credited to the return to more responsible loss-mitigation requirements” following pandemic-era policies, Schmidt said.
Borrowers who have exhausted their loss-mitigation options or no longer qualify for payment reductions may instead choose to sell homes they can no longer afford, she said.
National Mortgage Professional previously reported that repeat defaults, depleted partial-claim capacity and higher modification rates were creating liquidity pressures for FHA mortgage servicers.
Government-Backed Loans Show Greater Stress
Delinquency rates declined during the quarter across the three major mortgage categories.
The conventional mortgage delinquency rate fell 3 basis points to 2.72%, while the Department of Veterans Affairs loan delinquency rate declined 10 basis points to 4.89%. FHA delinquencies declined 9 basis points to 11.79%.
All three, however, were higher than a year earlier:
- Conventional loans: Up 12 basis points year over year.
- FHA loans: Up 122 basis points.
- VA loans: Up 57 basis points.
The difference was even more pronounced among seriously delinquent mortgages. The serious delinquency rate increased just 6 basis points from a year earlier for conventional loans, compared with 227 basis points for FHA loans and 31 basis points for VA loans.
Early Access to Program
National Mortgage Professional also noted that Pennymac recently became the first large servicer to provide distressed veteran borrowers early access to the VA’s new loss-mitigation waterfall and partial-claim option. All VA servicers are required to implement the new system by Nov. 28.
The MBA pointed to labor market weakness, increasing delinquencies on other forms of consumer debt, housing affordability pressures and slower accumulation of home equity as additional signs of potential financial stress among homeowners.
While fewer borrowers moved into delinquency during the second quarter, the data indicates a growing share of borrowers already experiencing problems are failing to recover, with FHA borrowers showing the greatest signs of stress
