fha financing is facing a fresh pullback even as overall mortgage credit availability moved higher in February. The Mortgage Bankers Association said Tuesday that the Mortgage Credit Availability Index rose 1. 1% for the month, but government-backed lending was the lone segment to contract as underwriting tightened amid rising FHA mortgage delinquency rates. The shift is sharpening a split-market picture: credit is expanding in refinance-heavy and jumbo channels while government lending, including FHA loans, slips.
Credit availability rises overall, but the government segment falls
At 11: 00 a. m. ET on Tuesday, the Mortgage Bankers Association (MBA) disclosed its latest monthly update showing the Mortgage Credit Availability Index increased 1. 1% in February, driven largely by expanded refinance opportunities for lenders. Joel Kan, Deputy Chief Economist at the MBA, said the month’s growth was concentrated in loan programs tied to cash-out refinances and investor homes, with availability largely limited to borrowers with lower loan-to-value ratios.
But the government component moved the other way. The MBA said the government component index—measuring access to loans insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA)—declined 0. 8% over the month. Kan attributed the contraction to lenders likely tightening underwriting standards in response to the recent increase in FHA mortgage delinquency rates.
Conventional credit availability expanded more sharply. The MBA’s component index tracking conventional mortgage availability aligned with Fannie Mae and Freddie Mac underwriting guidelines rose 2. 7% in February. The jumbo mortgage component index expanded nearly 3% in February, reflecting continued strength in the non-QM sector.
Delinquencies climb, pushing lenders to tighten on fha financing
The pressure point is performance. The MBA’s reporting showed that in the fourth quarter of 2025, the nationwide delinquency rate was 4. 26% on all outstanding mortgages on one- to four-unit residential properties, while FHA delinquencies increased to 11. 52%—the highest level since the second quarter of 2021.
Separate performance indicators also show deterioration in recent months. Ginnie Mae, the government-run issuer of government mortgage-backed securities, reported that the serious delinquency rate on FHA loans rose every month after a 2025 low of 3. 06% in May, reaching 4. 93% at the end of January.
Market activity data points in the same direction. Optimal Blue’s February rate-lock data showed the FHA share of total lock volumes was more than 3% lower over the year at 17. 1%, reflecting a monthly slide of 0. 26% and a three-month drop of 1. 7%. First-time buyer purchase share among all FHA purchase locks dipped 1% over the year to 70%.
Immediate reactions from MBA, analysts, and industry observers
Kan said the contraction in government lending was directly tied to credit performance concerns, noting lenders “likely tightened underwriting standards” as FHA delinquencies climbed.
Marina Walsh, Vice President of Industry Analysis at the MBA, told attendees at the MBA’s mortgage servicing conference last month that accumulated home equity could help stabilize performance, pointing to a “tremendous build up in home equity” that may help the industry “weather any type of storm, ” including increases in property taxes and insurance.
Risk specialists are also emphasizing how different borrower profiles can shape outcomes across segments. Jack Kahan, Senior Managing Director and Head of the Asset- and Residential Mortgage-Backed Securities Groups at Kroll Bond Rating Agency (KBRA), said, “FHA mortgages are going to be much more biased towards higher LTV and lower credit, ” contrasting that with non-QM credit scores that “remain like prime. ”
Quick context: why FHA performance is deteriorating
Industry observers have pointed to multiple drivers: rising taxes and insurance costs that erode long-term affordability, and the end of COVID-19 pandemic-era loss mitigation policies that delayed FHA foreclosures moving through the servicing system for several years.
Daren Blomquist of Auction. com previously wrote that more homeowners who used those pandemic-era FHA programs are now falling back into default and facing foreclosure with little or no equity left, making foreclosure harder to avoid.
What’s next for borrowers and lenders
In the near term, the February index update suggests lenders are expanding credit where risk is perceived as more manageable—especially refinance-oriented programs and the jumbo/non-QM space—while pulling back in the government channel. With serious delinquency on FHA loans rising into the end of January, the next monthly index readings will be watched closely for any sign the government component stabilizes or tightens further.
For households counting on fha financing, the immediate story is that access is narrowing even as the broader market loosens—an uneven dynamic likely to keep underwriting scrutiny elevated until delinquency trends improve.
