FHA Loans are the new Subprime

A lot of people saying 2008 could never happen again since subprime doesn't exist ignore that FHA loans are basically subprime now

FHA makes it too easy for buyers. Not as easy as subprime no doc loans and other BS we created in the early 2000s but a 580 credit score and 3.5% down should not be able to buy a house not should a 500 and 10% down

quote:

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• 580 or higher: Qualifies for the maximum financing (96.5% loan-to-value) with a low down payment of 3.5%.

• 500 to 579: Limited to a maximum financing of 90% loan-to-value, which requires a down payment of at least 10%.

• Below 500: Ineligible for FHA-insured financing

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quote:

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According to a new report by Auction.com, foreclosure auction volume continued its upward trend in the third quarter.

The report noted that completed auctions rose 25% year over year, making Q3 2026 the seventh consecutive quarter of annual volume gains and the highest quarterly total since Q1 2020.

Scheduled foreclosure auctions rose 15% from a year earlier, Auction.com said, reaching 71% of the Q1 2020 level. That’s a new post-pandemic high, the company said.

Loans insured by the Federal Housing Administration (FHA) accounted for most of the increase, Auction.com noted.

It said that FHA foreclosure auction volume surged 73% year over year and, for the first time in this cycle, crossed its own pre-pandemic baseline, reaching 117% of Q1 2020 levels — the highest since Q1 2019.

FHA-insured mortgages accounted for 43% of all foreclosure auction volume, the highest share since Q1 2015.

Mortgages originated in 2022 or later represented 46% of all foreclosure auction activity in Q3 2026, as an early wave of higher-rate post-pandemic originations continues moving through the default pipeline.

Foreclosure auction volume for those recent-vintage loans rose 73% from a year ago.

Auction volume for real estate owned (REO) properties in Q3 2026 increased 18% from a year ago — the seventh consecutive quarter with an annual increase — reaching the highest level since Q3 2020 and 51% of the pre-pandemic level in Q1 2020, Auction.com noted.

Daren Blomquist, Head of Market Economics at Auction.com, wrote that scheduled foreclosure auction volume for the fourth quarter indicates that both foreclosure auction volume and REO auction volume will continue to increase in that quarter.

Compared to the same time last year, scheduled foreclosure auction volume is up 11% for October, up 31% for November, and up 15% for December.

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Foreclosure Auction Volume Spikes YoY



The good news is that FHA is sitting on $188.87 billion in its Mutual Mortgage Insurance (MMI) Fund that is used to cover foreclosures and make banks whole when a FHA-insured house forecloses and is able to be conveyed to FHA. None of that is taxpayer-funded. It is all through mortgage insurance.

The bad news is FHA often sells the house way below market, which will hurt comps. Also, some houses that are in horrible shape and do not meet FHA standards to convey, the bank will let them sit and turn into a zombie property since they would be responsible for eating the costs. This happens a lot in lower-priced neighborhood if the repair costs are more than the bank can recover if they have to sell it REO so they are slower to move on it.

This will also create more lifelong renters since these people had their one shot with already shite credit and now have a foreclosure on their credit report for the next 10 years.

FHA should actually be raising their thresholds but that would crash prices too much so it will never happen.