The Trump administration has ended more than four years of pandemic-era relief for borrowers with mortgages backed by the Federal Housing Administration, closing the door on programs that helped millions keep their homes after Covid hit. The FHA ended Covid-era forbearance and relief programs on Sept. 30, just as servicers say the next wave of trouble is beginning to show up in delinquency data.
Foreclosures of FHA-backed loans jumped 28% in the first quarter from a year earlier, a sharp sign that the cleanup from the pandemic mortgage rescue is far from over. Borrowers who had been able to pause payments for months, and in some cases up to 18 months, are now moving into a new phase where missed bills are no longer being pushed to the back of the line.
Ron Malik, who has been tracking the fallout, said the system has run out of room to maneuver. “We’ve reached a period of exhausted loss mitigation and there’s no more to give,” he said, adding, “Exhausted loss mitigation is a real thing — there’s no more relief.” Ted Tozer put the shift more bluntly: “Over the last three to four years, we’ve really kicked the can down the road as far as forcing borrowers to deal with the inability to make their mortgage payment,” he said.
The timing matters because lenders and servicers are bracing for a harder stretch ahead. They expect significant deterioration in loans and spikes in delinquencies over the next six to 18 months, with thousands of borrowers potentially facing foreclosure, a short sale or deed-in-lieu. That pressure is landing as the FHA has begun restricting borrowers to just one loan modification every 24 months, and new requirements that began in February force borrowers to complete a three-month trial period before a modification can be finalized.
The result is a tighter path out of default just as more borrowers are entering it. A change in how trial payment plans are reported has already helped drive a surge in delinquencies and foreclosure filings, making it harder to tell, in real time, which loans are healing and which are sliding toward loss. The Federal Reserve System flagged some distress in FHA and Department of Veterans Affairs loans in its financial stability report this month, underscoring that the pressure is no longer isolated to a few troubled borrowers.
The pandemic relief was born out of the CARES Act, signed in March 2020, and was extended multiple times as the crisis dragged on. Those protections often deferred missed payments to the end of the loan term, which helped borrowers stay current on paper while the debt kept building. Now many face payment shock because deferred balances have matured into large balloon payments, while others have negative equity because missed interest and other charges were added to the mortgage balance. Ginnie Mae, which guarantees the timely payment of principal and interest to investors in mortgage-backed securities backed by FHA and other government loans, sits behind much of that market and will feel the strain if defaults keep rising.
For borrowers already running out of options, the next phase is likely to be blunt. The FHA can still steer some loans toward modification, repayment plans or other loss-mitigation tools, but the era of broad pandemic relief is over, and the numbers now point to a system that is shifting from forbearance to foreclosure. What remains unanswered is how many households will be able to absorb the reset before the next wave of delinquencies turns into permanent loss.
