John Comiskey just laid bare the disturbing reality of the FHA loan system—one that’s falling apart in slow motion. A borrower in Tennessee took out a $236,000 loan at 3.5% in 2020. Fast-forward five years, and not a single payment has been made. The FHA has been bailing him out every step of the way, with partial claims adding up to hundreds of thousands of dollars. Yet, this borrower has refused to pay.
It all started with a $38,000 bailout to cover missed payments in mid-2022. But that didn’t fix the problem. Nine months later, another partial claim of $13,000 was made. And still, no payment. This borrower has been in default for fifty-seven months and has faced no real consequences.
So what did the FHA do? They modified the loan—raised the interest rate to 7.25% and increased the monthly payment by $400. This, mind you, was the solution for a borrower who never paid at 3.5%.
The scary part? This isn’t isolated. Comiskey warns that this type of behavior is happening across the board, with delinquencies rising faster than during the subprime crisis. In fact, 7.05% of FHA mortgages issued last year went seriously delinquent within 12 months, surpassing even the 2008 peak.
The root of this crisis? The government kept approving mortgages for people who could never afford them. And instead of foreclosing, the system continues to throw money at the problem. There are now 100,000 loans in jeopardy of foreclosure, and 30,000 more loans are getting temporary relief every month.
But what happens when the music stops? Comiskey’s point is chilling: The loss mitigation procedures are shifting, and delinquencies are mounting. When the FHA runs out of options, the fallout will be brutal.
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