Mortgage delinquency rates rise on VA loans as safety net expires

Mortgage delinquency rates rose modestly in Q1 2025, with the increase largely driven by a notable uptick in foreclosures on VA loans following the sunset of the Veterans Affairs Servicing Purchase (VASP) Program.

The seasonally adjusted mortgage delinquency rate for one-to-four-unit residential properties rose to 4.04%, up six basis points from Q4 2024 and ten basis points higher than a year ago, the Mortgage Bankers Association (MBA) reported. The share of loans entering foreclosure also increased by five basis points to 0.20%.

“There were mixed results for mortgage performance in the first quarter of 2025 compared to the end of 2024. Delinquencies on conventional loans increased slightly, while mortgage delinquencies on FHA and VA loans declined,” said Marina Walsh, vice president of industry analysis at MBA. “Foreclosure inventories increased across all three loan types, and particularly for VA loans.

“Despite certain segments of borrowers having difficulty making their mortgage payments, the overall national delinquency and foreclosure rates remain below historical averages for now.”

The percentage of VA loans in the foreclosure process climbed to 0.84%, marking the highest level since Q4 2019 and the largest quarterly increase on record for VA loans since MBA began tracking data in 1979.

Walsh attributed the rise to the expiration of the VASP Program at the end of 2024. The moratorium on VA foreclosures had given borrowers breathing room while Veterans Affairs worked to implement VASP, but without a congressional replacement, many veterans now face fewer loss mitigation options. Walsh warned that without additional support, foreclosure activity could rise further, particularly if economic conditions worsen.

Delinquency rate rose by 8 basis points to 2.70%. FHA delinquencies dropped 41 basis points to 10.62%, while VA loans delinquency rate edged down 7 basis points to 4.63%.

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Despite the quarterly decline, seriously delinquent VA loans (90+ days or in foreclosure) were up 50 basis points year-over-year. FHA loans also saw a sharp 80-basis-point increase in serious delinquencies from the same time last year.

Commercial delinquencies

MBA’s latest Commercial Real Estate Finance (CREF) Loan Performance Survey also showed a continued uptick in delinquency rates for commercial properties.

“The delinquency rate for commercial mortgages increased again in the first quarter of 2025, driven by higher delinquencies on lodging and industrial properties,” said Judie Ricks, MBA’s associate vice president of commercial real estate research. “MBA is closely watching delinquency trends, as there have been increases in both later-stage and new delinquencies.”

In the first quarter, CMBS delinquencies were 5.2% (down from 5.3%), life company loans were 1.0% (up from 0.9%), GSE loans were 0.6% (up from 0.55%), and FHA multifamily/healthcare loans were 1.1% (up from 1.0%).

While multifamily delinquency rates remained stable, office and lodging sectors continued to show elevated stress.

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