{"id":186602,"date":"2026-01-23T13:17:15","date_gmt":"2026-01-23T20:17:15","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=186602"},"modified":"2026-01-23T13:17:18","modified_gmt":"2026-01-23T20:17:18","slug":"the-fha-piggy-bank-is-full-and-being-used-to-provide-relief-to-borrowers","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/the-fha-piggy-bank-is-full-and-being-used-to-provide-relief-to-borrowers","title":{"rendered":"The FHA Took Care of Its Piggy Bank\u2014Investors Have a Big Reason to Care About That"},"content":{"rendered":"\n

Source First (Teacher Rule!): Everything you\u2019re about to learn comes from one textbook: <\/span>Annual Report to Congress Regarding the Financial Status of the Federal Housing Administration Mutual Mortgage Insurance Fund (FY 2025)<\/span><\/em>, published by HUD and available <\/span>here<\/span><\/a>.<\/span><\/p>\n\n\n\n

Today\u2019s lesson turns that very serious report into something easier\u2014and more interesting \u2014 to understand.<\/span><\/p>\n\n\n\n

Lesson 1: FHA\u2019s Big Piggy Bank Is Very Full<\/span><\/h2>\n\n\n\n

Imagine the Federal Housing Administration (FHA) has a giant piggy bank called the Mutual Mortgage Insurance (MMI) Fund. This piggy bank:<\/span><\/p>\n\n\n\n

    \n
  • Collects mortgage insurance premiums.<\/span><\/li>\n\n\n\n
  • Pays claims when borrowers can\u2019t keep their homes.<\/span><\/li>\n\n\n\n
  • Is backed by taxpayer dollars, so <\/span>it must be managed<\/span> carefully.<\/span><\/li>\n<\/ul>\n\n\n\n

    In FY 2025:<\/span><\/p>\n\n\n\n

      \n
    • FHA\u2019s piggy bank had $140 billion inside.<\/span><\/li>\n\n\n\n
    • Over $100 billion of that was cash or cash-like.<\/span><\/li>\n\n\n\n
    • The piggy bank was filled to 11.47%, when the law only requires 2%.<\/span><\/li>\n<\/ul>\n\n\n\n

      Translation for investors<\/span><\/h3>\n\n\n\n

      FHA is not broke or fragile. It has plenty of cushion to handle borrower problems without panicking or dumping homes onto the market.<\/span><\/p>\n\n\n\n

      Lesson 2: Too Many \u201cSecond Chances\u201d Was a Problem<\/span><\/h2>\n\n\n\n

      During COVID, FHA tried to be nice\u2014maybe too nice. Borrowers who fell behind were allowed to:<\/span><\/p>\n\n\n\n

        \n
      • Modify loans<\/span><\/li>\n\n\n\n
      • Pause payments<\/span><\/li>\n\n\n\n
      • Get partial claims<\/span><\/li>\n\n\n\n
      • Try again\u2026and again\u2026and again<\/span><\/li>\n<\/ul>\n\n\n\n

        But the report shows something important: <\/span>Almost<\/span> 60% of borrowers who <\/span>got<\/span> help fell behind again within <\/span>one<\/span> year.<\/span> That\u2019s like letting a student retake the same test six times\u2014and they still keep failing.<\/span><\/p>\n\n\n\n

        Lesson 3: New Rules to Help People Succeed (or Move On)<\/span><\/h2>\n\n\n\n

        So in 2025, FHA changed the rules. <\/span>In April 2025, FHA <\/span>rewrote<\/span> its \u201chelp plan\u201d (<\/span>called<\/span> the loss mitigation waterfall).<\/span> New rules:<\/span><\/p>\n\n\n\n

          \n
        • COVID programs ended<\/span><\/li>\n\n\n\n
        • FHA-HAMP ended<\/span><\/li>\n\n\n\n
        • Borrowers now get one home-retention option every 24 months.<\/span><\/li>\n\n\n\n
        • Borrowers must prove they can actually make payments before getting permanent help.<\/span><\/li>\n<\/ul>\n\n\n\n

          FHA estimates this saves $2 billion.<\/span><\/p>\n\n\n\n

          Translation for investors<\/span><\/h3>\n\n\n\n

          This<\/span> doesn\u2019t mean \u201cmore foreclosures tomorrow.\u201d It means faster decisions and less endless limbo, which historically leads to clearer timelines when homes eventually change hands.<\/span><\/p>\n\n\n\n

          Lesson 4: Borrowers Are Struggling\u2014but Not All at Once<\/span><\/h2>\n\n\n\n

          Now let\u2019s talk about late homework (aka delinquency).<\/span><\/p>\n\n\n\n

            \n
          • Serious delinquencies (90+ days late) rose to 4.54%.<\/span><\/li>\n\n\n\n
          • That sounds scary\u2014but it\u2019s still normal by historical standards.<\/span><\/li>\n<\/ul>\n\n\n\n

            Here\u2019s the twist:<\/span><\/p>\n\n\n\n

              \n
            • Even when loans fail, losses are much smaller.<\/span><\/li>\n\n\n\n
            • Loss severity dropped from 50% years ago to 22% today.<\/span><\/li>\n<\/ul>\n\n\n\n

              Why?<\/span><\/p>\n\n\n\n

                \n
              • Home prices went up.<\/span><\/li>\n\n\n\n
              • FHA sells homes faster.<\/span><\/li>\n\n\n\n
              • Fewer homes sit empty and deteriorate.<\/span><\/li>\n<\/ul>\n\n\n\n

                Translation for investors<\/span><\/h3>\n\n\n\n

                Stress is rising, but damage is limited. Timing matters more than panic.<\/span><\/p>\n\n\n\n

                Lesson 5: \u201cRisk Layers\u201d\u2014When Too Many Weak Spots Stack Up<\/span><\/h2>\n\n\n\n

                FHA doesn\u2019t just look at one thing. It looks for stacked risks, called risk layers. Think of it like a Jenga tower. If all three are there, the tower wobbles:<\/span><\/p>\n\n\n\n

                  \n
                • Low credit<\/span><\/li>\n\n\n\n
                • High debt<\/span><\/li>\n\n\n\n
                • Very small down payment<\/span><\/li>\n<\/ul>\n\n\n\n

                  In 2025, FHA updated how it measures risk layers:<\/span><\/p>\n\n\n\n

                    \n
                  • Credit score below 640<\/span><\/li>\n\n\n\n
                  • Debt-to-income ratio above 40%<\/span><\/li>\n\n\n\n
                  • Loan-to-value ratio above 95%<\/span><\/li>\n<\/ul>\n\n\n\n

                    Using this better ruler:<\/span><\/p>\n\n\n\n

                      \n
                    • About 8% of FHA loans have risk layers.<\/span><\/li>\n\n\n\n
                    • Old rules only caught about 1%.<\/span><\/li>\n<\/ul>\n\n\n\n

                      Translation for investors<\/span><\/h3>\n\n\n\n

                      This<\/span> doesn\u2019t predict a crash. It helps identify where stress might appear if conditions worsen.<\/span><\/p>\n\n\n\n

                      Lesson 6: Students Are Smarte<\/span>r\u2026b<\/span>ut Carry Bigger Backpacks<\/span><\/h2>\n\n\n\n

                      Good news:<\/span> FHA borrower credit scores are higher than they\u2019ve been in years.<\/span><\/p>\n\n\n\n

                      Not-so-good news:<\/span><\/p>\n\n\n\n

                        \n
                      • Borrowers are carrying more debt.<\/span><\/li>\n\n\n\n
                      • Average<\/span> DTI today is 45%.<\/span><\/li>\n\n\n\n
                      • Twenty years ago, it was closer to 37%.<\/span><\/li>\n<\/ul>\n\n\n\n

                        Why?<\/span><\/p>\n\n\n\n

                          \n
                        • Homes cost more.<\/span><\/li>\n\n\n\n
                        • Rates are higher.<\/span><\/li>\n\n\n\n
                        • Insurance costs more.<\/span><\/li>\n<\/ul>\n\n\n\n

                          Translation for investors<\/span><\/h3>\n\n\n\n

                          Borrowers are more responsible\u2014but have less wiggle room. Small disruptions matter more than they used to.<\/span><\/p>\n\n\n\n

                          Lesson 7: FHA Ran the Worst Tests Imaginable (on Purpose)<\/span><\/h2>\n\n\n\n

                          FHA asked a scary question: \u201cWhat if the worst economy ever happened again?\u201d They replayed:<\/span><\/p>\n\n\n\n

                            \n
                          • The Great Recession<\/span><\/li>\n\n\n\n
                          • Massive home price drops<\/span><\/li>\n\n\n\n
                          • High unemployment<\/span><\/li>\n\n\n\n
                          • No price recovery afterward<\/span><\/li>\n<\/ul>\n\n\n\n

                            Even then:<\/span><\/p>\n\n\n\n

                              \n
                            • FHA\u2019s piggy bank stayed more than twice the legal minimum.<\/span><\/li>\n\n\n\n
                            • The system still worked.<\/span><\/li>\n<\/ul>\n\n\n\n

                              Translation for investors<\/span><\/h3>\n\n\n\n

                              This strength is why FHA could lower up-front mortgage insurance costs\u2014it wasn\u2019t reckless, it was math-backed.<\/span><\/p>\n\n\n\n

                              Final Thoughts:<\/span> What Can Investors Do With This?<\/span><\/h2>\n\n\n\n

                              This report is not a crystal ball. It is a map. Investors can use it to:<\/span><\/p>\n\n\n\n

                                \n
                              • Understand where stress forms.<\/span><\/li>\n\n\n\n
                              • Track policy-driven timing.<\/span><\/li>\n\n\n\n
                              • Watch cohort-level risk.<\/span><\/li>\n\n\n\n
                              • Avoid assuming \u201cdefaults = chaos.\u201d<\/span><\/li>\n<\/ul>\n\n\n\n

                                FHA isn\u2019t ignoring problems. It\u2019s managing them slowly, deliberately, and with money in the bank.<\/span><\/p>\n\n\n\n

                                Important Disclosures<\/span><\/strong><\/p>\n\n\n\n

                                Equity Trust Company is a directed custodian and does not provide tax, legal, or investment advice. Any information communicated by Equity Trust Company is for educational purposes only and should not <\/span>be construed<\/span> as tax, legal, or investment advice. Whenever making an investment decision, please consult with your tax attorney or financial professional.<\/span><\/em><\/p>\n\n\n\n

                                BiggerPockets\/PassivePockets <\/span>is not affiliated<\/span> in any way with Equity Trust Company or any of Equity\u2019s family of companies. Opinions or ideas expressed by BiggerPockets\/PassivePockets are not necessarily those of Equity Trust Company, nor do they reflect their views or endorsement. The information provided by Equity Trust Company is for educational purposes only. Equity Trust Company, and <\/span>their<\/span> affiliates, representatives, and officers do not provide legal or tax advice. Investing involves risk, including possible loss of principal. Please consult your tax and legal advisors before making investment decisions. Equity Trust and BiggerPockets\/PassivePockets may receive referral fees for any services performed as a result of being referred opportunities.<\/span><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

                                Source First (Teacher Rule!): Everything you\u2019re about to learn comes from one textbook: Annual Report to Congress Regarding the Financial Status of the Federal Housing Administration Mutual Mortgage Insurance Fund […]<\/p>\n","protected":false},"author":613768,"featured_media":146967,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[4433],"tags":[],"class_list":["post-186602","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-opinion"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/186602","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/613768"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=186602"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/186602\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/146967"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=186602"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=186602"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=186602"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}