American homeowners are struggling to keep up with their mortgage payments as delinquencies climbed 16 basis points in August, according to the ICE Monthly Mortgage Monitor Report released Oct. 6.
Despite some brief summer declines, the delinquency rate climbed to 3.43% in August, up 10 basis points from a year ago, ICE reported.
It’s worth noting that the uptick is partly due to August ending on a Sunday this year, creating an artificial bump as last-day payments rolled into September’s processing cycle. The month saw a 5% increase in short-term delinquencies that aligns with the three most recent Sunday-ending Augusts, which averaged 5.3% increases.
“The rise in the national delinquency rate for August is best understood in the context of how the calendar can impact payment processing,” Andy Walden, head of mortgage and housing market research at ICE, said in a news release. “This calendar-driven effect is consistent with what we observed in prior years, so the increase should be considered a temporary adjustment rather than a shift in underlying borrower health.”
Meanwhile, Federal Housing Administration (FHA) loans saw the highest share of delinquencies, surging 86 basis points over a year ago to reach 12% in August, the report found. Veterans Affairs (VA) loans, conventional loans backed by Fannie Mae and Freddie Mac and portfolio-held mortgages saw relatively flat delinquency rates compared to last year.
The fact that FHA borrowers seem to be struggling most with payments underscores the affordability pressures that tend to impact first-time and lower-income homebuyers who typically rely on the government-insured financing.
Serious delinquencies, foreclosures inch higher
Home loans that were 90-plus days past due but not yet in foreclosure rose by 16,000 in August, up 32,000 from last year. Active foreclosures rose modestly by 3,000 month-over-month and 23,000 year-over-year, ICE said.
Despite these increases, the share of past-due mortgages reaching severe delinquency remains steady at 23%. Also, active foreclosures held at 10%, showing minimal evidence of escalating pressure that would signal broader market distress.
But here’s where the data gets concerning: Foreclosure starts jumped nearly 6% in August from a year ago, marking the ninth straight month of increases. Foreclosure sales jumped 22.5% from a year ago for the sixth consecutive month, pushing national foreclosure inventory up by 12.3% annually, the report revealed.
Here are the top five states (mostly in the South) where homeowners were behind on their mortgages in August 2025:
- Louisiana – 7.91% (up 0.42% YoY)
- Mississippi – 7.82% (down 1.45% YoY)
- Alabama – 5.79% (up 3.20% YoY)
- Arkansas – 5.49% (up 7.40% YoY)
- Indiana – 5.48% (up 3.41% YoY)
Affordability improves, offering some relief to buyers
The silver lining? Home affordability reached its best level in over 2.5 years by mid-September, driven by easing mortgage rates and softening prices.
With 30-year rates hitting 6.26%, it required $2,148 monthly—or 30% of median household income—to cover principal and interest on an average-priced home as of mid-September. That’s down from over 32% earlier this summer and a peak exceeding 35% in late 2023, according to ICE’s research.
About a dozen of the nation’s 100 largest markets, primarily in the Midwest, have returned to long-run average affordability levels. However, coastal markets (battered literally and figuratively by severe weather that’s driving sky-high home insurance premiums) remain severely stretched. Los Angeles requires 62% of median income for mortgage payments, 26 percentage points above its historical average.
The average 30-year mortgage rate fell briefly to 6.215% in September before the Fed cut rates—the lowest in nearly a year—before rebounding slightly. Analysts anticipate at least one or two additional 25-basis-point cuts this year.
Housing market continues its sputter heading into slower sales stretch
For-sale inventory deficits backtracked to 14% below pre-pandemic averages after improving earlier this year, as sellers pulled listings amid falling prices rather than accepting lower offers.
New listings ran 17% to 19% below 2017 – 2019 averages recently, marking some of the weakest readings in a year. Markets experiencing inventory surpluses and price declines saw the sharpest pullbacks, particularly Austin, Denver, Seattle and San Francisco.
Home price growth reaccelerated to 1.2% annually in early September after eight months of slowing as falling inventory met improved affordability. Single-family home prices rose 1.5% year-over-year, while condo prices fell 1.8% nationally over the same period in August.
The mortgage market is caught in dual crosscurrents: improving affordability and falling rates provide relief to potential borrowers, but dismal FHA loan performance and inventory volatility are areas to watch.
